OpenAI Restructures from Non-Profit to For-Profit - New Business Model

OpenAI, the creator of ChatGPT, is reportedly planning a significant restructuring of its business model. Sources familiar with the matter revealed that the company aims to transition from its current structure, governed by a non-profit board, into a for-profit benefit corporation. This move is expected to attract more investors and could potentially value OpenAI at $150 billion.

Under this proposed restructuring, the non-profit OpenAI will still exist and maintain a minority stake in the newly structured for-profit entity. The shift could also lead to changes in how the company addresses AI-related risks under its new governance framework.

For the first time, OpenAI’s CEO, Sam Altman, will receive equity in the company as part of the restructuring process. Altman’s equity stake comes as the company works to remove the cap on returns for investors, making it an even more appealing prospect for future investment. The sources, who spoke on condition of anonymity, indicated that the plan is still being finalized with lawyers and shareholders, and the exact timeline for completing the restructuring remains uncertain.

“We remain focused on building AI that benefits everyone, and we’re working with our board to ensure that we’re best positioned to succeed in our mission. The non-profit is core to our mission and will continue to exist,” an OpenAI spokesperson said in a statement.

A New Chapter for OpenAI

The proposed restructuring marks a significant departure from OpenAI’s original structure. Founded in 2015 as a non-profit research organization, the company established the for-profit entity OpenAI LP in 2019 to secure funding for its ambitious projects. With Microsoft as a key investor, OpenAI made headlines with the launch of ChatGPT in late 2022, which quickly became one of the fastest-growing applications in history, boasting over 200 million weekly active users.

As the company’s valuation soared from $14 billion in 2021 to a projected $150 billion, it has attracted interest from major investors like Thrive Capital and Apple. This restructuring is expected to align OpenAI’s business model more closely with its mission while providing the flexibility needed to scale and innovate in the competitive AI landscape.

Governance and AI Safety Concerns

The restructuring has also raised questions about how OpenAI will manage its commitment to AI safety and governance. The company’s unique structure, which gave the non-profit full control over the for-profit subsidiary, was designed to ensure the development of “safe AGI that is broadly beneficial.” However, this model came under scrutiny last November when OpenAI’s non-profit board briefly ousted Altman, citing a breakdown in communication and trust. He was reinstated five days later, following overwhelming support from employees and investors.

Since then, OpenAI’s board has undergone significant changes, with Bret Taylor, former Salesforce co-CEO, now serving as chair. Any major corporate restructuring will require approval from the nine-person non-profit board, which currently includes several technology executives.

The proposed changes have been met with mixed reactions. While investors generally welcome the shift toward a more traditional corporate structure, some in the AI safety community worry that the new governance model might not provide sufficient oversight. Earlier this year, OpenAI dissolved its superalignment team, which focused on long-term AI risks, further fueling concerns about the company’s commitment to AI safety.

Altman’s Role and Vision

The amount of equity Sam Altman will receive has not been disclosed. Altman, who has a history of successful startup investments, chose not to take an equity stake in OpenAI initially to maintain the board’s independence and avoid conflicts of interest. He has previously stated that he is driven by a passion for the work, not financial gain.

The restructuring could position OpenAI similarly to its rivals, Anthropic and Elon Musk’s xAI, both of which are registered as benefit corporations. These organizations aim to balance profit with social responsibility and sustainability, a model that OpenAI appears to be moving towards.

The restructuring comes amid a period of significant leadership changes at OpenAI. Longtime CTO Mira Murati recently announced her departure, and President Greg Brockman is currently on leave. These shifts in leadership and the ongoing governance restructuring signal a pivotal moment for OpenAI as it navigates the complexities of scaling and innovating in the rapidly evolving AI sector.

As OpenAI prepares for these changes, the company’s leadership is expected to provide more details on the restructuring and its implications for the future during an upcoming all-hands meeting.