OpenAI is growing fast and burning through piles of money

OPENAI, the San Francisco startup behind ChatGPT, has been telling investors that it is making billions from its chatbot and that it expects to make a lot more in the coming years. But it has not been quite so clear about how much it is losing.

OpenAI’s monthly revenue hit US$300 million in August, up 1,700 per cent since the beginning of 2023, and the company expects about US$3.7 billion in annual sales this year, according to financial documents reviewed by The New York Times. OpenAI estimates that its revenue will balloon to US$11.6 billion next year.

But it expects to lose roughly US$5 billion this year, after paying for costs related to running its services and other expenses such as employee salaries and office rent, according to an analysis by a financial professional who has also reviewed the documents. Those numbers do not include paying out equity-based compensation to employees, among several large expenses not fully explained in the documents.

OpenAI has been circulating the documents with potential investors for an investment round that could bring in US$7 billion and value the company at US$150 billion, among the highest ever for a private tech company. The round, which could close as early as next week, comes at a crucial time for OpenAI, which is experiencing rapid growth but has lost a number of important executives and researchers.

OpenAI’s revenue in August more than tripled from a year earlier, and about 350 million people used its services each month as of June.

Most of that has come from the continuing popularity of ChatGPT, which was released in November 2022. The documents show a spike in growth after ChatGPT began allowing people to use the service without creating an account or logging in.

OpenAI’s deal discussions could be affected by three high-profile departures from the company. On Wednesday (Sep 25) evening, its chief technology officer, Mira Murati, resigned, followed quickly by Bob McGrew, chief research officer, and Barrett Zoph, vice president of research.

As part of the investment round, OpenAI has two years to convert to a for-profit business, or its funding will convert into debt, according to the deal documents. NYT