Announcing the restructuring plans, OpenAI said on Friday that it would establish a public benefit company to make it easier for it to “raise more capital than it imagined” and from its current nonprofit parent. Restrictions on the firm may be lifted.
His high-profile restructuring was recognized and fully justified in September. Reuters The story that fueled the debate between tech titans like Elon Musk and corporate watchdogs.
At issue were the implications of such a move on whether OpenAI would fairly allocate its assets to the nonprofit organization, and how the company could generate profits and create social and public good with the advancement of AI. will establish a balance between
Under the proposed plan, the current for-profit arm of the ChetGPT maker would become a Delaware-based public benefit corporation (PBC) — a structure designed to consider the interests of society in addition to shareholder value. is
OpenAI is trying to make changes to attract more investment, as the expensive search for artificial general intelligence, or AI that surpasses human intelligence, heats up.
Reuters reported in October that its latest funding round of $6.6 billion at a $157 billion valuation depends on whether the ChatGPT maker can expand its corporate structure and cap returns for investors. can terminate within two years.
The nonprofit, meanwhile, will have a “significant interest” in PBC in the form of shares as determined by independent financial advisers, OpenAI said in a blog post, adding that it “dated will be one of the best-resourced nonprofits.
OpenAI started as a research-focused nonprofit organization in 2015 but formed a nonprofit unit four years later to secure funding for the high costs of AI development. Its unusual structure gave control of the for-profit unit to a nonprofit and was in the spotlight last year when Sam Altman was fired as CEO only to return days after an employee revolt. was done
‘key step’
The Microsoft-backed startup said on Friday, “Once again we need to raise more capital than we thought. Investors want to back us but, at this scale of capital, traditional equity and Less structured bespokeness is required,” the Microsoft-backed startup said on Friday.
“The fact that major companies are now investing hundreds of billions of dollars in AI development shows what OpenAI will really have to do to continue the mission.”
Its plans to create a PBC would align the startup with rivals such as Anthropic and Musk-owned xAI, which use a similar structure and recently raised billions in funding.
Anthropic secured another $4 billion in investment from existing investor Amazon.com last month, while xAI raised nearly $6 billion in equity financing earlier in December.
“Key to the announcement is that OpenAI’s for-profit side will ‘run and control OpenAI’s operations and business,'” said DA Davidson and co-analyst Gil Loria.
“This is an important step that the company needs to take to continue fundraising,” Loria said, though he added that the move “doesn’t require OpenAI to go public. ”
However, startups may face some hurdles in the project.
Musk, an OpenAI co-founder who later left and is now one of the startup’s most vocal critics, is trying to block the project and filed a lawsuit against OpenAI and Altman in August. . Musk has alleged that OpenAI violated the terms of the agreement by putting the public good ahead of advancing AI.
OpenAI earlier this month asked a federal judge to deny Musk’s request and published a trove of messages with Musk arguing that he had initially made profits for OpenAI. Bakhsh supported the status before he parted ways with the company after failing to acquire a majority equity stake and full control.
MetaPlatforms is also urging California’s attorney general to block OpenAI’s transformation into a for-profit company, according to a copy of the letter seen by Reuters.
Anne Lipton, of corporate law, said that being a benefit corporation does not in itself guarantee that a company will put its stated mission above profit, as only a company’s board can legally set its mission for that status. And need to “balance” the concerns of making a profit. Professor at Tulane Law School.
“The only reason to choose a benefit form over any other corporate form is the announcement to the public,” he said. “There’s really no enforcement power behind it,” he said.
In practice, it’s the shareholders who own the controlling stake in the company that dictate how closely the public benefit company sticks to its mission, Lipton said.