- OpenAI is one step closer to becoming a for-profit company.
- The AI startup is in preliminary talks with California’s attorney general’s office, Bloomberg reported.
- A for-profit structure would be much more conventional for the investors OpenAI is courting.
OpenAI is one step closer to changing its governance structure from nonprofit to for-profit.
The AI startup is in preliminary talks with California’s attorney general’s office about the process of becoming a for-profit entity, Bloomberg reported Monday, citing two people familiar with the matter.
In September, the Sam Altman-led company, which is worth $157 billion, announced that it planned to go all-in on profit. The announcement came nearly a decade after launching as a nonprofit research organization focused on the creation of safe artificial intelligence.
Reports of the California attorney general’s involvement in the process indicate the company is one step closer to formalizing the unprecedented shift, which would require the attorney general’s approval.
A person familiar with the situation told Bloomberg that OpenAI will submit details of its restructuring plan to Attorney General Rob Bonta after finalizing its proposal.
OpenAI did not respond to Business Insider’s request for comment.
The company told Bloomberg that the company’s nonprofit entity would persist in any future restructuring. BI previously reported that the nonprofit would retain only a minority stake if the company becomes for-profit.
“While our work remains ongoing as we continue to consult independent financial and legal advisors, any potential restructuring would ensure the nonprofit continues to exist and thrive and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission,” OpenAI nonprofit board chairman Bret Taylor told Bloomberg.
A spokesperson for the California AG’s office declined to comment on the specific situation but told BI in a statement that the DOJ “is committed to protecting charitable assets for their intended purpose.”
In 2019, OpenAI added a for-profit arm to help raise money toward its mission. In subsequent years, tensions grew between those at the company who supported a fully nonprofit makeup and those eager to develop new products. The pressure boiled over last November when the company’s board briefly ousted OpenAI CEO Sam Altman.
One year later, many of those who disagreed with Altman’s approach are no longer at the company, and OpenAI has secured historic levels of funding. The company raised a record $6.6 billion in its most recent funding round, putting it on the same level as several big-name publicly traded companies.
A for-profit structure would be much more conventional for the big-name investors OpenAI is increasingly courting, including Microsoft and Nvidia.
The process of shifting from nonprofit to for-profit will likely involve a regulatory probe into how OpenAI values its services, including the popular ChatGPT model, Bloomberg reported.
The shift will require OpenAI to change its structure under Delaware law, where many companies are based, as well as its certificate of incorporation.
November 5, 2024 — This story has been updated with a comment from the California AG’s office sent after publication.
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