VCs will make billions on Anthropic’s IPO, but Amazon is set to make much (much) more

Key points

• Amazon's convertible notes in Anthropic were valued at $97.9 billion as of June 30, making it a likely top IPO beneficiary.
• Amazon's total investment in Anthropic is about $18 billion, including $8 billion in notes and $10 billion in preferred stock.
• Anthropic has committed to spend at least $110 billion on AWS over the next 10 years.

Anthropic's S-1 filing shows that Amazon is positioned to be the single largest financial beneficiary of the AI company's IPO, even as venture firms including Menlo Ventures, Sequoia, Sound Ventures and Spark Capital expect billion-dollar returns. None of those VC firms owns 5% of Anthropic, the threshold for the principal stockholders' table, which the article calls highly unusual for a tech IPO.

The reason given is Anthropic's size: at its $965 billion private valuation, a 1% stake is worth nearly $10 billion. Menlo's roughly $14 billion position is only about 1.5% of the company, according to recently reported Bloomberg figures.

How Amazon's stake is structured

Amazon first backed Anthropic in 2023 with a commitment of up to $4 billion. Much of its investment was structured as convertible notes, debt that converts into shares upon an IPO or sale. According to the S-1, Amazon holds notes with $6.2 billion in principal outstanding as of June 30, which is Anthropic's entire debt load; Amazon's own filings valued those holdings at $97.9 billion as of June 30.

The notes could convert into as many as 1.84 billion shares, but a cap limits Amazon to 12% of Anthropic's partially diluted share count. Amazon can waive the cap, and notes that cannot convert will stay outstanding and convert in later quarters under the same limit. Amazon also invested $10 billion in nonvoting preferred stock in the second quarter, $5 billion in each of Anthropic's last two funding rounds, bringing its total investment to about $18 billion.

the biggest winners of Anthropic's IPO may well be tech giants like Amazon

— TechCrunch

Cloud revenue and Google's position

Beyond stock gains, Anthropic has committed to spend at least $110 billion on AWS over the next 10 years. Google is also set for a major windfall: court filings reported by The New York Times showed it held about 14% of Anthropic as of early last year, and it has invested more since, including $10 billion in April. PitchBook analyst Harrison Rolfes told TechCrunch he estimates Google's current stake at closer to 5.6%, and Google has secured at least $114 billion in cloud commitments from Anthropic through 2033.

The S-1 warns that some of those cloud providers also build rival AI models and may not always want the same things Anthropic does.