OpenAI Closes Its Largest VC Round Ever

Author

Alec Beard
October 08, 2024

Hey SaaS Sentinel reader. Welcome back. Open AI just closed it largest VC round to date, investors are chomping at the bit to invest in ElevenLabs—a new voice AI startup, and a VC shares his key lessons for startup founders.

OpenAI Closes Largest VC Round Ever at $157B Valuation

Image Credits: Getty Images

OpenAI made history this week, raising a jaw-dropping $6.6 billion in a new funding round led by previous backer Thrive Capital. The monster round values the AI startup at $157 billion post-money.

To put that figure in context, OpenAI's new valuation exceeds the total market cap of companies like Boeing, Uber, and IBM. It's now firmly one of the most valuable private startups on the planet.

The flood of new capital brings OpenAI's lifetime funding to $17.9 billion, and ensures its place at the helm of the booming synthetic AI market. Powerhouses like Microsoft, Nvidia, and SoftBank also participated in the exclusive round.

So why did OpenAI attract more money in a single round than some tech giants generate annually? In short, to feed the hungry computational beast that is generative AI.

OpenAI is reportedly burning through billions to train ever-larger models like ChatGPT and to snap up the top experts needed to keep pace with rival Anthropic. ChatGPT alone was costing upwards of $700,000 per day at peak.

The spending spree has paid off, with ChatGPT garnering over 250 million users faster than any app in history. But the red-hot market has also drawn intense competition from fellow AI upstarts, traditional tech titans, and investors printing their own synthetic startups.

Unchaining itself from its nonprofit constraints can give OpenAI more freedom to explore capital-heavy bets as it faces these threats. However, the company has also seen an executive exodus in recent months.

As the new cash pours in, all eyes will be on OpenAI's next moves. Will it retain the magic that launched ChatGPT's stratospheric rise? Or will unchecked spending and leadership instability allow hungrier rivals to catch the unicorn? You can learn more in the full article below.

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Red-Hot ElevenLabs Eyes $3 Billion Valuation on Revenue Tear

Image Credits: Bryce Durbin / TechCrunch

Investors can't shovel funding fast enough into ElevenLabs, a two-year-old startup specializing in audio and voice AI tools. The company is currently entertaining offers that would value it as high as $3 billion — a tripling of its valuation in just months.

VCs are scrambling to pay up out of fear of missing yet another synthetic media juggernaut. One interested firm floated the idea of a $3 billion price tag, betting that's what it might take to squeeze into ElevenLabs' next raise.

If recent financial figures shared with some investors are accurate, it's easy to see why excitement is hitting a fever pitch. ElevenLabs' annualized revenue purportedly expanded from $25 million at the end of last year to around $80 million now.

In other words, ElevenLabs is on track to increase revenue over 3x in 2022 alone. Its products have clearly tapped into demand for AI voice generation, with offerings tailored to consumer use cases like narrated audiobooks.

We've witnessed consumer apps drive torrid top-line expansion before, but maintaining rocket-ship growth at scale is easier said than done. Just ask Snap after its red-hot debut.

Still, ElevenLabs finds itself on every top investor's radar as synthetic media's spotlight intensifies. And with a potential 3x valuation uptick that already factors in sky-high expectations, the company knows how to capitalize on the hype.

But all startups riding investor waves eventually need to back it up with real revenue staying power. We'll soon find out if ElevenLabs' founding team can translate their AI voice tech into an enduring business worthy of a $3 billion sticker price.

Lessons from the Trenches: VC Shares Key Tips for Founders

Image Credits: Crunchbase

Starting a company brings no shortage of exhilarating highs and crushing lows. As founders ride the entrepreneurship rollercoaster, it's wise to learn from those who've been thrown from the ride and limped away with hard-won wisdom.

Lucky for today's crop of founders, Asymmetric Capital Partners VC, Arjun Sethi, just authored a raw post about the core lessons he wished he knew when starting his first company. His VC firm has made over 80 early-stage investments, so Sethi knows how and when to dole out advice.

Among his key tips included focusing relentlessly on product-market fit, not growth hacks or vanity metrics. Sethi explained how overfunded rounds and inflated valuations — similar to OpenAI and ElevenLabs — can back founders into corners later on. He also encouraged starting small, running lean experiments instead of huge launches requiring hundred-person teams out the gates.

But one of Sethi's most vital points centered on the early team. Recognize that employees hired in year one likely can't scale for year five, he argued. In other words, resist the temptation to recruit long-term execs at the start.

As we've seen with OpenAI's executive defections, skill sets and demands evolve rapidly as companies mature. Being flexible enough to swap out roles is key, even if it means saying bye to your first sales leader — your high school sweetheart — as you prepare to marry a VP Sales with public company expertise down the road.

You can read the rest of Sethi’s startup tips in the full article below.

Parting Thoughts

Well, that’s the tech news for this week. Hit reply and let us know—did you learn something from today’s newsletter?

Until next time!