OpenAI is in the business of making OpenAI employees rich

Since OpenAI closed its massive $6.6 billion funding round that valued the company at $157 billion, I’ve been wondering how they managed to convince investors that the valuation makes sense. The answer, it turns out, was another large number: $100 billion.

Cory Weinberg over at The Information published an interesting piece breaking down OpenAI’s investor pitch for its most recent fundraise, and some of the numbers they showed investors were astounding. Notably:

Revenue: OpenAI expects revenue to scale from an expected ~$4 billion in 2024 to $100 billion in 2029, which would be a ~90% revenue CAGR over the next five years. While revenue growth over the last year has been explosive (monthly revenue for August 2024 was $300 million, up 1700% since early 2023), growth will become more difficult with size. For example, it’s easier to go from ~$180,000 in monthly revenue to $300 million (as OpenAI did) than it would be to grow from $300 million to $510 billion.

Compute Costs: Ignoring all other operating costs such as salaries, general and administrative expenses, and sales and marketing, OpenAI’s compute costs to train and run its models are expected to be $5 billion this year, compared to $4 billion in total revenue.

Stock Compensation: OpenAI reported stock compensation of $1.5 billion in the first half of 2024, which is around its revenue for that period.

This last point is especially interesting. Two weeks ago, I discussed the curious case of OpenAI’s wave of resignations, as at least nine high-level executives had left the company over the last year. At the time, I pointed out one factor that could be influencing these resignations was that long-time OpenAI employees had the opportunity to sell equity in a tender offer for massive returns:

All of the above-mentioned employees have been at OpenAI since at least 2022, when OpenAI was valued at ~$20 billion, and most of them started even earlier, when OpenAI’s valuation was much lower. In February 2024, they were able to sell some of their stakes in a tender offer at an $86 billion valuation. If you were a long-tenured employee at OpenAI, and you took some chips off the table in that tender offer, you’re rich. And not only are you rich, you are a hot commodity in a hot labor market in the hottest sector in technology right now. You would have no problem raising capital for a new startup or getting paid top-dollar to join another AI startup or a big tech company.

The real question is, if you’re already rich, anyone would hire or fund you, and the company you’ve worked at for years has changed its entire mission statement… why would you stay?

The stock-based compensation stat all but confirms that, yes, OpenAI’s employees have been getting p-a-i-d. For context, Nvidia, a $3.3 trillion company with ~30,000 employees, paid $2.2 billion in stock compensation through the first half of 2024. OpenAI, which is worth roughly 5% of Nvidia, paid 68% of Nvidia’s stock compensation. And the compensation per employee is jealousy-inducing.

In November 2023, OpenAI had 770 employees. According to employee contact database RocketReach, OpenAI now has 3,726 employees. With $1.5 billion in stock compensation paid out in the first half of 2024, the average employee earned between $400,000 and $2,000,000 in stock-based compensation in that six-month period, depending on headcount over the course of that period. Additionally, OpenAI’s CFO confirmed that, as with the February tender offer, employees would again be able to sell shares after this funding round. So, no, we shouldn’t be surprised that OpenAI employees are resigning. They’re millionaires with willing buyers of their shares.