OpenAI steals Instacart’s CEO as Sam Altman’s negotiations with partner Microsoft are increasingly shaky. Secondary share sales have become the easiest way for VCs and LPs to land liquidity in this frigid exit market, but some can come at a steep loss compared to a startup’s 2021 valuation. Read on for exclusive data on the current prices for 60+ startups. We also have more details on OpenAI’s decision to call off its for-profit conversion, for now, in a win for Elon Musk. OpenAI lobbies on the Hill for looser AI regulations. Plus, despite Bitcoin’s big surge it wasn’t the rosiest week for crypto boosters between a Senate bill snafu and the Celsius CEO’s sentencing.
The Main Item
Sam Altman Makes a Big Hire As Heated Talks With Microsoft Create Another Headache
OpenAI is becoming too unwieldy to run.
That was made clear this week in Sam Altman’s decision to appoint Fidji Simo to be the company’s CEO of applications, just a few weeks after he’d tapped COO Brad Lightcap to run day-to-day operations. Altman made sure to say he would remain CEO, a tell that managing this ship is increasingly treacherous.
The week began with the announcement that OpenAI was abandoning its effort to extract its for-profit entity from the control of its non-profit. Altman suggested that the decision was driven by the state attorneys general, which have the power to review transactions involving non-profits, but it also underscored the ongoing conflict with Microsoft over the terms of any restructuring.
Under the existing deal terms, Microsoft is entitled to a share of OpenAI’s profit and revenue. But how that pencils out to an equity stake in a corporation is up for negotiation. Microsoft wants a bigger stake than OpenAI feels is fair, sources tell us.
The sides are also butting heads over IP rights. Namely, Microsoft wants to retain its rights to have access and ownership rights to OpenAI’s models, whereas OpenAI is trying to claw that back. The topic has cropped up numerous times between the companies, including an episode last year that provoked a shouting episode between Microsoft’s consumer AI chief Mustafa Suleyman and OpenAI senior executives.
Finally, Microsoft wants to amend an AGI provision that gives OpenAI an out once it develops artificial general intelligence, sources tell us.
These issues were an obstacle to Altman’s planned for-profit conversion — and they remain an obstacle in the new plan to make the business a public benefit corporation that’s still controlled by the non-profit parent.
No restructuring process can move forward until this is figured out.
The fact is Microsoft has OpenAI in a tight spot and knows it. At a high level, relations are still strong — Altman welcomed Microsoft CEO Satya Nadella to their offices the other week. Beneath the surface, though, the competition is rising. Microsoft is no longer just a major investor in the company but increasingly a competitor, especially in enterprise software. A source close to the matter said the changing dynamic is influencing the proceedings. Some at OpenAI worry that Microsoft is setting up such high barriers to a deal so as to make one impossible.
On the Microsoft side, Nadellais staying out of the messiness for the most part, according to a source close to the situation, leaving it to deputies including CFO Amy Hood to put pressure on the OpenAI negotiators.
Meanwhile the instability in OpenAI’s executive ranks continues in the wake of a string of high-level departures. Altman and Simo will have to develop a working relationship that has faltered with many of his former lieutenants, while Lightcap’s future role is uncertain. Simo was already on the OpenAI board, so that familiarity should help.
Altman now has two high profile former CEOs working for him, Simo reporting directly to him and former Nextdoor CEO Sarah Friar, OpenAI’s CFO, who will report to Simo.
OpenAI still has some major assets that its competitors don’t: an iconic AI brand, a popular and revenue-generating consumer application, and a CEO who can raise endless sums of money.
Altman’s ability to manage it all will be quite a test.
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VCs & LPs Eye Secondaries, New Capital Sources as Exit Options Fade
The VC industry’s struggle to return capital to investors at a moment when some LPs — especially university endowments, whose institutional owners are facing federal funding cuts — are desperate for cash has spawned all sorts of creative thinking.
The big firms are finding new sources of capital, and diversifying beyond traditional VC investments. Meanwhile, the hunt for liquidity is feeding a secondary market that’s been growing steadily for several years and could be poised to get much bigger and more organized.
A string of recent developments underscore the trends. Andreessen Horowitz, for one, has assiduously courted big Middle Eastern investors in recent years, and they will presumably play a big role in a $20 billion megafund the firm is currently raising.
Coatue this week targeted another source of new money — wealthy individuals — with a fund that invests in both public and private tech companies, and has a minimum of just $50,000. Morgan Stanley also launched a new fund this week with a $25,000 minimum that will invest in private equity deals, often via secondary sales.
The Trump Administration has made a small move to loosen the “accredited investor” rules that limit private company investments to people with means, and the industry is now lobbying for more sweeping measures that could unlock more retail dollars.
The secondary market for venture investments, meanwhile, could be poised for a break-out as other exit options fade. Investors hoped that President Trump would bring an end to the IPO drought and usher in boom times for M&A, but instead his tariff announcements have caused market turmoil and left deal-making in the same deep-freeze it’s been in since 2022.
There are now hundreds of large, private tech companies that can’t raise more money but also can’t be sold, and some are beginning to outlive the projected time horizon of their shareholders’ funds. Absent other options, selling stakes to other investors can be an appealing route, though it can involve a big discount.
Shares of the crypto companies Chainalysis and Digital Currency Group, for example, are on offer for less than a third of those firms’ prior valuations. (We have data below on dozens of private company share prices.)
“Secondaries are being rediscovered by everyone because people want fund liquidity,” said Dave McClure, an investor who now specializes in secondaries. “That doesn't mean they’re going to get a great price. It’s really a buyers market for secondaries, so except for a few top companies with strong demand, most assets are overvalued, and sellers are usually at a substantial disadvantage.”
Secondary funds, often in the form of “continuation funds” where older investments can be rolled over to new money, are well established in PE, which tends to own stakes in profitable, established companies. VC-backed startups are much harder to value, but continuation funds are catching on among venture investors too.
“In PE there were over 100 continuation funds in 2024, and in the venture market there were like 10,” says Hans Swildens, CEO of Industry Ventures, which specializes in secondary deals and did almost $1 billion in investments last year. “We think there’s going to be a very large growth rate for continuation funds, it’s becoming an asset class.”
There are also severalexchanges where accredited investors can buy private company shares directly, sometimes from employees, though the process can be complicated and require permission from the firm involved.
A lot of the private trading activity involves just a few coveted names, according to McClure, including OpenAI, xAI, Anthropic, Anduril, SpaceX, Canva, and Databricks.
For proven companies like the ones above, the secondary game is about getting in ahead of a liquidity event that might drive prices even higher, but finding the shares can be hard. Several entities now specialize in getting individual investors access to the hottest deals, though at a price of course.
For the rest of the pack, secondary investors need to identify value, or price discrepancies, that didn’t impress existing investors. McClure warns that it’s all still very much buyer-beware. “It’s getting unprofessionalized faster than it is professionalized,” he said. “There’s still too much bullshit inventory.”
See current secondary sales prices for 60+ startups on the marketplace Hiive:
