Without any shares in OpenAI, Altman is worth billions through investment

Estimated read time 13 min read

In the latest Forbes and Bloomberg billionaire rankings, OpenAI co-founder and CEO Sam Altman’s personal assets exceed US$2 billion. This is also the first time that this entrepreneurial upstart has entered the ranks of billionaires. However, his assets have nothing to do with OpenAI and come entirely from his investment. It is no exaggeration to say that Altman is currently the most successful investor in Silicon Valley.

Oppenheimer of this era

There is no doubt that Altman is the most high-profile technology leader in the US technology industry in the past two years. With ChatGPT released at the end of 2022, OpenAI is one step ahead of the technology giant Google, taking the lead in opening the era of generative AI, and continues to maintain strong competitiveness in subsequent products such as GPT-4 and Sora, always firmly standing on the AI ​​​​The central location of this new air outlet.

New York Magazine even praised Altman as “the Oppenheimer of Our Age.” From a certain perspective, Altman and Oppenheimer do have many similarities, and this analogy is not too exaggerated.

Neither of them are real technical experts themselves, but they are outstanding project managers with efficient leadership skills. They lead a group of top scientists and technical talents to take the lead in bringing mankind to the forefront in the competition with powerful competitors Germany and Google. Entering the era of atomic energy and generative AI.

In mid-February this year, at the same time as it released Sora, a text-generating video tool, OpenAI also completed a share offer transaction, allowing employees to sell existing shares to venture capital institutions led by Thrive Capital. This transaction is not to raise funds for company purposes, but to give some core executives and employees the opportunity to cash out and achieve financial freedom. This is also an important means for popular startups to retain talents.

The overall valuation of OpenAI in this transaction reached US$80 billion, which has more than tripled from US$30 billion at the beginning of last year. According to statistics from CB Insights, an investment and financing market research company, OpenAI has become one of the most highly valued startups in the world, second only to ByteDance and SpaceX.

In fact, the transaction should have been completed in November last year, but it was only shelved due to conflicts between Altman and the board of directors. With Altman returning to the position of CEO of OpenAI, investors once again gave the AI ​​giant a vote of confidence. Obviously, after Sora is officially released, OpenAI’s valuation will soar further.

However, as OpenAI’s co-founder and CEO Altman, he himself has not been able to obtain any direct benefits from OpenAI’s soaring valuation. Because he does not hold any shares in OpenAI, many executives and core technical talents will benefit from the surge in valuation, which will not bring any direct personal wealth to Altman.

No holdings in OpenAI

Why, as the co-founder and CEO of OpenAI, Altman does not hold any shares in OpenAI?

This starts with the creation and transformation of OpenAI. In December 2015, Altman co-founded OpenAI, a non-profit AI research organization with Musk, former Google machine learning expert Llya Sutsskever and others, dedicated to promoting AI technology research and collaboration, and formulating the AI ​​industry Safety and ethical standards drive AI technology to benefit mankind. At that time, Altman was still the president of Y Combinator, a well-known incubator in Silicon Valley. He and Musk served as co-chairmen of OpenAI.

OpenAI’s initial research funding came entirely from the generosity of many billionaires and technology giants. Musk announced at that time that he would donate US$1 billion in batches in the future, and NVIDIA also sent its first supercomputer DGX-1. In fact, Musk had donated less than $45 million in total before the collapse, and other donors had donated a total of $90 million.

Thanks to donations from technology super-rich people such as Musk, OpenAI is able to recruit AI research talents according to the average salary standard in Silicon Valley. However, compared with industry giants such as Google and Facebook, there is still a significant gap in OpenAI’s salary standards. The talents who initially joined the company all have a desire to benefit mankind. As OpenAI advances product development, the problem of insufficient funds gradually emerges.

AI research is very expensive, and the nature of a non-profit organization has become a core shortcoming that limits OpenAI’s ability to raise funds, preventing them from recruiting top talents and increasing investment in research and development. OpenAI’s expenditure on cloud computing in 2017 was US$7.9 million, while Google’s DeepMind’s expenditure in the same year was US$442 million. The huge financial gap makes it difficult for OpenAI to compete with industry giants such as Google and Facebook.

Musk and Altman had differences regarding the development direction of OpenAI. At the beginning of 2018, Musk proposed to personally take over the operation and research and development of OpenAI, but he met with strong opposition from the board of directors. As an extremely confident and proud man, Musk subsequently left OpenAI completely, citing conflicts of interest, and also terminated donations. Altman then gradually faded out of Y Combinator’s work and shifted his focus entirely to the management of OpenAI. In 2018, Altman’s position changed from co-chairman of OpenAI to president.

