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December 21, 2023
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VCs: OpenAI, Anthropic deals leave them acting curiously!

Menlo Ventures, a venture capital firm, is leading an investment in Anthropic, a rival of OpenAI, in a funding round that values the company at $15 billion or higher. This valuation is at least 75 times its annualized revenue and higher than what investors are currently paying for shares of OpenAI. The decision by venture capitalists like Menlo Ventures to invest in mature AI startups at inflated prices is puzzling, as these firms are typically known for backing young startups. This move raises questions about the motivation behind such investments.

The investment in Anthropic comes after OpenAI recently underwent significant changes, including firing and rehiring its CEO, leading to the perception that it is becoming more like a for-profit corporation rather than a nonprofit research group. This shift is reflected in its board composition, which lacks diversity and resembles that of other tech startups. These developments may have influenced the decision of venture capitalists to invest in Anthropic instead of OpenAI.

Overall, the actions of venture capitalists in the OpenAI and Anthropic deals highlight the changing dynamics of the AI industry. Established firms like Google, Microsoft, and Nvidia are buying shares of mature AI startups at high valuations, while venture capitalists are making similar investments in companies that may be seen as competitors to these established players. The motivations behind these investments, such as potential profit opportunities and the desire to be part of the AI industry’s growth, are likely driving these unusual actions.

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