OpenAI, maker of ChatGPT, said today that it closed the largest VC round in history, raising $6.6 billion. That gives the startup a new valuation of $157 billion post-money.

The investor leading the new cash is Thrive Capital-an early backer of the company. Crunchbase reports brings OpenAI's total up to $17.9 billion in funding raised.

Thrice has invested around $1.3 billion, according to The New York Times, with the exclusive option to invest up to $1 billion more at the same valuation through 2025. Microsoft, Nvidia, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity and MGX have also participated in fundraising.

According to a report in The Wall Street Journal, Microsoft invested a little below $1 billion, Nvidia committed $100m; and SoftBank committed $500 million.

The new funding will enable us to double down on the efforts of being one among the leaders in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems," the company has written about it in its blog post. "We are grateful to our investors for trusting us, and we look forward to collaborating with our partners, developers, and broader community to shape an AI-powered ecosystem and future that benefits everyone, the blog post added. 

There may be strange strings attached. This morning, the Financial Times reported that OpenAI approached investors to dissuade them from backing competing startups like Anthropic and xAI. We've reached out to the company for more information and will update this post when we hear back.

OpenAI was already the world's best-funded AI startup. But the mammoth new tranche puts the San Francisco company in a category all its own.

The above-mentioned xAI, Elon Musk's AI startup, has raised more than $6 billion in the last few months but at a valuation smaller than OpenAI's ($24 billion post-money). Chief OpenAI competitor Anthropic has only raised half OpenAI's total-$9.7 billion-in the time it has existed since its founding, and high-profile AI startups Cohere and Mistral are both sitting at or around $1 billion.

So why did OpenAI need to raise more cash than the government of Zimbabwe spent in 2021? Well, pretty simply: to carry on its sprawling operations. OpenAI is reportedly burning through billions training and productizing its AI systems — systems like the recently debuted o1 — and recruiting coveted data science talent to stay apace with competition.

According to The Information, the training of OpenAI models cost $7 billion and staffing $1.5 billion in total. OpenAI CEO Sam Altman has said one of the company's older leading models, GPT-4, cost more than $100 million to train. And at one point in time, the running of ChatGPT alone was said to be costing OpenAI $700,000 a day.

On generative AI, OpenAI is far and away the market leader. More than 250 million users are on ChatGPT - around 10 million of whom are paying subscribers - and OpenAI's annualized revenue reportedly has already surpassed $3.4 billion. ChatGPT alone could generate $2.7 billion this year, according to internal OpenAI documents accessed by The New York Times.

Microsoft, OpenAI's close partner and investor (it's close to $14 billion in), has built an entire suite of productivity products on top of OpenAI models. And Apple is integrating ChatGPT with its Apple Intelligence lineup of AI technology.

OpenAI optimistically projects its revenue will reach $100 billion in 2029 — matching the current annual sales of Nestlé. But it faces competition on many fronts.

Competitors such as Runway and Luma Labs have entered market ahead of OpenAI with high fidelity video generation models. Its own video model, Sora, OpenAI hopes to sometime this fall. Anthropic continues building out an AI product line rivaling ChatGPT. XAI, Google, and Amazon continue to invest a whole lot in infrastructure that would support powerful next-generation models. Meta, together with new entrants like Black Forest Labs, continues to release open models on its quest to commoditize text- and image-generating AI.

Competitive pressures are such that OpenAI may steeply increase the price of its premium ChatGPT plan from $20 per month to $44 per month by 2029 — and revamp its corporate structure to attract more investments.

The for-profit part of OpenAI, meanwhile, is, at least for now, governed by a nonprofit that caps investors' returns. But according to reports, Altman signaled the company will step away from nonprofit governance in the coming months. Reuters had reported earlier that the close of the $6.6 billion round was contingent on this, in fact — and Altman possibly receiving equity.

Investors in the new round, reports Bloomberg, will be able to claw back their cash if OpenAI doesn't complete the conversion from nonprofit to for-profit within two years.

Unshackling its ability to raise might give OpenAI more freedom to pursue capital-intensive, long-term bets, such as AI chips—and even whole data centers—to lessen its reliance on Nvidia. (Nvidia makes the hardware on which OpenAI trains and runs many of its models.) It'll also refill the company's coffers to ink licensing agreements with data providers such as Reddit and Condé Nast — deals that could give OpenAI a competitive edge even as they shield it from IP lawsuits.

Whether it will be able to execute is another question. The firm, OpenAI, has been shedding high-profile executive departures in recent weeks, the culmination of disagreements over the company's direction.

This week, CTO Mira Murati, chief research officer Bob McGrew, and research VP Barret Zoph announced their resignations. Research scientist Andrej Karpathy, one of the most prominent minds at OpenAI, left in February, and in a spate of resignations that began shortly thereafter, OpenAI co-founder and former chief scientist Ilya Sutskever and ex-safety leader Jan Leike have stepped down. In August, co-founder John Schulman announced he would leave. And Greg Brockman, the company's president, is on sabbatical.

Of the 13 who founded OpenAI in 2015, three remain.