OpenAI Leads Investment in AI Programming Tool Cursor, Valuation Triples to $9 Billion in Six Months

AI Programming Tools Cursor Anysphere, a company that develops AI apps, has closed a new round of funding at a valuation that has more than tripled from the beginning of the year to about $9 billion, showing once again that Silicon Valley AI apps startups are attracting a steady stream of funding.

The funding round was led by OpenAI backer Thrive Capital and amounted to $900 million, according to people familiar with the matter, which also included Andreessen Horowitz and Accel.

Anysphere was founded in 2022 by four 20-something MIT math and computer science majors.

In January, the company closed a $105 million funding round at a $2.5 billion valuation, which also included Thrive and Andreessen Horowitz.

This significant increase in valuation is largely due to its rapid growth in annual recurring revenue (ARR): as of April, ARR had reached $200 million, making it one of the fastest-growing companies in the software industry.

However, such an aggressive valuation increase has also renewed concerns among some investors about the sustainability of AI company valuations, especially against the backdrop of recent secondary market volatility.

This comes after OpenAI's valuation soared to $260 billion in March and SoftBank pledged to lead a $40 billion investment in it.

Meanwhile, two startups founded by former OpenAI executives are gearing up for major funding rounds: Safe Superintelligence (SSI), founded by Ilya Sutskever, has been valued at $30 billion, and Thinking Machines Lab, founded by Mira Murati, is planning to raise $2 billion at a $10 billion valuation. Thinking Machines Lab, founded by Mira Murati, is planning to raise $2 billion at a $10 billion valuation. Neither company has yet to launch an official product.

Cursor It's popular with developers for its AI programming tool, which the team claims automatically generates nearly 1 billion lines of usable code per day. It allows programmers to develop software by talking to AI through natural language and uses "auto-complete" updates to dramatically increase efficiency.

Despite competing with products like Microsoft's GitHub Copilot, Cursor has won over tech companies like Stripe, OpenAI, and Spotify, as well as being used by top AI researchers like Andrej Karpathy.

The former Tesla and OpenAI engineer introduced the concept of "vibe coding" in February of this year to describe the almost meditative state of immersion that comes from communicating with Cursor AI to develop code - "total immersion, embracing exponential efficiency, and forgetting you're writing code". "Get totally immersed in the vibe, embrace exponential efficiency, and forget you're writing code."

AI programming assistants have become a big hit in the generative AI startup space, significantly boosting productivity at tech companies. Google CEO Sundar Pichai said last month that more than 30% code commits within the company "involved employees adopting AI-suggested solutions".

Since ChatGPT's launch in late 2022, AI programming startups have sprung up, including Poolside in France and Windsurf and Replit in Silicon Valley.

Thanks to the likes of OpenAI and AnthropicLarge ModelCompany valuations have turned off the vast majority of investors, and more and more VCs are turning their attention to AI application tier startups such as Anysphere, AI search app Perplexity, and video-generation platform Synthesia to leverage their way into the AI boom.

According to Dealroom.co and Flashpoint, funding for AI app startups has totaled $8.2 billion in 2024, more than double the amount raised last year.

While a number of enterprise AI apps have been rapidly generating tens of millions of dollars in revenue, some investors are concerned that this is more a reflection of the market's broader experimentation with AI technology than any real stable recurring revenue.