In March 2019, OpenAI officially transformed from a non-profit organization to a “limited profit organization” Open LP, and began to accept strategic investment and venture capital. The original non-profit organization Open Inc continues to exist as the parent company of Open LP. In order to avoid being influenced by financial interests and losing the original intention of research, members of the board of directors of OpenAI’s non-profit parent company are not allowed to hold shares in subsidiaries, including Altman himself.

From YC student to CEO

So the question is, since Ultraman does not hold any shares in OpenAI, where does his billion-dollar level come from? Almost entirely from venture capital. Forbes magazine consulted many regulatory documents and interviewed many industry insiders to determine that Altman’s investment assets must exceed US$2 billion.

In addition to being an outstanding entrepreneur, Altman is also a very successful investor. As early as 2015, Altman was listed as one of the “30 Under 30” venture capitalists by Forbes. After all, as the CEO of Y Combinator, the most famous entrepreneurial incubator in Silicon Valley, Altman has close access to a large number of startup companies. .

He himself also experienced the transformation from entrepreneur to investor in YC. In 2005, Altman, who was only 20 years old, was a second-year computer science student at Stanford University. He dropped out of school with his classmates to co-found the location sharing service Loopt, and he became the CEO. That year, Loopt became the first member of Y Combinator’s entrepreneurial training camp in Cambridge, Massachusetts, and received a total investment of more than US$30 million from Xfund and Sequoia Capital.

Due to slow user growth, Ultraman decided to sell Loopt for US$43.4 million in 2012. Although the first venture was not successful, at least it was successfully exited. The month after selling the company, Altman and his brother founded Hydrazing Capital, a venture capital firm, raising $20 million to invest in startups.

Although Loopt’s business was not smooth, Ultraman formed an indissoluble bond with YC. While participating in the YC Entrepreneurship Acceleration Camp, he met many entrepreneurial friends, which laid the foundation for his subsequent investment, including Reddit founder Alexis Ohanian. At the age of 25, Altman had already invested in 4 YC startups. Later, three-quarters of Hydrazing Capital’s investments were invested in YC startups.

In addition, Altman’s vigor, vision and courage left a deep impression on Y Combinator founder and well-known investor Paul Graham. Graham even compared Altman to the young Steve Jobs. In the later stages of Loopt’s business, Altman, who had accumulated several years of entrepreneurial experience, accepted Graham’s invitation and became a partner of YC.

Silicon Valley’s most connected investors

After selling Loopt in 2012, Altman had more energy to participate in YC’s management affairs. Less than two years later, in February 2014, Graham appointed Altman, who was less than 29 years old, as president of Y Combinator, handing over the most influential entrepreneurial incubator in Silicon Valley to the young man he valued most.

Altman not only manages YC, he also makes his own investments. From 2014 to 2019, Altman served as the president of YC for nearly five years and was exposed to countless entrepreneurial projects, and he also chose some for investment. Reddit, AirBnb and Stripe are all YC projects he has invested in.

Altman himself has experienced the difficulties of starting a business, and he understands the needs and feelings of entrepreneurs very well. When Silicon Valley Bank went bankrupt last year, many startups were short of funding for days. When many entrepreneurs were in anxiety, Altman provided them with hundreds of thousands to millions of dollars in working capital without even writing an IOU (loan contract). Many entrepreneurs were deeply moved by this kind of friendship that provided help in times of need.

Rad AI CEO Doktor Gurson said that he really had no choice at the time and sent an email to Ultraman. In less than two hours, Ultraman sent hundreds of thousands of dollars in cash, which was enough for him to temporarily Emergency needs, and there is no requirement for repayment time. “Send me back whatever you can whenever you can” (send me back whatever you can whenever you can).

Altman told the media after the incident was exposed, “I still remember the help investors provided me when I encountered financial difficulties when starting my own business, so I have been working hard to continue this help.”

In addition, despite his young age, Altman is one of the most well-connected investors in Silicon Valley. He knows almost every powerful person in the U.S. technology industry. These personal connections are an important reason why entrepreneurs are willing to accept Altman’s investment. A phone call or an email from him may bring a large amount of financing to a start-up company and promote business cooperation.

