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When it comes to AI, the one company that comes to everyone’s mind is OpenAI. It was founded in 2015 as a non-profit entity by Sam Altman, Elon Musk, Ilya Sutskever, Greg Brockman, John Schulman, and Wojceih Zaremba to develop a useful version of AI. OpenAI was set up with the intention to act as a countermeasure for the possibility of monopolization of AI technology by tech giants.

OpenAI’s Offerings

By 2018, OpenAI had made its first version of Generative Pre-trained Transformer (GPT), a neural network that simulates human brain and is trained on data sets. That was just the beginning for GPT models. Within a year, it had expanded GPT’s capabilities to launch GPT-2 that was known for its ability to create text like humans. A year later came the release of GPT-3 that had the ability to answer natural language questions and translate between languages while generating improvised text.

OpenAI also released an API platform, a suite of services that helps build and deploy AI applications and became its first commercial product. Today, OpenAI is on a GPT-4 version that boasts of far superior AI capabilities than its earlier counterparts and is focused on enterprise customers.  

Besides GPT, OpenAI is also known for DALL-E, a deep learning model that can generate complex digital images from text commands and descriptions. Like GPT, DALL-E has also evolved over the years where the current version can follow complex prompts with more accuracy and detail to generate more coherent and accurate text and imagery.

OpenAI continues to improve its offerings and recently announced the release of Sora, a tool that can generate videos from text. It is also looking at expanding to develop its own chipset through an acquisition to control the costs of its chips.

OpenAI’s Financials

OpenAI started as a non-profit entity, but in 2019, it had pivoted to a for-profit entity. With the increasing adoption of AI globally, OpenAI has seen its revenues skyrocket. In December 2023, it was earning $1.6 billion in revenues. Recent reports suggest that revenues have doubled to $3.4 billion over the last six months of which nearly $3.2 billion came from subscriptions to ChatGPT and fees from developers accessing its models through its API.

OpenAI also earns revenue through its partnership with Microsoft where OpenAI models are sold through the Azure platform. Microsoft’s collaboration helped it earn $200 million in revenues in the 6-month period. OpenAI did not disclose any other financial metrics. Last year, it had recorded a loss of $1 billion for the year.

OpenAI remains a privately held organization. Microsoft has been a big investor in the company and owns a 49% stake. The original non-profit organization still owns a 49% stake in the company. The balance is owned by other investors including a16z, Sequoia, Tiger Global, and Founders Fund. Earlier this year, OpenAI allowed employees to sell existing shares in a tender offer led by the venture firm Thrive Capital. The deal valued the company at $80 billion. Analysts believe that within a couple of years, OpenAI could become the first private company with a trillion-dollar valuation.

OpenAI is not the only player in the space. Google and Amazon’s investments are helping fuel the growth of companies like Anthropic and Cohere. But there is no denying that OpenAI remains the biggest name in the industry.

OpenAI’s Platform Strategy

OpenAI’s platform has gained significant traction. Its API platform is used by over 3 million developers for building third party apps with access to enterprise grade features. Earlier this year, OpenAI also announced the launch of its marketplace – a GPT store, which features a range of GPTs developed by its partners and the community. Within two months of its launch, the GPT store had created more than 3 million custom versions of ChatGPT. OpenAI’s store also comes with a search function that will help people discover new GPT apps. It will also promote some GPTs and publish leaderboards of the more popular GPTs.

OpenAI plans to monetize this store and announced plans to launch a GPT builder revenue program. The program was expected to allow US-based builders to be paid based on user engagement with their GPTs in Q1. However, OpenAI has still not released a formal revenue plan for these developers. But I suspect that once it does, it will become one of the most powerful PaaS players.

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