OpenAI Plans Major Restructuring: Shift from Non-Profit to For-Profit Status

OpenAI weighing governance shift away from non-profit

The big picture: OpenAI is close to finalizing a new investment round reported to be around $6.5 billion, which would make it the largest venture capital round of all time, per Axios' Dan Primack. Between the lines: One provision in the funding agreement, which is not yet finalized, allows investors to ask for money back if the governance changes don't happen within two years, according to the source. What they're saying: "We remain focused on building AI that benefits everyone and, as we've previously shared, we're working with our board to ensure that we're best positioned to succeed in our mission. The nonprofit is core to our mission and will continue to exist," an OpenAI spokesperson told Axios. Driving the news: Recent reports by Reuters, Bloomberg and the Wall Street Journal have suggested changes at OpenAI are imminent, with one likely scenario involving the company shifting to a public benefit corporation structure.

Report: OpenAI Plans to Restructure and Become For-Profit Benefit Corporation | PYMNTS.com

OpenAI reportedly plans to restructure its core business into a for-profit benefit corporation that won't be controlled by its nonprofit board. Under this plan, the OpenAI nonprofit will own a minority stake in the for-profit company, Reuters reported Wednesday (Sept. 25), citing unnamed sources. The plan has not been finalized and the timeline for its implementation is uncertain, according to the report. Asked about the report by Reuters, an OpenAI spokesperson said: "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 nonprofit is core to our mission and will continue to exist." The planned restructuring will make the company more attractive to investors, as it would operate more like a typical startup, the report said. OpenAI is also working to remove a cap on returns for investors that it currently has, according to the report. On Sept. 15, it was reported that OpenAI's $150 billion valuation will depend on whether it can change its corporate structure and remove the profit cap for investors. The report said that the conditions on the $6.5 billion in funding show the extent of OpenAI's evolution from a research-based nonprofit and signify the changes it's willing to make to woo investors to fund its costly efforts in the field of artificial general intelligence (AGI).

Exclusive-OpenAI to remove non-profit control and give Sam Altman equity, sources say

ChatGPT-maker OpenAI is working on a plan to restructure its core business into a for-profit benefit corporation that will no longer be controlled by its non-profit board, people familiar with the matter told Reuters, in a move that will make the company more attractive to investors. The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company, these sources said. Chief executive Sam Altman will also receive equity for the first time in the for-profit company, which could be worth $150 billion after the restructuring as it also tries to remove the cap on returns for investors, sources added. The sources requested anonymity to discuss private matters. "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. The details of the proposed corporate structure, first reported by Reuters, highlight significant governance changes happening behind the scenes at one of the most important AI companies. The plan is still being hashed out with lawyers and shareholders and the timeline for completing the restructuring remains uncertain, the sources said. The restructuring also comes amid a series of leadership changes at the startup. OpenAI's longtime chief technology officer Mira Murati abruptly announced her departure from the company on Wednesday. Greg Brockman, OpenAI's president, has also been on leave. Founded in 2015 as a non-profit AI research organization, OpenAI added the for-profit OpenAI LP entity in 2019 as a subsidiary of its non-profit, securing capital from Microsoft to fund its research. The company captured global attention with the launch of ChatGPT in late 2022, a generative AI app that spit out human-like responses to text queries, which has become one of the fastest-growing applications in history with over 200 million weekly active users, igniting a global race to invest in AI. Along with ChatGPT's success, OpenAI's valuation has skyrocketed from $14 billion in 2021 to $150 billion in the new convertible debt round under discussion, attracting investors such as Thrive Capital and Apple. AI SAFETY The company's unusual structure, which gives full control of the for-profit subsidiary to the OpenAI nonprofit, was originally set to ensure the mission of creating "safe AGI that is broadly beneficial," referring to artificial general intelligence that is at or exceeding human intelligence. The structure came into focus last November during one of the biggest boardroom dramas in Silicon Valley, where members of the non-profit board ousted Altman over a breakdown in communication and loss of trust. He was reinstated after five days with overwhelming support from employees and investors. Since then, OpenAI's board has been refreshed with more tech executives, chaired by Bret Taylor, former Salesforce co-CEO who now runs his own AI startup. Any corporate changes need approval from its nine-person non-profit board. The removal of non-profit control could make OpenAI operate more like a typical startup, a move generally welcomed by its investors who have poured billions into the company. However, it could also raise concerns from the AI safety community about whether the lab still has enough governance to hold itself accountable in its pursuit of AGI, as it has dissolved the superalignment team that focuses on the long-term risks of AI earlier this year. It's unclear how much equity Altman will receive. Altman, already a billionaire from his multiple startup investments, has previously stated that he chose not to take an equity stake in the company because the board needed a majority of disinterested directors with no stake in the company. He has also said he has enough money and is doing it because he loves the work. The new structure of OpenAI would resemble that of its major rival Anthropic and Elon Musk's xAI, which are registered as benefit corporations, a form of for-profits that aim to promote social responsibility and sustainability in addition to making profits. (Reporting by Krystal Hu and Kenrick Cai in San Francisco; editing by Kenneth Li)

