Morgan Stanley’s OpenAI ties show how bank reels in hot startups

OpenAI (Courtesy: Reuters photo)

Almost no one outside the tech industry had heard the term ChatGPT when a team at Morgan Stanley invited Sam Altman to its Menlo Park office to meet with some of the bank’s executives.

OpenAI was still months away from releasing its revolutionary chatbot when the meeting took place. But the Wall Street bank quickly signed on as one of OpenAI’s first clients, and, in the years since, has managed to land a large swath of business from one of the world’s hottest startups.

The trillions of dollars being raised and spent by AI companies have made them juicy clients for banks. Even amid a growing chorus of warnings about the potential for a 1990s-style bubble, the industry is a bright spot for investment bankers chasing hefty fees.

At Morgan Stanley, which has grabbed the lead for tech IPOs so far this year but ranks third in overall investment-banking fees, executives have been leaning on its innovation team to make inroads that could ultimately lead to a revenue boost across its business. On its face, the group is charged with finding up-and-comers to sign on as vendors. But behind the scenes, the team has been giving the firm’s investment bankers and wealth advisers a foot in the door.

“We establish an initial relationship and then we try to expand it as much as possible,” Jed Finn, Morgan Stanley’s head of wealth management, said in an interview. “At some point there will be a need to access capital markets and advice. If we’ve been good partners for five, 10, 15 years, we’re going to get the benefit of that.”

Morgan Stanley signed on as an OpenAI client shortly after the 2022 meeting, and the two firms began working on use cases. Weeks later – still months ahead of ChatGPT’s public unveiling in November of that year – they had the idea for their first one: a tool for financial advisers. They now have dozens, and Morgan Stanley has inked partnerships with other AI firms as well, including Elon Musk’s xAI and Anthropic, according to people familiar with the matter.

The relationship with OpenAI has grown from there. Morgan Stanley now handles OpenAI’s employee share plan, the people said. When the artificial intelligence giant completed a deal in October to help employees sell shares at a $500 billion valuation, the transaction took place on a Morgan Stanley platform. The bank also manages the riches of key executives including Altman, the people said, asking not to be identified discussing non-public information.

Morgan Stanley executives and a spokesperson declined to comment on the specific banking relationships with OpenAI and Altman, as did a representative for OpenAI.

Morgan Stanley’s prowess in winning technology industry mandates is well-known: the tale of a veteran dealmaker moonlighting as an Uber Technologies Inc. driver to win its initial public offering has become a Wall Street legend. But the OpenAI relationship is an example of a lesser-known way the bank sinks its hooks into Silicon Valley: the innovation team, which has about 50 staffers worldwide and meets with 1,000 companies a year – as potential vendors.

Many of those meetings lead to nothing, but a few have planted the seed for long, lucrative tie-ups.

“These are highly sophisticated individuals running a corporate entity in growth mode, anticipating an IPO,” said Mandell Crawley, Morgan Stanley’s chief client officer. “We’re able to recognize certain patterns.”

When it comes to the banking of technology companies, it’s a tight race for the top ranking and one that’s often determined by only a couple percentage points of market share — or less.

In the tech IPO space, for instance, Morgan Stanley and Goldman Sachs Group Inc. have vied for the no. 1 ranking for the lead-left role most years in recent history. Goldman took the top spot last year, while Morgan Stanley is in the lead for 2025. JPMorgan Chase & Co. is also trying to muscle its way up the league table, pouring money into its Silicon Valley presence on the heels of its 2023 purchase of First Republic.

Every bank has taken its own approaches to try to get the upper hand. Years ago, Goldman created a fund for dealmakers to plow money into promising startups. JPMorgan, meanwhile, is pitching itself as a one-stop shop for startups as they grow, touting its massive balance sheet and businesses its rivals don’t have, such as treasury management.

In addition to its innovation team, Morgan Stanley has its army of wealth advisers, who have the ability to tap a roster of ultra-rich clients to privately raise money for nascent firms. It also has a share-plan business that manages the cap tables for the vast majority of the largest unicorns.

‘Not here to sell’

OpenAI is a recent example, but Morgan Stanley has something of a track record of meeting up-and-coming firms through its innovation group and then expanding the relationship. The team’s efforts are anchored by an annual conference in the Bay Area, called “Tech Week.”

Far from a typical investment banking conference, Morgan Stanley uses the gathering to hunt for new vendors.

Attending tech companies “obviously are potential clients or existing clients,” Sean Manahan, head of firmwide innovation, said in an interview on the side of the conference at Hotel Nia in Menlo Park. “We’re not here to sell them on that though, we’re here to understand what they do.”

Take Alphabet Inc.: Morgan Stanley executives first met with a team from what was then known as Google at the bank’s conference in 2002 – and won the coveted lead left position on its initial public offering two years later.

Half a decade had passed since teams from the two firms initially met, also at Tech Week. Morgan Stanley started using Zoom as a vendor in 2018 – prior to its IPO and well before it skyrocketed in popularity during the Covid-19 pandemic. The list of similar examples goes on, including, more recently, Figma Inc., Databricks Inc. and Wiz Inc.

Winning these deals is big business for banks. Take the Zoom listing: Morgan Stanley earned about $11.3 million in fees, or 30% of the total, according to data compiled by Bloomberg. For Google’s IPO, Morgan Stanley’s dealmakers generated roughly $20 million, about 40% of the total, the data show.

“A really good signal for us is when multiple VCs start saying to us ‘have you spoken to this company yet?’” Megan Brewer, Morgan Stanley’s head of firmwide market innovation and labs, said in an interview.

At the meeting between Morgan Stanley and OpenAI in early 2022, Finn, and Morgan Stanley Co-President Andy Saperstein and others got a demo of the startup’s new technology. They uploaded an E*Trade customers service transcript and had ChatGPT respond in the style of Dr. Seuss.

Then they fed ChatGPT a speech Saperstein had previously given and started asking questions. The responses, Saperstein joked, were better than what his own would have been.

When the firms found their first use case, Saperstein hosted a celebratory dinner at his home. Altman brought the wine.