OpenAI Reveals Plans to Become a For-Profit Firm

OpenAI is undergoing a corporate overhaul. The ChatGPT creator announced in a business blog post (via The New York Times) that it intends to make some structural changes soon. OpenAI will become a Public Benefit Corporation, or PBC, which is a sort of corporation under US corporate law that operates intentionally to create profits while also benefiting society in some way. As it is would be reformed as a public benefit corporation, with the non-profit that controls the organization receiving shares in the new firm. 

On Friday, OpenAI published information about its plans to adopt a new organizational structure, which will free the business from oversight by a charity that has been the source of conflict.

OpenAI’s executives have been secretly considering a transition for several months, but have revealed few details.

In a business blog post published on Friday, OpenAI stated that it intends to restructure as a public benefit corporation, or P.B.C., a for-profit corporation dedicated to creating public and societal good. OpenAI competitors such as Anthropic and Elon Musk’s xAI have a similar framework.

“The P.B.C. 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,” according to the organization. “It will enable us to raise the necessary capital with conventional terms like our competitors.”

Although it still possesses “ordinary shares of stock,” according to OpenAI, this new structure will incentivise the corporation to “balance shareholder interests, stakeholder interests, and a public benefit interest in its decision making,” as it puts it.

Previously, OpenAI’s corporate operations included both for-profit and non-profit sides. That will remain the situation, with the non-profit owning shares in the PBC. However, OpenAI said in a blog post that this new structure will allow it to raise more cash than before, though it did not specify how.

The for-profit branch will oversee OpenAI’s day-to-day operations, while the non-profit arm will “hire a leadership team and staff to explore charitable initiatives in fields such as health care, education, and science.”

It’s unclear how or if this will affect OpenAI’s consumer-facing products or the user experience associated with them in the short future. However, with ChatGPT facing a major service outage the day after Christmas, a large new influx of money and resources will most likely be very welcome, assuming that is how everything plays out.

In the previous year, the non-profit’s board attempted to dismiss its CEO, Sam Altman. It failed, but the incident alarmed OpenAI’s investors, which included Microsoft. In recent months, Mr. Altman and his colleagues have been working on a new structure.

With the new structure, Mr. Altman and his colleagues must find ways to compensate the non-profit for its loss of control. OpenAI stated that the organization will receive shares in the P.B.C., although the valuation was still being negotiated by independent financial consultants.

The idea “would result in one of the best resourced non-profits in history,” the business wrote on its blog. OpenAI’s most recent funding round valued the company at $157 billion.

OpenAI sparked the generative A.I. boom in late 2022 with the publication of its online chatbot, ChatGPT, which can answer questions in a near-humanlike manner. In the months that followed, start-ups and tech behemoths like Google, Meta, and Amazon competed to develop similar technology.

In 2015, Mr. Altman created OpenAI as a non-profit with numerous AI researchers and businesspeople, including Mr. Musk. Mr. Altman and his co-founders stated that the goal was to develop artificial intelligence for the benefit of humanity rather than corporate stockholders.

However, by 2018, OpenAI’s founders concluded that developing sophisticated A.I. technology would cost far more than they could generate through a nonprofit.

Mr. Musk left the lab earlier that year. When Mr. Altman took over as CEO, he established a for-profit firm capable of attracting investors and promising financial returns while being accountable to the non-profit board. It eventually secured more than $13 billion in capital from Microsoft and others.

Microsoft, OpenAI’s largest investor, also established a collaboration that has tightly tied the two companies as they compete with other artificial intelligence firms. Microsoft provides the raw processing power required to develop OpenAI technologies, and it has an exclusive license to utilize them in its own products.

However, Microsoft and other investors became dissatisfied with the non-profit’s authority over the start-up when its board attempted to remove Mr. Altman in November 2023. The board stated that it no longer trusted Mr. Altman to develop AI for the good of humanity.

Mr. Musk sued OpenAI this year, claiming that the business and two of its founders, Mr. Altman and Greg Brockman, violated the organization’s founding contract by prioritizing commercial interests over the public benefit. OpenAI has refuted the claim.