OpenAI asked for $30 billion and got about $11 billion. Now the pitch goes to wealthy families.

OpenAI set out to raise $30 billion. It has about $11 billion in hand. Berber Jin reported the shortfall in Monday's Journal, Nov. 2. Some large investors were lukewarm. So the maker of ChatGPT is changing who it asks. Next up are family offices and wealthy individuals.

The numbers tell the story. The round values OpenAI at $1.25 trillion. The company had hoped for $1.4 trillion. It now aims for up to $20 billion in all, one person told the Journal, still well short of the first goal. The timing is rough. Tech stocks sold off last week after disappointing earnings at Google, Amazon and Intel. Investors now ask harder questions about which AI companies deserve their money, and at what price. OpenAI plans to go public as soon as early next year.

Here's the part we care about. A private company usually raises money from pension funds, sovereign funds and big venture firms first. Those buyers have teams of analysts and the power to haggle. When they say no, or say less, the deal goes looking for other buyers. Wealthy individuals and family offices are next in line. They often pay the price the institutions wouldn't.

The Journal notes one more thing, and so should we. Its owner, News Corp, has a deal to license its content to OpenAI. The Financial Times reported the cut first.

Our read

This is a Consumer Protection · M11 story, with an Investments/Risk · IN04 lesson inside it. OpenAI is private. It isn't in any of our model books, and we don't buy private shares for them. The company may do very well. That's beside the point. The point is how the deal travels. Say a round comes up short with the pros. Then it shows up at a wealth-management firm or in a pooled fund. The price is often the price the pros refused. The fees stack up along the way. And private shares come with lockups. You may not be able to sell for years, whatever the headlines say.

So here's the check for your own plan. If a broker or an adviser has offered you a piece of a pre-IPO company lately, find the paperwork this week. Look for three things. The price per share, and what the last big round paid. The total fees, including the fund's cut on the way in and on the way out. And the lockup, meaning the earliest date you could sell. If any of the three isn't written down, that's your answer. Bring the papers to your next review and we'll read them together. It's a lot easier to read the fine print now than after the gates close.