OpenAI is one of the hottest private companies today. OpenAI is the creator of ChatGPT, the one AI [artificial intelligence] app that truly launched consumer AI into the mainstream.
According to ChatGPT, it is currently in the process of raising $40 billion in a new funding round led by SoftBank, which will value the company at approximately $300 billion post-money. In October 2024, the company raised $6.6 billion at a valuation of $157 billion, so in one year, the firm has almost doubled in value.
Yesterday, Republic distributed a notice that it was listing an investment in OpenAI via an SPV (Forma Capital Management Company, LLC). The offering page states the investment is being made at an implied valuation of $330 billion.
The deal is only available for Accredited Investors and starts with a minimum of $25,000. Republic’s offering is for a total of $10 million and has a deadline of May 17th.
As the creator of the SPV, Republic takes a 5% management fee along with a 5% placement fee so in reality you are committing $22,500 into the vehicle. There is no carried interest with the investment.
Investors are acquiring convertible interest rights in OpenAI, which they expect to convert into a for-profit entity upon its restructuring.
There has been some jostling between OpenAI’s intent to morph from a non-profit to a for-profit firm. Today, it was reported that founder Sam Altman announced that it will remain a non-profit that oversees and controls the for-profit going forward.
There has been a significant move by online investment platforms to focus more on secondary offerings or primary offerings for Reg D funding rounds. As these tend to be more established firms, and thus less risky than smaller startups, there has been greater interest from investors (as long as you are accredited).
Other platforms have listed shares in OpenAI and it is important that investors understand the structure of the offering and the fees paid to the platform because not all offerings are the same.
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