OpenAI is venturing into venture capital, betting $400 million on the next generation of AI companies.

Dynamica Beating AI Newsletter: OpenAI Launches Second Startup Fund of $400 million, fully funded by OpenAI.

The first fund, raised in 2021, totaled $175 million and was backed by external investors such as Microsoft, with no contribution from OpenAI itself. At that time, OpenAI was entitled to a portion of the investment profits, but the majority of the financial gains went to the fund's LPs (Limited Partners). Now, OpenAI has taken on the second fund, and the money earned from investments will no longer primarily benefit external LPs.

The initial fund has already invested in 24 companies, including Cursor and the legal AI firm Harvey, with all funds now fully deployed. Cursor was acquired by SpaceX earlier this month in a deal corresponding to a hidden equity value of $60 billion.

The new fund will continue to focus on early-stage AI companies, aiming to invest in 8 to 10 companies per year, with a goal of leading the investment rounds. Individual investments will start from a few million dollars, typically capped at $50 million, while suitable projects may receive up to $100 million.

Although the OpenAI Startup Fund was previously associated with OpenAI's name, it mainly utilized funds from external investors. With the success of the first fund, OpenAI has now decided to personally commit $400 million to continue investing, bearing the risks themselves and retaining a greater share of the investment returns.