OpenAI considers shift to for-profit corporate structure

AI start-up says the change will help it raise more funding

OpenAI started in 2015 as a research-focused non-profit. Reuters

OpenAI, the company leading the generative artificial intelligence boom, is considering a shift in its structure to create a for-profit corporation alongside its non-profit unit.

The company plans to change its existing for-profit arm into a public benefit corporation (PBC), incorporated in Delaware, with ordinary shares of stock, it said in a blog post on Friday.

The PBC will run and control OpenAI’s operations and business, while the non-profit will hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education and science.

The company's current structure does not allow the board to "directly consider the interests of those who would finance the mission and does not enable the non-profit to easily do more than control the for-profit", it said.

However, its shift will enable it to raise the necessary capital on conventional terms, like others in the space, OpenAI said.

OpenAI, which started in 2015 as a research-focused non-profit, says that its mission is to ensure that AI is of benefit to humanity.

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Its ChatGPT platform is a generative AI chatbot that provides human-like responses to prompts in seconds, based on information publicly available on the internet. The technology has become hugely popular since its launch in December 2022 and is currently used by 300 million people each week, according to OpenAI.

However, the company, which is backed by Microsoft, is seeking to boost investments as it rapidly scales its AI offering.

In October, the company raised $6.6 billion in new funding, giving it a valuation of $157 billion. OpenAI said it would use the cash influx to drive forward AI research and increase its computing capacity.

The round was led by Thrive Capital, which put in $1.3 billion, with Microsoft, Khosla Ventures, Fidelity Management and Research, Nvidia, Tiger Global Management, SoftBank and Altimeter Capital among other investors, Bloomberg reported at the time.

"We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," OpenAI said.

At present, the company's competitors, including AI start-up Anthropic and Elon Musk-owned xAI, use a similar corporate structure.

Mr Musk, who co-founded OpenAI in 2015, had a falling out with the start-up. He also sued OpenAI and its chief executive Sam Altman in February, alleging it abandoned its initial non-profit mission and called the company “a lie”.

Although the Tesla founder withdrew the lawsuit in June, he filed another one in August, arguing that the AI company put profits ahead of the public good.

In the new lawsuit, first reported by The New York Times, Mr Musk alleged that once the company's technology started to transform generative AI, Mr Altman “flipped the narrative and proceeded to cash in”.

OpenAI has a licensing partnership with Microsoft, with the tech company investing billions of dollars into the AI start-up in exchange for use of its large language models for its computing services.

Mr Musk contends that OpenAI's language models are outside the scope of the company's partnership with Microsoft. The lawsuit seeks a judicial decision rendering the company's licence to Microsoft null and void.

OpenAI, meanwhile, has said that Mr Musk is just regretful that he wasn't part of the company's success.