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The Almighty Buck AI Businesses

OpenAI Asks Investors Not To Back Rival Startups Such as Elon Musk's xAI (ft.com) 52

Posted by msmash from the going-exclusive dept.
Financial Times has more details on the new fundraise closed by OpenAI. From the report: OpenAI has asked investors to avoid backing rival start-ups such as Anthropic and Elon Musk's xAI, as it secures $6.6bn in new funding and seeks to shut out challengers to its early lead in generative artificial intelligence. [...] During the negotiations, the company made clear that it expected an exclusive funding arrangement, according to three people with knowledge of the discussions. Seeking exclusive relationships with investors restricts rivals' access to capital and strategic partnerships. The move by the maker of ChatGPT risks inflaming existing tensions with competitors, especially Musk, who is suing OpenAI. Venture firms are party to sensitive information about the companies they invest in, and close relationships with one company can make it difficult or contentious to also back a rival. But exclusivity is rarely insisted on, according to VCs, and many leading firms have spread their bets in certain sectors. Sequoia Capital and Andreessen Horowitz, for instance, have backed multiple AI start-ups, including both OpenAI and Musk's xAI.
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OpenAI Asks Investors Not To Back Rival Startups Such as Elon Musk's xAI More

OpenAI Asks Investors Not To Back Rival Startups Such as Elon Musk's xAI

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  • Wut? (Score:4, Interesting)

    by Okian Warrior ( 537106 ) on Wednesday October 02, 2024 @01:15PM (#64834661) Homepage Journal

    I'll let you give me your money, if you agree to my terms?

    Is that a thing with VC nowadays?

    • Re: (Score:3)

      by Luckyo ( 1726890 )

      It's a question of supply and demand. There's an overabundance of money fleeing most IT sectors and into generative AI. And OpenAI has a significant advantage in proven tech, proven teams and proven track record as a successful trail blazer in the field. So supply of suitable investment targets is constrained on the top, demand to invest in such companies is abundant. So supplier gets to set terms.

    • Re: (Score:1)

      by Tablizer ( 95088 )

      If it's required, it's probably illegal. If it's merely a strong suggestion, it's probably legal by itself, but could be a court problem if combined with other anti-competitive moves.

  • May those with the best funding win (Score:5, Insightful)

    by MobileTatsu-NJG ( 946591 ) on Wednesday October 02, 2024 @01:16PM (#64834667)

    Seeking exclusive relationships with investors restricts rivals' access to capital and strategic partnerships. The move by the maker of ChatGPT risks inflaming existing tensions with competitors, especially Musk, who is suing OpenAI.

    In other words they'd like to compete based on the patience of their investors and not the merits of their tech.

  • Apparently having the self-declared most brilliant minds in the world is not enough, Altman needs to monopolize funding as well. Does Sam Altman fear a free market?

    • Re:the free market at work (Score:5, Insightful)

      by DamnOregonian ( 963763 ) on Wednesday October 02, 2024 @01:36PM (#64834749)
      All executives fear a free market. That's why we have antitrust laws. Because sometimes they become powerful enough to do something about it.

      • Surely an explicit call for monopolistic lending will raise an eyebrow <somewhere>

        • Re:the free market at work (Score:4, Insightful)

          by DamnOregonian ( 963763 ) on Wednesday October 02, 2024 @02:21PM (#64834973)
          Depends.
          If OpenAI were a monopoly, then such a call would likely raise eyebrows.
          If OpenAI were not, then it wouldn't at all. Exclusivity is normal in a functioning market. It's however illegal in a monopolized one.

          • Re: (Score:2)

            by Alascom ( 95042 )

            Between OpenAI and Microsoft (OpenAI bedfellow), they control 70% of the market in foundational generative LLM paid services.
            https colon slash slash iot-analytics.com/wp/wp-content/uploads/2023/12/Generative-AI-models-and-platforms-market-share-2023.png

            • Gonna be up to prosecutors and judges/juries to allege and convict them of being a harmful duopoly.
              If they were to collude to control the marketplace, that would be flat out illegal.
      • Not 100% true but yes in general Note that Musk has given free access to Tesla Patents to push the EV market forward. I think he said something like patents are for the weak. SpaceX is also not pushing a lot of patents. Not that the discussion is on patents but the concept is in there.
        • It doesn't matter what Musk says- SpaceX and Tesla have, and enforce, and license, patents.
          "a lot" is a subjective qualifier that is utterly meaningless.

          I'd try harder not to let certain popular CEOs influence your opinion with their self-marketing.
      • The ones that do typically pay to have the laws written in such a way that it benefits them at the expense of any potential competition and usually manages to hoodwink a large percentage of the population into believing that the government has done something other than cementing the position of that company and ensuring they'll stick around for longer than they're actually useful.

    • Apparently having the self-declared most brilliant minds in the world is not enough, Altman needs to monopolize funding as well. Does Sam Altman fear a free market?

