OpenAI is under fire from the SEC over restrictive NDAs

Presented by GOTO Market Institute

Hey SaaS Sentinel reader. Welcome back. This week, Stripe is giving its investors an early payday, OpenAI is under fire from the SEC over restrictive NDAs, and HubSpot chooses to remain independent after turning down an offer from Google. 

• Stripe hits $70 billion valuation and gives its investors an early payday

• Anonymous whistleblowers have accused OpenAI of illegally restricting staff communication with regulators

• Boston VCs are pleased that HubSpot will remain an independent company

Stripe Hits $70 Billion Valuation as Growth Stays Strong

Payments giant Stripe continues to see its valuation climb back toward the highs of 2021, reaching a $70 billion valuation based on recent secondary share sales.

Major Stripe investor Sequoia Capital offered existing investors the chance to sell some of their Stripe equity this week, confirming the company's impressive new valuation. The move comes as investors have grown antsy for liquidity given the slow IPO environment in 2023 so far.

But it also shows Sequoia's confidence in Stripe's future prospects. The venerable VC firm said it remains "highly optimistic" on Stripe's outlook across economic cycles. Sequoia has reaped over $10 billion in returns for its investors so far this year.

The new $70 billion Stripe valuation represents a rebound from lows last year. After being valued at $95 billion in early 2021, the company saw its value slide to $50 billion in 2022 amid tech industry woes.

However, Stripe has continued to show strong execution. The payments processor crossed $1 trillion in total payment volume last year, up 25%. It also noted it was cash flow positive in 2022 and expects the same in 2023.

The impressive financials and new secondary cash outs indicate an IPO is not imminent for Stripe after 15 years of private growth. But with investors getting liquidity in private markets and the company's growth staying vigorous, Stripe remains one of the world's most valuable startups.

Read more.

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OpenAI Faces SEC Complaint Over Restrictive NDAs

Artificial intelligence startup OpenAI is facing fresh controversy over its employee agreements. Anonymous whistleblowers have accused the ChatGPT maker of illegally restricting staff communication with regulators.

In a letter sent to the SEC, viewed by The Washington Post, the whistleblowers allege OpenAI's severance agreements and NDAs have prohibited and discouraged employees from reporting potential legal violations to the SEC. They also claim the agreements violate whistleblower protection laws.

The complaint states OpenAI required employees to waive rights to blow the whistle and receive financial incentives or compensation. Staff were allegedly mandated to notify the company if they talk to government regulators.

An OpenAI spokesperson told The Post its whistleblower policy aims to safeguard employee freedom to make "protected disclosures." But lawmakers argue more transparency and accountability are vital as AI advances create new risks.

“OpenAI’s policies and practices appear to cast a chilling effect on whistleblowers’ right to speak up and receive due compensation for their protected disclosures,” said Senator Chuck Grassley (R-Iowa) in a statement. Grassley said OpenAI's NDAs “must change” if policymakers hope to monitor AI's societal impacts.

The controversy comes after OpenAI already backtracked on restrictive exit agreement terms earlier this year that would have revoked unvested employee equity for not signing or breaching NDAs. CEO Sam Altman apologized at the time and pledged to fix the agreements.

But the new whistleblower complaint suggests OpenAI's NDA problems are far from resolved as pressure mounts to reform its policies. Regulators may take a tougher look at enforcing accountability around AI development—and not just at OpenAI.

Read more.

Boston VCs Breathe Sigh of Relief as HubSpot Stays Independent

The end of takeover talks between Google and Boston-based software firm HubSpot comes as welcome news for many in the local startup community. This week reports emerged that acquisition discussions between the two companies have ceased.

While some shareholders may be disappointed the rumored $30 billion+ deal didn't materialize, several Boston VCs expressed relief at HubSpot remaining independent.

As one of the city's highest-valued tech companies, HubSpot plays an integral role in the Boston ecosystem. The 16-year-old firm has driven innovation in marketing and CRM software while spinning off numerous startups from former employees.

"HubSpot has been a great anchor in the Boston ecosystem, spinning out a lot of startups and driving a lot of activity in the local tech scene, so I’m glad to see them stay independent and continue down that path,” said angel investor Rob May.

Some believe a Google takeover could have stalled that innovation pipeline in the near term as organizational changes distracted the company’s focus from serving its vast customer base.

"The good news is that Hubspot is a healthy company that continues to grow and innovate. As long as it can continue to attract great talent in this next chapter, it can continue to be a powerful force in the Boston ecosystem,” said Lily Lyman, general partner at Underscore VC.

While a shot-in-the-arm from acquisition cash could have also boosted new startup funding down the road, retaining a $25 billion anchor tech company seems the safer bet for now.

HubSpot remains firmly on its growth trajectory as it continues to scale across sales, marketing and service software categories. Its most recent quarter saw 23% annual revenue growth to $617 million.

As OpenAI, Amazon Robotics and other giants loom nearby, a thriving HubSpot staying put only bolsters Boston's case as a top tech hub. The city’s startup scene appears relieved at dodging a major loss.

Read more.

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!