OpenAI has laid out a plan to revamp its corporate structure next year, saying it would create a public benefit corporation to manage its growing business and ease the restrictions imposed by its current non-profit parent.
Rumors have swirled that OpenAI was in the process of shifting to a largely for-profit company, but this is the first time it has detailed the proposal publicly.
Under the proposed structure, the public benefit corporation, which is a for-profit corporate entity, will run and control OpenAI’s operations and business, while the non-profit will hire a leadership team and staff for charitable initiatives in sectors such as healthcare, education and science.
This new structure will give the for-profit arm of OpenAI much more control. In a blogpost, the company said it is “a stronger non-profit supported by the for-profit’s success”. OpenAI added that the structure will allow it to “raise the necessary capital” like other businesses in this space.
OpenAI, the maker of the extremely popular ChatGPT chatbot and one of the world’s most valuable startups, started in 2015 as a research-focused non-profit.
But over the past year, it has been looking to make structural changes to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that it says will surpass human intelligence.
OpenAI’s latest $6.6bn funding round, at a valuation of $157bn, was contingent on whether it could upend its corporate structure and remove a profit cap for investors.
“Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness,” OpenAI said in the blogpost.
Microsoft is OpenAI’s biggest investor, with a 49% stake, but this structure becomes complicated when OpenAI transitions to a for-profit company. Both businesses have hired investment banks to guide them through the process and help determine how much of stake Microsoft will own in a newly structured OpenAI, according to the Wall Street Journal.
OpenAI’s rivals in the generative AI space include Anthropic and Elon Musk-owned xAI, which use the same public-benefit-corporation structure. OpenAI said changing its business to this structure will help it better compete.
“The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission,” OpenAI said in the blogpost. “We once again need to raise more capital than we’d imagined.”
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