OpenAI was valued at $852 billion earlier this year in a new funding round. The increasing valuation of the ChatGPT parent company could benefit early backers like Microsoft Corporation (NASDAQ:MSFT). A new court document has revealed that one of the company's earliest backers is not a company but rather the University of Michigan’s endowment.
University of Michigan A Victor In OpenAI Investment
The ongoing court case between OpenAI co-founders Sam Altman and Elon Musk has revealed some new details to the public for the first time.
This includes the fact that the University of Michigan public endowment invested $20 million in OpenAI. This investment came years before Microsoft made its first investment and around the time the AI startup had attracted money from Khosla Ventures and the Y Combinator Fund, as reported by Business Insider.
Microsoft has invested around $13 billion in OpenAI, with an early investment in 2019 and a large $10 billion investment in 2023.
ChatGPT didn't debut until November 2022, meaning the University of Michigan made its investment in the AI startup at least three years before the launch of the popular chatbot.
The University of Michigan endowment handles around $21.2 billion in investments according to the report. The early stake in OpenAI could be one of the best investments ever made by a public endowment.
What Michigan's Winning Investment Means
According to the newly released documents, Michigan's investment came with a "target redemption amount" of $2 billion, meaning the public university expects to get that amount back from its investment. With the investment coming ahead of Microsoft and other key investors, the University of Michigan could be prioritized over later investors to cash out its stake.
Fans of the University of Michigan are used to singing "Hail to the Victors," the team's fight song, after victories. The school may be singing the fight song as OpenAI’s valuation continues to grow.
While the exact value of Michigan's stake in OpenAI is unknown, the investment is likely worth billions today given the timing of the early investment. The “target redemption amount” of $2 billion could be just a place holder and Michigan could end up making more from its stake.
A future IPO of OpenAI or additional funding rounds could see the university eventually cash out part or all of its investments.
The money from the early OpenAI stake could go towards many university projects, including funding scholarships and paying NIL (name, image, likeness) money to incoming student-athletes.
Michigan is among the top universities in the country when it comes to professional sports. The Michigan Wolverines won the NCAA Football championship in 2023 and are fresh off winning the 2026 NCAA Men's Basketball championship.
Sports fans could have more reasons to sing "Hail to the Victors" if the profits made from the OpenAI stake go towards bringing in the top names in college sports to the university.
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