In 2023, OpenAI, the American artificial intelligence company known for its generative pre-trained transformer (GPT) models, executed a secondary share sale that valued the company at approximately $27–29 billion. The sale allowed existing shareholders, including employees and early investors, to sell their shares to outside buyers, rather than issuing new shares to raise capital for the company itself. The transaction reflected the surge in investor interest in generative AI following the November 2022 release of ChatGPT, which had accelerated an AI boom and made OpenAI a central figure in the technology industry.
The share sale was structured as a tender offer, a common mechanism in private companies for providing liquidity to employees and early backers. Under the terms, investors purchased existing shares from current holders, with the company not receiving any of the proceeds. The valuation of $27–29 billion marked a significant increase from OpenAI's previous valuation of around $14 billion in 2021, when it had raised funding from Microsoft and other investors. The 2023 sale was part of a broader trend of large secondary transactions in the AI sector, as investors sought to gain exposure to leading AI startups.
Background and Context
OpenAI was founded in December 2015 as a nonprofit organization by Elon Musk, Sam Altman, Ilya Sutskever, Greg Brockman, Trevor Blackwell, Andrej Karpathy, John Schulman, Wojciech Zaremba, and others, with the mission of ensuring that artificial general intelligence benefits all of humanity. In 2019, the organization transitioned to a "capped" for-profit model, creating a subsidiary that could attract investment while maintaining the nonprofit's oversight. Microsoft invested $1 billion in OpenAI in 2019, and the company's systems were migrated to Microsoft Azure. By 2023, Microsoft had invested over $13 billion in OpenAI, making it a key strategic partner.
The release of ChatGPT in November 2022 was a watershed moment for generative AI, bringing large language models to a mainstream audience. ChatGPT reached 100 million users within two months of its launch, and its success drove demand for OpenAI's technology and for investment in the company. The 2023 share sale was partly a response to this demand, as investors sought to acquire stakes in a company that had become synonymous with the AI boom.
Details of the Share Sale
The 2023 secondary share sale was reported in April 2023, with a separate funding round later in the year that valued the company at $80–90 billion. The secondary sale was led by venture capital firms, including Founders Fund, and involved the purchase of shares from existing shareholders. The transaction was structured to provide liquidity to employees, many of whom held stock options that had become valuable due to the company's rising valuation.
The sale was notable for its size and the valuation it implied. At $27–29 billion, OpenAI's valuation was more than double its 2021 figure, reflecting the company's rapid revenue growth and its dominant position in the AI market. The sale also attracted attention because it occurred while OpenAI was still a private company, and the terms of the deal were not publicly disclosed in full. However, reports indicated that the shares were sold at a price that implied a valuation in the range of $27–29 billion, with some variation depending on the class of shares.
Participants and Investors
Participants in the 2023 share sale included existing OpenAI shareholders, such as employees and early investors, who sold their shares to a group of buyers. The buyers were primarily institutional investors, including venture capital firms and sovereign wealth funds. Reid Hoffman, a co-founder of LinkedIn and an early OpenAI investor, was among those who had previously invested in the company, though his involvement in the 2023 sale was not publicly detailed. Jessica Livingston, another early investor, also had a stake in OpenAI.
The sale was part of a broader pattern of secondary transactions in the AI industry. For example, Anthropic, a rival AI company founded by former OpenAI personnel, raised $450 million in 2023, and Figure AI raised $675 million in the same year. These deals highlighted the intense investor interest in AI startups, driven by the success of ChatGPT and the potential of large language models.
Impact on OpenAI's Valuation and Strategy
The 2023 share sale had several implications for OpenAI. First, it provided a liquidity event for employees, which helped the company retain talent in a competitive market. Second, it established a benchmark valuation that influenced subsequent fundraising efforts. Later in 2023, OpenAI raised $10 billion from Microsoft in a deal that valued the company at $80–90 billion, a significant increase from the $27–29 billion figure. This rapid appreciation reflected the company's growing revenue, which was driven by subscriptions to ChatGPT Plus and enterprise sales.
The sale also signaled OpenAI's strategic shift toward commercialization. The company had initially been founded as a nonprofit with a focus on safety, but the 2019 restructuring and subsequent investments had made it a for-profit entity with a capped profit model. The 2023 share sale was part of this evolution, as OpenAI sought to balance its mission with the need to attract capital and compete with other AI companies.
Comparison with Other AI Funding Rounds
The 2023 share sale was one of several significant funding events in the AI sector that year. In addition to Anthropic's $450 million round and Figure AI's $675 million round, Microsoft's $10 billion investment in OpenAI was the largest single investment in the company. These deals were part of a broader AI boom that saw record levels of investment in artificial intelligence companies. The valuation of OpenAI at $27–29 billion in April 2023 was higher than that of most AI startups, but it was still below the valuations of established tech giants like Google and Amazon.
The sale also drew comparisons to earlier OpenAI funding rounds. In 2021, OpenAI had raised $250 million in a round that valued the company at $14 billion, and in 2022, it had raised $500 million in a round that valued it at $20 billion. The 2023 sale represented a significant jump, reflecting the impact of ChatGPT on the company's fortunes.
Regulatory and Market Reactions
The 2023 share sale occurred amid growing scrutiny of AI companies. Regulators in the United States and Europe were beginning to examine the potential risks of AI, including issues related to AI safety and copyright. The sale itself did not raise regulatory concerns, but it contributed to the perception that OpenAI was becoming a dominant player in the AI industry. Some observers expressed concerns about the concentration of power in a few large AI companies, while others noted the potential benefits of AI for society.
The market reaction to the sale was generally positive, with investors viewing OpenAI as a leading innovator in the field. The company's valuation continued to rise in subsequent years, reaching $852 billion in March 2026, according to reports. This growth was driven by the success of ChatGPT, the release of new models, and the expansion of OpenAI's product offerings, including GPT Image and Codex.
Legacy and Significance
The 2023 share sale was a milestone in OpenAI's history, marking a period of rapid growth and increasing valuation. It demonstrated the financial potential of generative AI and helped solidify OpenAI's position as a leader in the field. The sale also highlighted the challenges of balancing mission and profit, a tension that would continue to shape the company's trajectory, including the brief removal and reinstatement of Sam Altman as CEO in November 2023.
In the years following the sale, OpenAI faced a series of challenges, including lawsuits from authors and media companies over copyright infringement, and concerns about the safety of its AI systems. Nevertheless, the company remained at the forefront of AI development, with its models influencing a wide range of applications. The 2023 share sale was an early sign of the financial and strategic direction that OpenAI would take, and it remains a notable event in the history of the AI industry.