Two heavyweight investors, PayPal co-founder Peter Thiel and Y Combinator founder Graham, are both mentors and friends in Altman’s career, while Microsoft CEO Nadella and Apple CEO Ku Katsuya also admires Ultraman very much. The reason why Microsoft is willing to invest more than 10 billion US dollars in OpenAI largely comes from Nadella’s trust in Altman himself.

After being ousted from the OpenAI board of directors last year, Altman made a dramatic return to the company in just four days, with Nadella behind the scenes. When OpenAI employees threatened the board of directors with resignation, Nadella gave Altman the best pressure chip: announcing the recruitment of Altman to lead Microsoft’s AI department.

Altman obviously will not really join Microsoft, but if he goes to Microsoft, OpenAI employees will also resign en masse, which will directly turn OpenAI into a shell company. It was after Microsoft recruited Ultraman that the OpenAI board of directors finally changed its stance and welcomed Ultraman back. Microsoft also received an observer seat on the OpenAI board of directors, which at least has the right to know about major matters.

The craziest investor

Ultraman’s most valuable investments include Reddit and payment solution company Stripe, travel rental company Airbnb, supersonic aircraft company Hermeus, and cryptocurrency company Worldcoin, among others.

The listing of Airbnb made Altman a billionaire. His US$70 million mansions in Hawaii and California came from cashing out his shares in Airbnb. Stripe, which is not yet listed, was valued at more than $65 billion at the beginning of this year, making it one of the most valuable startups currently. The value of Worldcoin’s tokens has soared 337% in the past year, bringing Ultraman considerable returns.

Reddit just went public last month. Altman has invested in the social media company multiple times over the past decade and even served as interim CEO in 2014. He currently holds 8.7% of Reddit’s shares, second only to Tencent, the second largest shareholder with 11%. Based on Reddit’s current market value of $7.4 billion, Altman’s stake is worth $650 million. Of course, this investment has another important meaning: Reddit’s user-generated content is also OpenAI’s highest quality large model training asset.

Although Ultraman also has many luxurious purchases, in addition to luxury properties in Hawaii and California, he also has many expensive personal collections, such as aircraft engines, etc.; but these do not affect his investment of large sums of money. Once When encountering a project that interests him, Ultraman will invest at all costs.

Well-known investor and LinkedIn founder Reid Hoffman said of Altman that he is a rare investor who is not afraid to make big bets. Many investors are afraid of failure and only invest in projects that can make money rather than take the risk of possible failure, but Altman has the courage to take these risks.

In 2021 alone, Altman invested US$375 million in the nuclear energy company Helion Energy and became the company’s chairman. He also invested US$180 million in the biomedical company Retro Biosciences. According to him, it was all he owned at the time. Available working capital.

As early as during YC, Altman was very interested in biomedical projects. At that time, he specifically asked the YC investment department to look for related projects. Although he later went to OpenAI, Altman still maintained a strong interest in investment. After Retro Biosciences came into his investment horizon in 2020, Altman learned that the blood transfusion technology studied by this company could potentially delay human aging. He did not hesitate long and spent almost all his funds.

The AI ​​arms race is bound to bring huge power consumption, and Ultraman believes that nuclear fusion will be an important technical solution. Last summer, Helion Energy reached a cooperation agreement with Microsoft and plans to use nuclear fusion to generate electricity in 2028 to provide power for Microsoft data centers. This is the first commercial contract Helion has received. As an investor and chairman, Altman is an important intermediary between Helion and Microsoft.

In fact, Altman invested in many investment projects with his mentor Thiel. In addition to Helion Energy, he and Thiel also invested in the supersonic aircraft company Hermeus in 2022. The company, founded in 2018, plans to build a hypersonic aircraft that is five times the speed of sound. Although it sounds very crazy, Ultraman quite appreciates this madness.

Ultraman himself is an aircraft engine fan and has also purchased and collected some aircraft engines. After investing in Hermeus, he said, “Hermeus is chasing a very ambitious dream that seems impossible at first, but they are gradually turning it into a reality through engineering culture and technology roadmap. My heart is for Sonics Jumping from the plane.”

Although the vast majority of Altman’s US$2 billion net worth is paper investment assets, and the valuation may fluctuate wildly as the status of investment projects changes, he does not seem to care about risks and has not allocated safe-haven assets. Altman once introduced his investment philosophy this way: As long as one investment is successful, it can exceed the investment losses of other projects.

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