• Elon Musk is raising funds for xAI at a $15 billion pre-money valuation.
  • Some investors are being offered access to the deal through SPVs with high fees.
  • xAI is a project that emerged out of Twitter. Its only product so far is the Grok chatbot.

Elon Musk’s new AI startup is luring more investors through special purpose vehicles that charge hefty fees, according to an email sent this week.

The message offers a chance to get in on a funding round for xAI, a startup Musk is building out of the company formerly known as Twitter.

The startup said it is soliciting investments at a $15 billion pre-money valuation. If it gets the $3 billion in outside investment it is seeking, the post-money valuation will be $18 billion.

The email lays out the terms if investors want to take part in the xAI financing round through special purpose vehicles. These SPV structures let different VCs invest together through a single entity.

For prospective xAI investors, these commitments come at a cost. For investments of $10 million and up, an investor will get a piece of an SPV that is ahead of other SPVs on the cap table of xAI, making it more attractive. There’s a 5% upfront fee, though, along with a management fee of 1%. Carried interest is set at 10%, according to the email.

Other amounts invested would increase some of these fees. For instance, the email states that a management fee of 2% and carried interest of 20% may apply in some situations.

The email was sent to a wide array of potential investors, according to a person who received it and shared it with Business Insider. Yet, the email said xAI “expects 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. It added that it has already “secured allocation in the upcoming equity round of x.AI” and that, prior to its “first official funding round, Elon allocated a certain number of shares to his closet circle (a few GPs) at a pre-money valuation of $15 billion.”

Despite xAI’s multibillion-dollar valuation, it remains a small operation led by a handful of new hires Musk has made since last year. One person familiar with the group said it’s about 10 engineers working full time with about 5,000 to 10,000 GPUs, a relatively small number of the 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 sound like him.

A representative for X did not respond to an email seeking comment.

Are you an X/Twitter employee or someone with a tip or insight to share? Contact Kali Hays at khays@businessinsider.com or on secure messaging app Signal at 949-280-0267. Reach out using a non-work device.

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