- Elon Musk is raising funds for xAI with a pre-money valuation of $15 billion.
- Some investors are offered access to trading via SPVs with high fees.
- xAI is a project born from Twitter. Its only product to date is the Grok chatbot.
Elon Musk’s new AI startup is attracting more investors with special vehicles that charge high fees, according to an email sent this week.
The post offers a chance to participate in a funding round for xAI, a startup that Musk is building from the company formerly known as Twitter.
The startup said it is seeking investments at a pre-money valuation of $15 billion. If it gets the $3 billion in outside investment it seeks, the post-money valuation will be $18 billion.
The email specifies the conditions if investors wish to participate in the xAI funding round through special purpose vehicles. These SPV structures allow different VCs to invest together through a single entity.
For potential xAI investors, these commitments come at a cost. For investments of $10 million and above, an investor will get a share of an SPV that is ahead of other SPVs on xAI’s cap table, making it more attractive. There is, however, a 5% upfront fee, as well as a 1% management fee. Carried interest is set at 10%, according to the email.
Additional amounts invested would increase some of these costs. For example, the email states that a 2% management fee and 20% carried interest may apply in certain situations.
The email was sent to a wide range of potential investors, according to a person who received it and shared it with Business Insider. Still, the email states that xAI “plans to raise the funds in the next 2-3 weeks on a first-come, first-served basis.”
“A significant number of LPs have been waiting for this deal since December 2023,” the email said. He added that he had already “secured an allocation in x.AI’s next funding round” and that before his “first official funding round, Elon had allocated a number of shares to his inner circle (a few GP) during a pre-investment. -monetary valuation of 15 billion dollars.
Despite xAI’s multibillion-dollar valuation, it remains a small operation run by a handful of new hires that Musk has made since last year. A person close to the group said it was about 10 engineers working full time with about 5,000 to 10,000 GPUs, a relatively small number of graphics processing units needed to train large language models. .
xAI’s only product so far is a chatbot called Grok that was trained using Twitter data, including Musk’s tweets, so it would look like him.
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