OpenAI reverses course, nonprofit arm to control business operations
What's the story
OpenAI has announced that its nonprofit division will continue to oversee its for-profit operations, reversing earlier plans to transition to a fully for-profit structure.
The decision follows discussions with civic leaders and the Attorneys General of California and Delaware, as well as public criticism and legal challenges, notably from cofounder Elon Musk.
OpenAI was originally established as a nonprofit focused on safe AI development and added a for-profit arm in 2019 to fund its mission.
Transition plan
OpenAI's business wing to become public benefit corporation
OpenAI's business division, which has been operating under the nonprofit umbrella since 2019, will now become a Public Benefit Corporation (PBC).
The nonprofit will retain control and a majority stake in the new entity.
"OpenAI was founded as a nonprofit, and is today overseen and controlled by that nonprofit," said Bret Taylor, chairman of the OpenAI board.
"Going forward, it will continue to be overseen and controlled by that nonprofit."
Historical context
OpenAI's journey from nonprofit to capped-profit and back
OpenAI was founded as a nonprofit in 2015 but transitioned to a "capped-profit" model in 2019. This model enabled the company to maintain its nonprofit wing while establishing a corporate arm.
The latest move marks a reversal of that trend, with the nonprofit maintaining control over OpenAI's business.
Critics argued that the shift could compromise OpenAI's ethical commitments and safety standards.
The decision to retain nonprofit control aims to address these concerns while allowing for necessary capital investment.
Funding outlook
OpenAI's CEO discusses future funding needs
In a letter to staff, also shared on OpenAI's blog, CEO Sam Altman spoke about the organization's future funding needs.
He hinted that OpenAI may eventually need "trillions of dollars" to make its services widely available.
Altman also detailed plans for the nonprofit to become a major shareholder in the PBC, and for the organization to adopt a standard capital structure where all stakeholders hold stock.
Microsoft's holdup
Microsoft yet to fully back OpenAI's restructuring
Microsoft, which has invested $13.75 billion in OpenAI, is reportedly the most prominent investor yet to fully back the start-up's proposed restructuring.
According to Bloomberg, the tech giant is focused on ensuring its investment remains protected under any new governance model.
OpenAI said, "We continue to work closely with Microsoft, and look forward to finalizing the details of this recapitalization in the near future."