Chip startup Rain AI backed by Sam Altman up for sale after funding round flops
San Francisco-based chipmaker
Rain AI
, once a promising startup backed by
OpenAI
CEO
Sam Altman
, is exploring a sale after its $150 million Series B fundraising round collapsed, the New York Post reports. Sources familiar with the matter told the Post that OpenAI is among the suitors circling the company, which develops energy-efficient chips designed to outperform industry leader
Nvidia
.
In acquisition talks for weeks, with no offer as yet
Rain AI has been in acquisition talks for weeks, with no formal offer yet from OpenAI, according to the Post. Altman, a key investor in Rain AI's $25 million seed round in 2022, is reportedly looking to salvage his investment. 'Sam Altman is looking to bail out his investment by having OpenAI acquire Rain for pennies,' a source close to the situation told the Post.
Took loan to stay afloat
The startup has faced significant challenges, including the quiet departure of co-founder and CEO Will Passo, who stepped down for personal reasons, the Post reports. Co-founder Jack Kendall has taken over as CEO, as confirmed on Rain AI's website. In an email obtained by the Post, Kendall acknowledged the company's struggle to secure Series B funding to compete with giants like Nvidia, prompting a pivot to finding a buyer. Rain AI has been burning through cash and recently secured a $3 million bridge loan to stay afloat during sale negotiations, a source told the Post.
'They are in active conversations with suitors,' the source said, noting that major tech companies vying for a foothold in the chip industry are involved. However, Rain AI's inability to secure contracts or letters of intent has hindered its progress, despite successful chip testing. 'It is not a great business,' a source told the Post. 'They couldn't get real accounts.'
OpenAI interviewing Rain AI employees
The Post also reported that OpenAI has begun interviewing Rain AI employees to determine which ones to retain in a potential takeover. Rain AI's struggles stem partly from its young founders' lack of industry credentials, with one source telling the Post, 'It appears the founders are good engineers and poor salesmen.'
Rain AI's Series B, initially slated for last December and expected to value the company at $600 million, was repeatedly delayed, the Post noted. Altman had personally pitched OpenAI investors to back the round, as the Post exclusively reported in November. Despite hiring Apple veteran Jean-Didier Allegrucci last year to bolster its chip development, Rain AI has struggled to translate its technology into sales.
Neither OpenAI nor Rain AI responded to the Post's requests for comment.
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