Musk to raise $6B (from his buddies) for xAI

Elon Musk is about to close a deal that will raise $6B in funding for his AI company, xAI, valuing it (pre-funding) at $18B.

The deal will give investors a 25% stake in xAI and is expected to close over the next few weeks, providing the terms don’t change.

Initially, Jared Birchall (who manages Musk’s family office) told prospective investors that Musk was looking for $3B in investment, valuing the company at $13B. But, following a surge in investor interest, the terms magically increased to $6B (with a company valuation of $18B), with investors being told not to complain “because a lot of other people want in.”

Who is investing in xAI?

Sequoia Capital and Future Ventures (co-founded by Musk’s long-time friend Steve Jurvetson) have been named as frontrunners in the funding round. Jurvetson currently sits on the board of Musk's space technology company, SpaceX, and was a director at Tesla until 2020.

Other potential investors expected to contribute, include Valor Equity Partners and Gigafund, both of which have also been founded by close friends of Musk:

Gigagfund co-founder, Luke Nosek, was the first person to invest in SpaceX and has been a board member, ever since.

Valor Equity Partners founder, Antonio Gracias, was one of the earliest investors in Tesla and (like Jurveston) is a former Tesla Director and (like Nosek and Jurvetson) also sits on the board of SpaceX.

What will Musk use the funding for?

According to its marketing collateral, xAI’s main aim is to connect the digital world with the physical one. Musk plans to achieve this by using the funding to leverage training data from all of his ventures, including Tesla, SpaceX, Boring Company (his tunnel construction company), and Neuralink (which develops implantable chips for human brains). Funding could also advance Musk's vision of developing his AI chatbot (Grok) into a formidable competitor to ChatGPT.

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