Here’s how it played out, as Khosla told Fortune. First Musk balked at following through on a pledged $1 billion for OpenAI, insisting on control and effectively holding Altman and his team “hostage.” So Altman went looking for a white knight. Khosla calls Musk a “great entrepreneur” but recalls that, “it seems like he wanted it like a private fiefdom with him in charge.”

The terms of Khosla’s investment were not for the faint of heart: $50 million at a $1 billion valuation into what was, at the time, a nonprofit with no clear commercial model. Khosla said it was the largest initial check he’d written in 40 years by a factor of two and the only time in Khosla Ventures history he sent an apology letter to LPs explaining that he knew how “foolhardy” the deal looked but was “doing it anyway.”

How’s that working out? OpenAI has restructured into a public‑benefit corporation and granted Microsoft a 27% stake worth about $135 billion, as part of more than $13 billion in total investment and a long‑term IP‑sharing pact that runs through 2032. As of late February, OpenAI’s valuation was estimated between $730 and $840 million—up from about $300 billion earlier that year. That means Khosla’s $50 million check for 5% of the company is now suspected to be worth billions. 

Khosla, for his part, insists this wasn’t just a momentum trade. He saw a strategic hole: Google and Baidu were racing ahead in AI, and he didn’t want Chinese AI efforts to dominate the West. Backing OpenAI was, in his telling, both an ideological bet on democratizing AI and a geopolitical hedge. It also required a strong stomach. 

Even now, with OpenAI widely viewed as the front‑runner—900 million active weekly users as of early 2026, a brand synonymous with consumer AI, and a deep-pocketed partner—Khosla is not calling the race. He names Demis Hassabis at Google, Anthropic, and Meta as credible challengers, and predicts that whoever has the best model will likely change every six months. The real competition, he argues, will be over compute and long‑horizon research, not this quarter’s benchmark.

You can listen to the full episode of Fortune 500: Titans & Disruptors of Industry on Spotify, YouTube, and Apple.

See you next week,

Lily Mae Lazarus
X: @LilyMaeLazarus
Email: lily.lazarus@fortune.com
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Joey Abrams curated the deals section of today’s newsletter. Subscribe here.

VENTURE CAPITAL

- Replit, a Foster City, Calif.-based no-code app builder, raised $400 million in funding from Georgian, G Squared, Prysm Capital, 1789 Capital, YC, Coatue, a16z, Craft Ventures, and others.

- Axiom Math, a Palo Alto, Calif.-based developer of AI mathematical superintelligence, raised $200 million in Series A funding. Menlo Ventures led the round and was joined by existing investors Greycroft, Madrona, and B Capital.

- ORO Labs, a Palo Alto, Calif.-based AI-powered corporate procurement platform, raised $100 million in Series C funding. Growth Equity at Goldman Sachs Alternatives and Brighton Park Capital led the round and were joined by Norwest Venture Partners, B Capital, XYZ Capital, and Felicis.

- Gumloop, a San Francisco-based platform designed for employees to build AI automations, raised $50 million in Series B funding. Benchmark led the round and was joined by Nexus VP, First Round Capital, Y Combinator, Box Group, The Cannon Project, and Shopify Ventures.

- Qdrant, a Berlin, Germany-based vector search engine, raised $50 million in Series B funding. AVP led the round and was joined by Bosch Ventures, Unusual Ventures, Spark Capital, and 42CAP.

- Cryptio, a New York City-based crypto accounting company, raised $45 million in Series B funding. BlackFin Capital Partners and Sentinel Global led the round and was joined by 1kx, BlueYard Capital, and Ledger Cathay Capital.

- Bold Security, a New York City-based cybersecurity company, raised $40 million in funding from Besemer Venture Partners, Picture Capital, and Red Dot Capital Partners.

- Monteris Medical, a Minnetonka, Minn.-based developer of minimally invasive neurosurgery technology, raised $28 million in Series E funding. InnovaHealth Partners and Birchview Capital led the round and were joined by others. 

- Scanner, a San Francisco-based security data platform, raised $22 million in Series A funding. Sequoia Capital led the round and was joined by CRV and Mantis VC.

- Ernesta, a New York City-based custom rug company, raised $20 million in Series B funding. Addition led the round and was joined by True Ventures and Platform Capital Management.

- Qurrent, a San Francisco, Calif.-based developer of autonomous digital workforces designed to automate operational work, raised $15 million in Series A funding. Cervin Ventures led the round and was joined by Streamlined Ventures.

- Carefam, a New York City-based conversational AI platform designed for health care human resources, raised $14.5 million in funding from Pitango HealthTech, Emerge, and others.

- Freestyle, a Santa Monica, Calif.-based baby care brand, raised $10 million in Series A funding. Silas Capital led the round and was joined by ECP Growth

- Ezra, a San Francisco-based developer of AI infrastructure for private markets, raised $8 million in seed funding. Congruent Ventures led the round and was joined by Planeteer, Wireframe, KDX, Stepchange, Leap Forward, and others.

- Tower, a Berlin, Germany-based AI-powered data engineering platform, raised $6.4 million across pre-seed and seed rounds. DIG Ventures led the pre-seed round and Speedinvest led the seed round.

- Ark Labs, a Lugano, Switzerland-based bitcoin infrastructure company, raised $5.2 million in seed funding from Tether, Ego Death Capital, Epoch VC, and others.

- AmpliSi, a Sheffield, U.K.-based battery materials developer, raised £2 million ($2.7 million) in pre-seed funding. Northern Gritstone and Clean Growth Fund led the round.

IPOS

- PayPay, a Tokyo, Japan-based mobile payment app and digital wallet, raised $880 million in an offering of 55 million shares priced at $16 on the Nasdaq.

- MDA Space, a Toronto, Canada-based developer of robotics, satellite systems, and geointelligence manufacturer for the space industry, raised $300 million in an offering of 9.8 million shares priced at $30.50 on the New York Stock Exchange.