Sam Altman-backed chipmaking startup Rain AI explores sale after $150M fundraising flops: sources
An upstart chipmaker backed by Sam Altman is exploring a sale after plans to raise $150 million from private investors fell through – and OpenAI is among the suitors, The Post has learned.
Rain AI — a San Francisco-based startup that says it's developing chips that are more powerful and energy-efficient than those currently being sold by giants like Nvidia — has been in talks to be acquired for several weeks, sources said.
It's unclear whether OpenAI has yet extended a formal offer for Rain AI, but one source said Altman — who was a major investor in Rain AI's $25 million seed round in 2022 — is circling after the Series B fundraising round collapsed.
Advertisement
5 Sam Altman was an early investor in Rain AI.
AFP via Getty Images
'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.
Co-founder Will Passo has quietly stepped down as Rain AI's CEO and has been replaced by fellow cofounder Jack Kendall, who is now listed as CEO on the company's website.
In an email from earlier this month obtained by The Post, Kendall confirmed that it had proven difficult for the company to close a Series B that would allow it to compete with industry giants like Nvidia and that, instead, Rain had pivoted to a search for a buyer.
Advertisement
Kendall said Rain was burning through cash and would need to raise a $3 million bridge fund to keep the lights on until a deal was finalized. A private placement source said Rain AI has secured the bridge loan and has been 'making good progress in sales talks.'
'They are in active conversations with suitors,' the source said. 'These are major, major technological companies that are looking to compete in the chip space.'
That's after Rain's Series B round, originally expected to launch last December, had been postponed several times.
Advertisement
5 Will Passo recently stepped down as Rain AI's CEO.
William Passo / LinkedIn
Kendall said Passo had stepped down for personal reasons and that his exit had impacted the firm's ability to raise its Series B. OpenAI has begun interviewing Rain AI employees as it assesses which ones to keep in a potential takeover, one of the sources said.
'It appears the founders are good engineers and poor salesmen,' a second source said. 'They were very young and Silicon Valley outsiders without academic or industry credentials. This has always kept them at a disadvantage.'
Rain 'has been very successful in the testing of the chips' but has struggled to turn its advanced tech into actual sales, the private placement source said.
Advertisement
'The old CEO made some great hires but it is not a great business,' the source added. 'They couldn't get real accounts. They don't have contracts or letters of intent.'
5 Rain AI cofounder Jack Kendall has taken over as CEO.
Representatives for OpenAI and Rain AI did not return multiple requests for comment.
As The Post exclusively reported in November, Altman had been personally pitching OpenAI investors on backing Rain AI in the Series B round, which would have valued the startup at roughly $600 million.
Last year, Rain AI hired Apple veteran Jean-Didier Allegrucci, who helped the Big Tech giant develop its own computer chips to replace Intel hardware in its iPhones and Macs.
'Our novel compute-in-memory technology will help unlock the true potential of today's generative AI models, and get us one step closer to running the fastest, cheapest, and most advanced AI models anywhere,' Passo said in a statement at the time.
5 Rain AI makes advanced computer chips.
The turmoil at Rain AI comes during a period of fierce competition in the AI sector as OpenAI looks to fend off rivals like Elon Musk's xAI and Google.
Advertisement
OpenAI recently abandoned plans to become a for-profit entity after facing fierce public pushback from the attorneys general of California and Delaware. Instead, the company will remain governed by a non-profit entity.
Altman's firm is also locked in a legal battle with Musk, who had sued to block the for-profit move and has argued OpenAI abandoned its original mission of building safe AI for humanity's betterment. OpenAI has argued that Musk is simply trying to slow down its progress.
5 OpenAI is one of multiple suitors for Rain AI.
REUTERS
In March, Nvidia and xAI joined a group that includes Microsoft, investment fund MGX and BlackRock to expand AI infrastructure in the US.
Advertisement
The group collectively plans to invest more than $30 billion in AI-related projects.
