OpenAI CEO Sam Altman Kent Nishimura
When a startup seeks a large round of financing, meetings are usually organized with venture capitalists at which the founders pitch their business idea. At the end of 2023, when OpenAI was looking to raise $300 million from investors, CEO Sam Altman took a different approach. In a group video call, he presented to a handful of high-profile venture capitalists, including SequoiaLightspeed and NEA, an offer they could either accept or reject, and let them discuss it among themselves.
A VC partner whose firm had previously backed Altman companies and who was on the call thought he had clicked on the wrong link when he found himself at a virtual table with his closest competitors. “I thought, ‘This is surreal,’” the investor said. The offer on the table was also unconventional. Each participant could participate in OpenAI at a post-money valuation of $29 billion. The return was limited to three times the investment amount and the conditions were non-negotiable. Altman said this transaction structure would protect OpenAI from undue influence and allow the company to work for the good of humanity.
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“I thought, ‘Try again,’” the investor said. “Altman likes to act altruistic, but I would prefer if he told me his true intentions.” His VC firm wasn’t happy with the deal structure, with limited upside and no loss limits, and was put off by Altman’s Shark Tank-style pitch. They declined the offer but watched as competitors scrambled to write checks. Even those who had expressed dislike for Altman in the past.
Investors are fighting back, but only half-heartedly
This is one of several stories Business Insider US learned during a reporting trip through Silicon Valley. In some parts of this club world, over seven dollar coffees and handcrafted cocktails, the meteoric rise of OpenAI and Sam Altman is leading to an inevitable backlash.
“He’s one of the most intellectually dishonest guys in tech,” says another VC investor who has dealt with Altman and invested alongside him: “I had a lot of meetings with him where he said things that I thought just couldn’t be true, but he somehow gets away with it.”
Silicon Valley can be a fickle place. Venture capitalists fight for the hottest deals. If they lose out, they sometimes become angry and attack founders if they have rejected their offer. The bitterness increases when these startups become very successful.
During Business Insider’s tour of the Valley, growing dissatisfaction with Altman was palpable. OpenAI is preparing for a $100 billion funding round and its artificial general intelligence (breaking latest news) revolution is advancing. Meanwhile, the VCs are busier than ever trying to weaken Altman privately. Most people avoid criticizing him publicly. The investors BI spoke to did not want to be named. After all, no one wants to be excluded from the next round. Even if the offer is presented again via a group video call.