      Sam Altman wants all of everything. He wants all the funding. He wants all the data. He wants all the Earth's resources poured into his little attempt at computer god, because his computer god is going to save the universe from all the bad shit we've done to it. Or some such nonsense.

      Sam is the posterboy for greed today. And OpenAI is the manifestation of that greed. Suck up everything into one system and it's bound to pay off. Right? RIGHT?

      • Suck up everything into one system and it's bound to pay off. Right? RIGHT?

        Pin-apathy, that means you!

  • .. I hope they sue each other and the only people to profit are the lawyers.

  • War of entrenchment (Score:3)

    by xack ( 5304745 ) on Wednesday October 02, 2024 @01:32PM (#64834725)
    Also the same by scraping web resources early before the firewalls got updated, and training on "pure" data before AI-generated content pollutes the data set. We will also see programmers separated by those who graduated from CS courses before AI code generators were common.

  • No surprise though.

  • JUST a bit outside, Bob Uecker. (Score:5, Funny)

    by Pseudonymous Powers ( 4097097 ) on Wednesday October 02, 2024 @01:32PM (#64834731)

    "OpenAI Asks Investors Not To Back Rival Startups Such as Elon Musk's xAI "

    I agree with them halfway. Now if their investors would just not fund OpenAI either."

    • "OpenAI Asks Investors Not To Back Rival Startups Such as Elon Musk's xAI "

      I agree with them halfway. Now if their investors would just not fund OpenAI either."

      That's not going to happen, AI isn't going away. What I hope happens is that we get as many damn competitors for OpenAI that they lose count of them because however much assholes like Sam Altman harp on about how they thrive on competition they actually hate the crap out of it, what they dream of is a monopoly.

  • First off it smacks of desperation and an admission that the closest thing to a moat is the money needed (at least if following in the footsteps of OpenAI).

    Secondly, it seems their main competitor may well be Anthropic, who are continuing to raise money successfully, including from the likes of deep pocketed Google and Amazon to who they are a strategic partner.

    Thirdly, most of their competition at the end of the day is going to be the giants like Meta, Google and Microsoft who don't need external funding,

    • I'd also not be surprised to see companies develop O1-like "enahanced reasoning" models...

      If available, OpenAI could then have run their decision to publicise their anti-competitiveness via the model :-)

  • Please comment on the following news article:

    <the text of this article>

    ChatGPT:

    OpenAI's push for exclusivity from investors as it raises $6.6 billion marks a significant shift in the competitive dynamics of the AI industry. While it's not unusual for companies to seek strategic advantages, demanding exclusivity in such a rapidly evolving field like AI could fuel tensions with competitors and venture capital firms. Given the increasing number of AI startups like Anthropic and Elon Musk's xAI, OpenAI

    • Could this be considered to break any laws?

      ChatGPT:

      OpenAI’s request for exclusive investment arrangements is not inherently illegal, but it does raise questions about potential antitrust concerns, particularly if the move is seen as an attempt to stifle competition in the AI industry. Let’s break this down in the context of antitrust law and investor regulations:

      1. Antitrust Concerns (U.S. Sherman Act and Clayton Act)
      Antitrust laws are designed to prevent monopolistic practices that harm competi

  • Isn't that a massive antitrust violation? (Score:4, Insightful)

    by rsilvergun ( 571051 ) on Wednesday October 02, 2024 @02:09PM (#64834917)
    Everyone keeps wondering why prices keep going up and here we have a company literally using its market dominance to discourage investment in competitors and they're doing it right out in the fucking open and we're all just shrugging our shoulders like it's normal

  • Illegalville (Score:4, Insightful)

    by backslashdot ( 95548 ) on Wednesday October 02, 2024 @02:19PM (#64834957)

    Let's see first they converted a non profit into a for-profit .. now they blatantly ask (force?) people not to invest in xAI.

    Do these guys have lawyers or what? Can't they use that AI lawyer? Ask chatgpt?

    • Re: (Score:2)

      by migos ( 10321981 )
      It's totally legal. They're not big enough for anti-trust yet. People are lining up to give money to OpenAI so they get to pick who to take money from. Pretty normal.

      • How ironic (something else?) it will be when another AI company destroys them with orders of magnitude less investment.

  • If you are that threatened by a 10 month old company whose only product is an open source image generator dare I say you might not be worth 150 billion dollars.
  • ...on the darkness of this firm.

  • Please invest all in us and not across our competitors, says no sane CFP ever!

  • Isn't this illegal on some level? Seems blatantly anti-competitive.

  • Non profit in the US doesn't mean anything anymore, it's just a place to park untaxed income for most. This is their silly scheme:OpenAI - Our structure [openai.com]

    Our non profit status requirements for corporations needs a major fix, and by that I mean a complete overhaul.

  • Investors 5 years from now :
    Sam set us up the bomb!

  • If a business tries to tell its customers that they can't shop elsewhere or they'll cut them off, that's absolutely grounds for antitrust prosecution.

    I get that's it's obviously a different context, but is there something like that for the funding side? I mean, a company is technically 'selling' those shares in investment, no?

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