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OpenRouter raises $113M Series B

openrouter.ai

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Re: OpenRouter raises $113M Series B

#211

Post by octoberfranklin »

sowbug wrote: post #138
arw0n wrote: post #78

Earlier quoted context omitted.

I love their product and use them myself. But where's the value proposition for investors? Unless they get purchased by one of the large cloud providers, they will get pushed out of the market sooner or later. What's the value proposition for the typical AWS startup to go with openrouter, if Amazon offers similar rates with direct integration into all their other offerings? The only reason OpenRouter can exist at the…

If you believe there will be lots of LLM providers in the future, then OpenRouter could be a DoorDash play. Established restaurants didn't need DoorDash because they were already on everyone's speed dial. But new or small restaurants couldn't afford to advertise or maintain a team of delivery people. DoorDash created a two-sided marketplace that made it a lot easier for new entrants to bootstrap. Today even the estab…

DoorDash is viable only because the restaurant business (minus national chains) is extremely balkanized. Restauranteurs have very little power.

Re: OpenRouter raises $113M Series B

#212

Post by kristianp »

brianwawok wrote: post #84
simonw wrote: post #6

It took me quite a while to come round to OpenRouter. Originally I didn't understand why anyone would put a proxy between them and an LLM, but it actually adds some quite significant value: 1. By far the lowest friction way to support and try out all the models. 2. They offer billing caps! Most model providers still don't do this [EDIT: maybe they do, see reply comment], but if you're going to run anything in public…

I’m just not sure they have a moat or a long term play? I put $20 in and tried a few models. Then I went right to the model provider to put in $1000 and avoid the middleman tax. Now imagine a big corp spending millions on AI. That’s a lot of middleman tax.

The value of openrouter isn't as a middleman for users of claude, gemini or chatgpt, it's for those looking to find a model that fills the use case at a lower price than the top 3.

Re: OpenRouter raises $113M Series B

#213

Post by potamic »

numlocked wrote: post #141

Hi HN! OpenRouter co-founder and COO here. Lots of questions about why we raised! First off: We remain founder-led and founder-controlled, and intend on being here for a long time, creating awesome products for builders all over the world. We are basically a bunch of tinkerers who like building things, and try to make stuff that we would like, when building with AI. Since this is about the raise though, happy to shar…

> We don't need venture dollars to continue scaling (indeed the business is healthy) but you know when you don't want to raise $100m? When you really need it!

That's a nice narrative but I suspect you're not touching upon the investor pressure side of things. Your earlier investors would be upon you to show a multiple in valuation beyond what the balance sheets can show. The only way to do that is to raise more money.

The problem with this is that you're now beholden to another set of investors who will also expect a multiple on their investment which makes increasing valuation your primary objective, even to the detriment of the business. With a margin business you could sustain for a long time even when the market stagnates, but you've lost that option when you first took money from someone. It's an all or nothing play now.

Re: OpenRouter raises $113M Series B

#216

Post by drob518 »

dnnddidiej wrote: post #188
drob518 wrote: post #158

Hm. Would be interesting to see the finance spreadsheets for this. Typically the B-round guys are looking for something approaching a 10x return. Can anyone justify OpenRouter being worth $1.1Bn? That seems really high for a “management”/man-in-the-middle play. But sure, AI and all. But I’m old enough to remember when every dot-com was a billion dollar valuation, too.

Well yeah if they route most of the worlds tokens easily. What if we get to a point where the 5% is paid by the supplier and they take over more of the infra /routing side that they do. Lots of ways it could be a 10B company.

But is that likely, particularly as the market matures? That seems unlikely to me. We had some of the same sorts of management middleman tools and organizations ideas 15 years or so ago in the cloud computing world and all that pretty much went away.

Re: OpenRouter raises $113M Series B

#217

Post by voidstitch »

jampekka wrote: post #159
simonw wrote: post #6

It took me quite a while to come round to OpenRouter. Originally I didn't understand why anyone would put a proxy between them and an LLM, but it actually adds some quite significant value: 1. By far the lowest friction way to support and try out all the models. 2. They offer billing caps! Most model providers still don't do this [EDIT: maybe they do, see reply comment], but if you're going to run anything in public…

The main friction reduction, for me at least, is the consolidated billing that avoids extra bureaucracy in corporate environments. The API-translation/abstraction tends to cause more problems than it solves. I’d prefer something that consolidates billing, but still lets me use providers' APIs directly (or via some "raw HTTP" proxy). There are plenty of unified API gateways, but I haven’t seen one that is just billing…

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