👉 Background: OpenAI, launched in 2015, as a non-profit research lab that focused on exploring AI, while ensuring it benefited all of humanity. In 2022, OpenAI launched its now-famous chatbot ChatGPT, which became the fastest-growing consumer app ever - hitting 100 million users in just 2 months. ChatGPT now has more than 500 million weekly users.

‍👉 What happened: Now, OpenAI has raised $40 billion USD, which values the company at $300 billion. And, this has become the largest ever round of capital raised - more than triple the previous record.

‍👉 What else: Because of the unique structure of OpenAI as part-for-profit and part-non-profit, the shares are expected to be issued as convertible notes. While they'll receive $10 billion USD upfront, the remaining capital will only be received by OpenAI once they hit certain milestones.

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‍What's the key learning?

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‍💡A convertible note is essentially a loan that can be converted into shares of the company at a later date. Generally, there are specific ‘events’ that cause the convertible note to convert into equity — it might be a later round of financing, a maturity date or an exit event.

💡SoftBank and Microsoft — two of OpenAI's key backers have invested via a convertible note. The conversion event is when OpenAI converts into a for-profit structure, which must happen by the end of 2025.

💡In fact, OpenAI will only receive $10 billion USD upfront. So for OpenAI, this funding round isn’t just a cheque — it’s a ticking clock.