Startup News: OpenAI leads in generative AI technology

OpenAI is the most prominent generative AI startup but unicorns Jasper and Stability AI are not far behind.

Imagine a bot that can solve some of the most complex mathematical equations, write computer programs, or come up with medical diagnoses.

Such feats of artificial intelligence may have already arrived in the version of ChatGPT, a chatbot innovation of OpenAI, a San Francisco-based startup. The company has emerged as a leader in what is arguably the hottest sector of the AI industry, so-called “generative AI.”

As the name suggests, generative AI can generate text, images, sounds and other media in response to short prompts. As the New York Times recently put it, “investors, pundits and journalists have talked up artificial intelligence for years, but [generative AI] represents a more powerful and more mature breed of AI.” In a recent report on the sector, Renaissance Capital wrote that generative AI has the potential to generate trillions of dollars of economic value in the coming years.

Small wonder that venture capitalists are smitten. In 2022, investors pumped at least $1.37 billion into generative AI companies across 78 deals, almost as much as they invested in the previous five years combined, according to data from PitchBook. In addition to OpenAI, other prominent generative AI start-ups include Jasper and Stability AI.

But OpenAI, co-founded in 2015 by Elon Musk and investor Sam Altman, appears to have attracted the most attention. According to news site Semafor, Microsoft is in talks to invest $10 billion in OpenAI as part of funding that will value the firm at $29 billion. In 2019, Microsoft invested $1 billion in OpenAI and became its preferred partner for commercializing new technologies for services like search engine Bing and design app Microsoft Design.

In addition, The Wall Street Journal recently reported that OpenAI is in talks to sell existing shares in a tender offer that could total at least $300 million and that venture-capital firms Thrive Capital and Founders Fund would be the buyers.

Jasper and Stability AI Building an Array of AI Software

With a valuation of $1.5 billion, Austin, Texas-based Jasper currently lacks the kind of expectations that investors are assigning to OpenAI. But the company is building an array of generative artificial intelligence software accessible to businesses and individual creators alike, enabling them to break through writer's block, create original art, and repackage content for format, language, and tone.

In October, the company announced that it raised a $125 million Series A funding round led by global software investor Insight Partners and joined by other leading firms including Coatue, Bessemer Venture Partners, and Founders Circle Capital. And in December, the company introduced JasperChat, which uses natural language that allows users to request a variety of tasks.

Across the Atlantic, London-based Stability AI, with a valuation of $1 billion, is developing a suite of generative AI products of its own. Among its best known AI innovations is Stable Diffusion, which in the words of the company “will empower billions of people to create stunning art within seconds.” In October, the company announced a $101 million funding round led by Coatue and Lightspeed Venture Partners.

About the Author

John Kimelman is a veteran journalist who has worked at Barron’s and CNBC covering such topics as investing and commercial banking. Mr. Kimelman has received compensation from Forge Global, Inc. for authoring this article.

Please Read These Important Legal Notices & Disclosures

The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc., Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.

This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.

Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions. Forge Data LLC is an affiliate of Forge Global, Inc. and Forge Securities LLC.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.