What SSI’s $5 Billion Valuation Really Means
It’s the billion-dollar baby of artificial intelligence. Safe Superintelligence Inc., the AI startup launched by former OpenAI chief scientist Ilya Sutskever, announced Wednesday it had raised a whopping $1 billion from big-name venture capital firms, including Sequoia and Andreessen Horowitz.
That’s a huge amount of money for a three-month-old company with 10 staffers, no product and a “singular focus” on creating “safe” AI rather than a money-making product (at least in the short term). While a few other AI startups have raised billion-dollar or greater funding rounds, most obviously Elon Musk’s xAI, as well as CoreWeave and Scale AI, according to Crunchbase, they’re all more advanced, with actual products and businesses.
Even more strikingly, a Reuters article, which SSI offered up as containing more details about the fundraising, said SSI was being “valued” at $5 billion, whatever that means. That ranks SSI as among the most highly valued AI startups around, judging by our ranking of generative AI startups.
To be sure, at this very early stage of SSI’s life, the valuation that its investors ascribe to it is presumably a totally arbitrary number. There’s no revenue to put a multiple against. Maybe the investors are putting a multiple on Sutskever—who worked at Google before co-founding OpenAI—by comparing him to Character co-founders Noam Shazeer and Daniel De Freitas.
Google paid $2.7 billion to get both Shazeer and Freitas when the tech giant agreed to hire most of Character’s staff last month. In other words, SSI’s valuation implies Sutskever is worth nearly two times what Shazeer and De Freitas are. It surely helped that tech investor Daniel Gross, who we profiled here, is a co-founder of SSI with Sutskever.
Of course, crazy valuations are par for the course among AI startups. That was evident from this ranking of valuations for such firms, which my colleague Stephanie Palazzolo put together earlier this year.
That’s mostly due to investor excitement over the potential of AI to change the world, for sure. But a contributing factor may be that major cloud providers and Nvidia have invested in some startups, such as Anthropic, CoreWeave and OpenAI, which in turn end up buying either cloud services or chips from the tech giants. For that reason, the big tech companies can make investments at inflated valuations because they don’t need a financial return from their bets.
Speaking of OpenAI, the ChatGPT creator is reportedly fundraising right now at a $100 billion valuation, which, given the brand name and market strength of its flagship product, may not be that crazy. But the best definition of value is what someone would pay for something in the open market. Would OpenAI fetch $100 billion in an auction? It loses billions of dollars a year and, given the cost of training and running large language models, could be years away from profitability. The need to subsidize the firm to such a degree surely would affect a buyer’s attitude.
By the same token, is there anyone out there who would pay $5 billion to buy SSI right now? If so, Sutskever should just sell now and head for the hills. That would be the quickest fortune he’s ever likely to make.
Verizon’s Round-Trip Sale and Buyback
Cute. Verizon is poised to buy Frontier Communications, according to The Wall Street Journal, the same company that in two separate deals over the past 15 years bought a big chunk of Verizon’s phone lines.
The news sent Frontier’s stock surging 38%, raising its market capitalization to $9.6 billion. That, by the way, is less than the $10.5 billion in cash Verizon received from Frontier when it sold its second tranche of phone lines in 2016.
Those deals didn’t work out too well for Frontier, which took up billions in debt to buy declining businesses (which is why Verizon sold them). Frontier went through bankruptcy in 2020, getting rid of most of the debt. Since then it’s been ramping up its phone line upgrades to fiber, which is capable of delivering superfast internet. If Verizon buys back these businesses, it’ll get the benefit of those upgrades.
Denial of the Day
When is a subpoena not a subpoena? When it’s a civil investigative demand.
Nvidia told the news media today that it had not been subpoenaed by the Justice Department as Bloomberg had reported Tuesday night when it highlighted the news that the DOJ’s antitrust review against the AI chipmaker was moving ahead. Today, however, the news outlet noted that the request for information was in the form of a “civil investigative demand.” That may not technically be a subpoena, but the difference is largely semantic.