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OpenAI lays out plan to shift to new for-profit structure

Simon Osuji by Simon Osuji
December 27, 2024
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OpenAI on Friday 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.

Under the proposed structure, the public benefit corporation (PBC) 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 health care, education and science.

OpenAI, among the world’s most valuable startups, started in 2015 as a research-focused non-profit but has since been looking to make structural changes to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that surpasses human intelligence.

Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors.

“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,” the Microsoft-backed startup said in a blogpost.

OpenAI plans to turn its existing for-profit arm into a public benefit corporation, incorporated in Delaware, it said. OpenAI’s non-profit arm would take shares in the PBC at a fair valuation determined by independent financial advisers.

Its rivals such as Anthropic and Elon Musk-owned xAI use a similar structure.

“(The structure) will enable us to raise the necessary capital with conventional terms like others in this space,” OpenAI said.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Anil D’Silva)



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