Last December, Nvidia also joined xAI's $6 billion funding round as a strategic investor.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Los Angeles Times
an hour ago
- Los Angeles Times
Accounting Firm Growth Spurned by Acquisitions, Global Expansion and New Services
For Southern California's many accounting firms, acquisitions have been a means of expansion as the industry consolidates to streamline operations and enhanced technology. Over the past year, a flurry of acquisitions has also been supplemented by new offerings, such as legal services and global expansion with employees in foreign countries that provide services to support U.S. operations. One of the largest mergers of the past year was CBIZ's $2.3-billion acquisition of Marcum LLP, which closed on November 1. The combined firm is expected to have combined annualized revenue of approximately $2.8 billion. Smaller firms have also been the targets of acquisition as aging partners seek exit plans and firms utilize artificial intelligence and offshore resources to optimize operations. It's a trend that mirrors the wider business climate, according to Aldrich CPAs + Advisors. The firm conducted a survey of more than 100 owners and executives at private companies in California, Oregon and Washington and found that 61% received at least one unsolicited offer to be purchased within the past 12 months, and nearly a quarter of those surveyed received three or more unsolicited offers. Competition to acquire accounting firms has been fierce, but local firms have been able to execute mergers despite interest from national firms. In October, GHJ Accounting, Tax and Advisory Firm acquired Los Angeles-based GGF, which provides audit, tax and consulting services to entrepreneurial businesses and individuals. 'We are proud to integrate GGF into the GHJ family to strengthen our ability to deliver exceptional value to our clients. Their strong client relationships and tailored approach make them a perfect strategic fit for our firm,' said Tom Barry, GHJ managing partner, in a statement. Firms are also expanding by adding new services beyond traditional audit and tax advisory. Two firms quickly took advantage of an Arizona Supreme Court ruling in 2021 that allowed nonlawyers to have an economic interest in law firms under the state's Alternative Business Structure program. The Arizona Supreme Court granted a special license to Big Four firm KPMG to operate a law firm in February. In addition to KPMG, Aprio acquired Radix Law, a Scottsdale-based firm, and launched Aprio Legal in February under the alternative business structure. However, a state law proposed in California may limit the impact of the Arizona ruling. Assembly Bill 931 would prohibit California attorneys from sharing legal fees with out-of-state firms operating under alternative business structures such as those that exist in Arizona and Utah, where non-lawyers, including private equity firms and corporations, may invest in or own law firms. Aprio's addition of a law firm complements its nationwide acquisition spree that included Woodland Hills firm Kirsch Kohn & Bridge in November. The Kirsch Kohn & Bridge acquisition added five partners and more than 30 local professionals. Nationally, it has expanded its footprint with firms in Atlanta, Austin, Baltimore, Denver and Chicago. Plus, it added cybersecurity firm Securitybricks. Firms have also expanded their reach globally by opening new offices worldwide to support operations. For example, Weaver credited its West Coast growth partly due to long-term progress reflected by the firm's global footprint and official expansion into India. It opened four new offices since the beginning of 2025 in India: Kochi, Coimbatore and Bengaluru opened in January, while Weaver's Chennai office opened in March. At Long Beach-based Windes, local tax partner Guy Nicio, who serves on the firm's board of directors, leads its growing Philippines team, which provides employee support and client services. HCVT continued to invest in its Armenia operations, reinforcing a commitment to build infrastructure that supports future growth.
an hour ago
Fred Smith, FedEx founder who revolutionized package delivery business, dies at 80
MEMPHIS, Tenn. -- Fred Smith, the FedEx Corp. founder who revolutionized the express delivery industry, has died, the company said. He was 80. FedEx started operating in 1973, delivering small parcels and documents more quickly than the post office could. Over the next half-century, Smith, a Marine Corp. veteran, oversaw the growth of a company that combined air and ground service and became something of an economic bellwether because so many other companies rely on it. Memphis, Tennessee-based FedEx grew into a global transportation and logistics company that averages 17 million shipments per business day. Smith stepped down as CEO in 2022 but remained executive chairman. Smith, a 1966 graduate of Yale University, used a business theory he came up with in college to create a delivery system based on coordinated air cargo flights centered on a main hub, a "hub and spokes" system, as it became known. The company also played a major role in the shift by American business and industry to a greater use of time-sensitive deliveries and less dependence on large inventories and warehouses. Smith once told The Associated Press that he came up with the name Federal Express because he wanted the company to sound big and important when in fact it was a start-up operation with a future far from assured. At the time, Smith was trying to land a major shipping contract with the Federal Reserve Bank that didn't work out. In the beginning, Federal Express had 14 small aircraft operating out of the Memphis International Airport flying packages to 25 U.S. cities. Smith's father, also named Frederick, built a small fortune in Memphis with a regional bus line and other business ventures. Following college, Smith joined the U.S. Marines and was commissioned a second lieutenant. He left the military as a captain in 1969 after two tours in Vietnam where he was decorated for bravery and wounds received in combat. He told The Associated Press in a 2023 interview that everything he did running FedEx came from his experience in the Marines, not what he learned at Yale. Getting Federal Express started was no easy task. Overnight shipments were new to American business and the company had to have a fleet of planes and a system of interconnecting air routes in place from the get-go. Though one of Memphis' best-known and most prominent citizens, Smith generally avoided the public spotlight, devoting his energies to work and family. Despite his low profile, Smith made a cameo appearance in the 2000 movie 'Castaway' starring Tom Hanks. The movie was about a FedEx employee stranded on an island. 'Memphis has lost its most important citizen, Fred Smith,' said U.S. Rep. Steve Cohen of Tennessee, citing Smith's support for everything from the University of Memphis to the city's zoo. 'FedEx is the engine of our economy, and Fred Smith was its visionary founder. But more than that, he was a dedicated citizen who cared deeply about our city." Smith rarely publicized the donations he and his family made, but he agreed to speak with AP in 2023 about a gift to the Marine Corps Scholarship Foundation to endow a new scholarship fund for the children of Navy service members pursuing studies in STEM. 'The thing that's interested me are the institutions and the causes not the naming or the recognition,' Smith said at the time. Asked what it means to contribute to the public good, he replied: 'America is the most generous country in the world. It's amazing the charitable contributions that Americans make every year. Everything from the smallest things to these massive health care initiatives and the Gates Foundation and everything in between,' he said. 'I think if you've done well in this country, it's pretty churlish for you not to at least be willing to give a pretty good portion of that back to the public interest. And all this is in the great tradition of American philanthropy.'
