Wen Microsoft Invested $ 1 Billion in Openai in 2019, IT WAS Weird. Now, The Bet Looks Like One of the Smartest Investments in Technology History.
Openai Announced Last Week That IT’S Restructuring ITSELF INTO A For-Profit Public Corporation Benefit. The Move Will Create Traditional Stock That Enables Investors to Get Equity Stakes in the Business.
As part of this, Microsoft Will Likely Get A New Equity Stake in Openai that COULD BE WORTH AT LEAST $ 150 BILLION, ACCING TO Analysts at BNP Paribas and Other Estimates.
Microsoft Invested About $ 13 Billion to Acquire This Stake, Including the initial $ 1 Billion and A Bigger Investment in Early 2023, Soon after Chatgt Came Out.
Returns rivaling the best
If the restructuring happens as planned, Microsoft Wold Receive a More Than Tenfold Return in Just a Few Years, rivaling Other Famously Successphal Investments by Big Tech Companies.
For Instance, Google Bought YouTube for $ 1.65 Billion in 2006. The video site is Now Worth Hundreds of Billions of Google’s Broader Internet Business. Facebook Acquired Instagram for $ 1 Billion in 2012. This is Worth Worth Hundreds of Billions of Dollars Now, Too.
These two investments took more than a decade to play out, whereas Microsoft’s return on its openai investments has grown much more quickly.
Satya, Kevin, and Sam
Microsoft Ceo Satya Nadella, Cto Kevin Scott, and Openai CEO Sam Altman Crafted the Original Partnership. IT INVOLVED UNUSUAL PROFIT-SHARING UNITS IN WHAT WAS Essentily a Research Lab Wrapped in a Charity at the time.
Openai Also Got Credits to USE Microsoft’s Azure Cloud Service to Train and Run the Giant it Power Chatgt and the Startup’s Other Offers.
AFTER CHATGPT TOOK OFF, OPENAI Needed More Money to Purchase Computing Power and Other Resources to Support This Unprecedented Growth. New Investors Have Wanted Traditional Equity Stakes in Return for Their Cash, and Openai Has Said That Its Unusual Structure Possed Challenges in Fundraising from Investors.
This Pressure Forced Openai to Rethink Its Corporate Structure and Renegotiate Its Partnership With Microsoft. While that the process has haen somewhat acrimonious, the two tech giants seem close to resolving their differences now.
The result is a potential win-twin: Microsoft Gets a Massive New Equity Stake, and Openai Can Traditional Stock, Which Will It Raise Eve More Funding.
“The Openai Relationship, and the Uncertainty Around, has Almost Been Viewed as a lichen for Microsoft, Rather than a valuable asset,” bnp paribas analyst Stefan Slowinski Wrote in a recent not to clients. “That is set to Change as Details Become Avilable.”
A Stake Worth $ 150 Billion or More
In negotiations, the tech companies have discussed Microsoft Getting About A Third of the New Equity. Meanwhile, Openai Employees Are Seling Stock in a New Round That Values the Startup at $ 500 Billion.
“There are Microsoft Will Have a ~ 30% Stake. This Wold Add $ 150 Billion to Microsoft’s Valusion,” BNP’s Slowinski Wrote.
If the stake is 33%, this would be worth more for Microsoft, Based on A $ 500 Billion Valuation for Openai.
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