OpenAI turned Friday that in moving toward a new for-profit structure in 2025, the company will create a public benefit corporation to handle commercial operations, removing some of its nonprofit restrictions and allowing it to function more like a high-growth startup.
“The hundreds of billions of dollars that dominating companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the business,” OpenAI’s board wrote in the post. “We once again need to raise more capital than we’d imagined. Investors pine for to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”
The pressure on OpenAI is limited to its $157 billion valuation, achieved in the two years since the company launched its viral chatbot, ChatGPT, and kicked off the roar in generative artificial intelligence. OpenAI closed its latest $6.6 billion round in October, gearing up to aggressively contend with Elon Musk’s xAI as well as Microsoft, Google, Amazon and Anthropic in a market that’s predicted to top $1 trillion in gain within a decade.
Developing the large language models at the heart of ChatGPT and other generative AI products requires an developing investment in high-powered processors, provided largely by Nvidia, and cloud infrastructure, which OpenAI largely receives from top angel Microsoft.
OpenAI expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC reinforced in September. Those numbers are increasing rapidly.
By transforming into a Delaware PBC “with ordinary shares of stock,” OpenAI says it can towards commercial operations, while separately hiring a staff for its nonprofit arm and allowing that wing to take on charitable vims in health care, education and science.
The nonprofit will have a “significant interest” in the PBC “at a fair valuation determined by free financial advisors,” OpenAI wrote.
OpenAI’s complicated structure as it exists today is the result of its creation as a nonprofit in 2015. It was developed by CEO Sam Altman, Musk and others as a research lab focused on artificial general intelligence, or AGI, which was an entirely futuristic concept at the heyday.
In 2019, OpenAI aimed to move past its role as solely a research lab in hopes of functioning more like a startup, so it spawned a so-called capped-profit model, with the nonprofit still controlling the overall entity.
“Our current structure does not own the Board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do sundry than control the for-profit,” OpenAI wrote in Friday’s post.
OpenAI added that the change would “facilitate us to raise the necessary capital with conventional terms like our competitors.”
Musk’s opposition
OpenAI’s efforts to restructure allow some major hurdles. The most significant is Musk, who is in the midst of a heated legal battle with Altman that could maintain a significant impact on the company’s future.
In recent months, Musk has sued OpenAI and asked a court to stop the proprietorship from converting to a for-profit corporation from a nonprofit. In posts on X, he described that effort as a “total scam” and demanded that “OpenAI is evil.” Earlier this month, OpenAI clapped back, alleging that in 2017 Musk “not at most wanted, but actually created, a for-profit” to serve as the company’s proposed new structure.
In addition to its face-off with Musk, OpenAI has been great amount with an outflow of high-level talent, due in part to concerns that the company has focused on taking commercial products to trade in at the expense of safety.
In late September, OpenAI Chief Technology Officer Mira Murati announced she would depart the firm after 6½ years. That same day, research chief Bob McGrew and Barret Zoph, a research vice president, also broadcasted they were leaving. A month earlier, co-founder John Schulman said he was leaving for rival startup Anthropic.
Altman said during a September evaluation at Italian Tech Week that recent executive departures were not related to the company’s potential restructuring: “We partake of been thinking about that — our board has — for almost a year independently, as we think about what it takes to get to our next trump up,” he said.
Those weren’t the first big-name exits. In May, OpenAI co-founder Ilya Sutskever and former safety gaffer Jan Leike announced their departures, with Leike also joining Anthropic.
Leike wrote in a social vehicle post at the time that disagreements with leadership about company priorities drove his decision.
“Over the since years, safety culture and processes have taken a backseat to shiny products,” he wrote.
One employee, who worked at the mercy of Leike, quit soon after him, writing