San Francisco Chronicle
an hour ago
- San Francisco Chronicle
Fred Smith, FedEx founder who revolutionized the package delivery business, dies at 80
MEMPHIS, Tenn. (AP) — Fred Smith, the FedEx Corp. founder who revolutionized the express delivery industry, has died, the company said. He was 80. FedEx started operating in 1973, delivering small parcels and documents more quickly than the post office could. Over the next half-century, Smith, a Marine Corp. veteran, oversaw the growth of a company that combined air and ground service and became something of an economic bellwether because so many other companies rely on it. Memphis, Tennessee-based FedEx grew into a global transportation and logistics company that averages 17 million shipments per business day. Smith stepped down as CEO in 2022 but remained executive chairman. Smith, a 1966 graduate of Yale University, used a business theory he came up with in college to create a delivery system based on coordinated air cargo flights centered on a main hub, a "hub and spokes" system, as it became known. The company also played a major role in the shift by American business and industry to a greater use of time-sensitive deliveries and less dependence on large inventories and warehouses. Smith once told The Associated Press that he came up with the name Federal Express because he wanted the company to sound big and important when in fact it was a start-up operation with a future far from assured. At the time, Smith was trying to land a major shipping contract with the Federal Reserve Bank that didn't work out. In the beginning, Federal Express had 14 small aircraft operating out of the Memphis International Airport flying packages to 25 U.S. cities. Smith's father, also named Frederick, built a small fortune in Memphis with a regional bus line and other business ventures. Following college, Smith joined the U.S. Marines and was commissioned a second lieutenant. He left the military as a captain in 1969 after two tours in Vietnam where he was decorated for bravery and wounds received in combat. He told The Associated Press in a 2023 interview that everything he did running FedEx came from his experience in the Marines, not what he learned at Yale. Getting Federal Express started was no easy task. Overnight shipments were new to American business and the company had to have a fleet of planes and a system of interconnecting air routes in place from the get-go. Though one of Memphis' best-known and most prominent citizens, Smith generally avoided the public spotlight, devoting his energies to work and family. Despite his low profile, Smith made a cameo appearance in the 2000 movie 'Castaway' starring Tom Hanks. The movie was about a FedEx employee stranded on an island. 'Memphis has lost its most important citizen, Fred Smith,' said U.S. Rep. Steve Cohen of Tennessee, citing Smith's support for everything from the University of Memphis to the city's zoo. 'FedEx is the engine of our economy, and Fred Smith was its visionary founder. But more than that, he was a dedicated citizen who cared deeply about our city." Smith rarely publicized the donations he and his family made, but he agreed to speak with AP in 2023 about a gift to the Marine Corps Scholarship Foundation to endow a new scholarship fund for the children of Navy service members pursuing studies in STEM. 'The thing that's interested me are the institutions and the causes not the naming or the recognition,' Smith said at the time. 'America is the most generous country in the world. It's amazing the charitable contributions that Americans make every year. Everything from the smallest things to these massive health care initiatives and the Gates Foundation and everything in between,' he said. 'I think if you've done well in this country, it's pretty churlish for you not to at least be willing to give a pretty good portion of that back to the public interest. And all this is in the great tradition of American philanthropy.'
