How OpenAI shunned advisers on a $1.5tn deal spree
A few things were missing from OpenAI’s $1.5tn flurry of deal announcements in recent months: how it plans to fund them, details of the bulk of the financial terms, and any mention of who was providing independent, clear-eyed advice on these complex mega transactions.
The reason for that is OpenAI still doesn’t know exactly how it will fund them, the terms mostly don’t exist, and advisers were overwhelmingly shunned.
In fact, founder and chief Sam Altman came up with the “bold vision” himself and leaned heavily on a small number of lieutenants to flesh out the details and push the deals through with little involvement of bankers or lawyers, DD’s Tabby Kinder and George Hammond report.
These are highly unusual processes for deals of this size and significance, given that they involve huge multiyear agreements with some of the world’s largest chipmakers and cloud providers.
The deals tie huge groups including Nvidia, Oracle, AMD and Broadcom to OpenAI’s fortunes, even as it loses billions of dollars a year, and have been criticised for their circular structures that link together suppliers, investors and customers.
It turns out that the crucial structural and governance details all came down to the start-up’s president, Greg Brockman, chief financial officer Sarah Friar and Peter Hoeschele, recently promoted to lead efforts to boost OpenAI’s access to computing power, said people close to the company.
“Sam is the visionary, but Greg and the team under him really pulled [these deals] together,” said a person close to the company. “He’s quiet and behind the scenes but Greg is the one that’s pushing when it’s not so simple.”
Brockman was part of the founding team at OpenAI in 2015 and chief technology officer of fintech Stripe. Meanwhile, Friar joined OpenAI last year from social networking app Nextdoor where she was chief executive. A small team under Hoeschele, a former Deloitte consultant, have been responsible for the finer details of recent partnerships.
These executives, who have stayed largely out of a spotlight which has shone firmly on Altman in recent years, may find themselves more in focus as these unconventional deals play out.
That’s not to say traditional financial advisers have been completely left on the sidelines on what is arguably the world’s most important growth company.
Altman has relied on former Citigroup banker Michael Klein as a financial adviser on fundraising agreements, but Klein did not work on the chip supply deals. A vehicle created by Klein’s firm also took small mini nuclear reactor start-up Oklo public alongside Altman.
Law firms Sullivan & Cromwell and Wachtell Lipton have also advised OpenAI on some of its recent deals, with the latter advising its $6.5bn acquisition of Sir Jony Ive’s Io Products.