OpenAI has officially announced its shift to a for-profit structure, amid fierce opposition from the likes of Elon Musk and Meta.
In a blog post announcing the move, OpenAI said it plans to turn its existing for-profit segment into a Delaware Public Benefit Corporation (PBC).
A public benefit corporation is a particular type of corporate structure where a company must balance making a profit for shareholders, stakeholder interests, and a public benefit interest in its decision-making.
It’s a structure that is being commonly deployed in the AI world, for example, by OpenAI competitor and Claude-maker Anthropic, and by Elon Musk’s AI start-up xAI, which makes X’s chatbot Grok. OpenAI says its plan “would result in one of the best-resourced non-profits in history” and allow it to raise funds with “conventional terms,” like its competitors.
OpenAI was founded in 2015 as a nonprofit research lab, but later adopted a hybrid structure that includes both a nonprofit and a commercial arm. The start-up would later go on to raise huge sums of money from the likes of Microsoft, and its total funding raised hit $17.9 billion in October per Crunchbase following its latest round, two years after it launched its flagship product, ChatGPT.
Reports have circulated about OpenAI transitioning into a fully for-profit firm for months, though this is the first time the firm has publicly announced the move.
“Our current structure does not allow the board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do more than control the for-profit,” wrote OpenAI in the blog post. “The PBC will run and control OpenAI’s operations and business, while the nonprofit will hire a leadership team and staff to pursue charitable initiatives in sectors such as healthcare, education, and science.”
OpenAI says that the nonprofit’s part of the organization’s interest in the existing for-profit will “take the form of shares in the PBC at a fair valuation determined by independent financial advisors.”
This could potentially, according to some sources, give founder Sam Altman a multibillion-dollar 7% stake in the company.
The move comes as Musk, who co-founded OpenAI, is now suing the start-up over its plans to ditch its nonprofit status, among other things. Meta has also pledged their support to the request, saying that the move would represent a “seismic shift” for Silicon Valley.
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About Will McCurdy
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