After months of speculation, OpenAI today officially announced that it is changing its corporate structure to best support its mission. Back in 2015, OpenAI started as a nonprofit. Since it faced difficulties in raising funds, OpenAI announced its “capped profit” structure in 2019.
The OpenAI Nonprofit remained as before, and its board was responsible for the overall governance of all OpenAI activities. The new for-profit subsidiary issued equity to raise capital and was responsible for research, development, commercialization, and other core operations. Now, OpenAI again wants to raise billions to continue pursuing the mission. However, investors are expecting changes to OpenAI's corporate structure.
OpenAI's board is now working with outside legal and financial advisors on how to best structure OpenAI. The OpenAI board is now considering transforming OpenAI into a Delaware Public Benefit Corporation (PBC) with ordinary shares of stock with the following objectives:
- Choose a non-profit / for-profit structure that is best for the long-term success of the mission. Our plan is to transform our existing for-profit into a Delaware Public Benefit Corporation (PBC) with ordinary shares of stock and the OpenAI mission as its public benefit interest. The PBC is a structure used by many others that requires the company to balance shareholder interests, stakeholder interests, and a public benefit interest in its decision making. It will enable us to raise the necessary capital with conventional terms like others in this space.
- Make the non-profit sustainable. Our plan would result in one of the best resourced non-profits in history. The non-profit’s significant interest in the existing for-profit would take the form of shares in the PBC at a fair valuation determined by independent financial advisors. This will multiply the resources that our donors gave manyfold.
- Equip each arm to do its part. Our 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. 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.
PBCs are not new to the technology world. Elon Musk's recently incorporated xAI, OpenAI's main competitor Anthropic, and Inflection AI are all PBCs. This upcoming OpenAI PBC will run and control OpenAI for-profit's operations and business.
This strategic move by OpenAI highlights the challenges faced by companies trying to balance ambitious missions with financial sustainability. By adopting the popular PBC structure, OpenAI aims to navigate these complexities and continue pursuing its mission of ensuring artificial general intelligence (AGI) benefits all of humanity.
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