OpenAI mulls plan for a more conventional for-profit business

OPENAI, founded a decade ago as a research organisation, is considering a change to the artificial intelligence (AI) company’s structure that would create a more conventional money-making corporation alongside a non-profit arm.

The board is evaluating a plan that would turn OpenAI’s business into a public benefit corporation – an entity free to pursue income but with the goal of bettering society – while retaining a non-profit side, according to a blog post on Friday (Dec 27). As part of the new structure, the non-profit arm would hold shares in the moneymaking entity.

Bloomberg previously reported that the company was considering such a move and has been in talks with regulators in California and Delaware about the potential change. Friday’s announcement signals that the board is poised to move forward with a restructuring.

OpenAI’s existing for-profit arm is currently controlled by its non-profit organisation. Under the proposal, the business would become a Delaware Public Benefit Corp, or PBC. The non-profit entity would continue to exist as one of the “best-resourced non-profits in history” and would then hold a “significant interest” in the for-profit arm, in the form of shares determined by independent financial advisers at a fair valuation, OpenAI’s board said.

When OpenAI was founded in 2015, it adopted the idealistic mission of building AI that would be safe and beneficial to humanity. In 2019, OpenAI created the for-profit subsidiary to help fund the high costs of AI model development. By 2022, when OpenAI debuted its ChatGPT chatbot, the company became a superpower in the AI industry – and put its operations under greater scrutiny.

A simplified for-profit structure is considered more attractive to investors, although it could raise questions about whether the San Francisco-based company is sticking with its original public mission. Elon Musk, a co-founder and early investor in OpenAI, filed a lawsuit against the company in August accusing it of breaching an agreement to operate as a non-profit. Musk recently asked a federal court to block OpenAI from pursuing a conversion to a for-profit business while his legal fight plays out.

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OpenAI’s board said the proposed plan will ensure the company’s for-profit arm is successful in the long term. It will help the non-profit raise funds and better execute on its mission, according to the post.

“We once again need to raise more capital than we’d imagined,” the board said. “Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”

The board said the plan that it’s considering would better equip OpenAI’s non-profit to pursue charitable initiatives in sectors such as health care, education and science. BLOOMBERG