OpenAI presents plan to transition to a for-profit corporate structure | OpenAI

OpenAI has laid out a plan to overhaul its corporate structure next year, saying it would create a nonprofit corporation to manage its growing business and ease restrictions imposed by its current nonprofit parent company.

There have been rumors that OpenAI is in the process of becoming a largely for-profit company, but this is the first time the company has publicly detailed the proposal.

Under the proposed structure, the nonprofit corporation, which is a for-profit business entity, will manage and control OpenAI’s operations and business, while the nonprofit organization will hire a leadership team and staff for charitable initiatives in sectors such as healthcare and education Science.

This new structure will give OpenAI’s for-profit arm much more control. In a blog post, the company said it is “a stronger nonprofit supported by the nonprofit’s success.” OpenAI added that the structure, like other companies in this space, will allow it to “raise the necessary capital.”

OpenAI, the maker of the wildly popular ChatGPT chatbot and one of the most valuable startups in the world, was founded in 2015 as a research-focused nonprofit organization.

But over the past year the company has sought to make structural changes to attract more and more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI, which it says will surpass human intelligence.

OpenAI’s latest funding round of $6.6 billion at a $157 billion valuation hinged on whether the company can shake up its corporate structure and remove a profit cap for investors.

“Investors want to support us, but with this capital size they need conventional equity and less structural measures,” OpenAI said in the blog post.

Microsoft is OpenAI’s largest investor with a 49% stake, but that structure becomes complicated if OpenAI becomes a for-profit company. According to the Wall Street Journal, both companies have hired investment banks to guide them through the process and help determine how much of a stake Microsoft will own in a restructured OpenAI.

OpenAI’s competitors in the generative AI space include Elon Musk-owned Anthropic and xAI, which use the same nonprofit corporate structure. OpenAI said moving its business to this structure will help it become more competitive.

“The hundreds of billions of dollars that major companies are now investing in AI development shows what OpenAI really needs to continue the mission,” OpenAI said in the blog post. “We once again have to raise more capital than we imagined.”