Exclusive: OpenAI to remove non-profit control and give Sam Altman equity, sources say

SAN FRANCISCO, Sept 25 (Reuters) - ChatGPT-maker OpenAI is working on a plan to restructure its core business into a for-profit benefit corporation that will no longer be controlled by its non-profit board, people familiar with the matter told Reuters, in a move that will make the company more attractive to investors. The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company, the sources said. The move could also have implications for how the company manages AI risks in a new governance structure. Advertisement · Scroll to continue Chief executive Sam Altman will also receive equity for the first time in the for-profit company, which could be worth $150 billion after the restructuring as it also tries to remove the cap on returns for investors, sources added. The sources requested anonymity to discuss private matters. "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. Advertisement · Scroll to continue The details of the proposed corporate structure, first reported by Reuters, highlight significant governance changes happening behind the scenes at one of the most important AI companies. The plan is still being hashed out with lawyers and shareholders and the timeline for completing the restructuring remains uncertain, the sources said. The restructuring also comes amid a series of leadership changes at the startup. OpenAI's longtime chief technology officer Mira Murati abruptly announced her departure from the company on Wednesday. Greg Brockman, OpenAI's president, has also been on leave. Founded in 2015 as a non-profit AI research organization, OpenAI added the for-profit OpenAI LP entity in 2019 as a subsidiary of its non-profit, securing capital from Microsoft (MSFT.O), opens new tab to fund its research. The company captured global attention with the launch of ChatGPT in late 2022, a generative AI app that spit out human-like responses to text queries, which has become one of the fastest-growing applications in history with over 200 million weekly active users, igniting a global race to invest in AI. Along with ChatGPT's success, OpenAI's valuation has skyrocketed from $14 billion in 2021 to $150 billion in the new convertible debt round under discussion, attracting investors such as Thrive Capital and Apple (AAPL.O), opens new tab. AI SAFETY The company's unusual structure, which gives full control of the for-profit subsidiary to the OpenAI nonprofit, was originally set to ensure the mission of creating "safe AGI that is broadly beneficial," referring to artificial general intelligence that is at or exceeding human intelligence. The structure came into focus last November during one of the biggest boardroom dramas in Silicon Valley, where members of the non-profit board ousted Altman over a breakdown in communication and loss of trust. He was reinstated after five days with overwhelming support from employees and investors. Since then, OpenAI's board has been refreshed with more tech executives, chaired by Bret Taylor, former Salesforce co-CEO who now runs his own AI startup. Any corporate changes need approval from its nine-person non-profit board. The removal of non-profit control could make OpenAI operate more like a typical startup, a move generally welcomed by its investors who have poured billions into the company. However, it could also raise concerns from the AI safety community about whether the lab still has enough governance to hold itself accountable in its pursuit of AGI, as it has dissolved the superalignment team that focuses on the long-term risks of AI earlier this year. It's unclear how much equity Altman will receive. Altman, already a billionaire from his multiple startup investments, has previously stated that he chose not to take an equity stake in the company because the board needed a majority of disinterested directors with no stake in the company. He has also said he has enough money and is doing it because he loves the work. The new structure of OpenAI would resemble that of its major rival Anthropic and Elon Musk's xAI, which are registered as benefit corporations, a form of for-profits that aim to promote social responsibility and sustainability in addition to making profits. Reporting by Krystal Hu and Kenrick Cai in San Francisco; editing by Kenneth Li Our Standards: The Thomson Reuters Trust Principles., opens new tab Krystal Hu Thomson Reuters Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and characters, with a focus on growth-stage startups, tech investments and AI. She has previously covered M&A for Reuters, breaking stories on Trump's SPAC and Elon Musk's Twitter financing. Previously, she reported on Amazon for Yahoo Finance, and her investigation of the company's retail practice was cited by lawmakers in Congress. Krystal started a career in journalism by writing about tech and politics in China. She has a master's degree from New York University, and enjoys a scoop of Matcha ice cream as much as getting a scoop at work. Kenrick Cai Thomson Reuters Kenrick Cai is a correspondent for Reuters based in San Francisco. He covers Google, its parent company Alphabet and artificial intelligence. Cai joined Reuters in 2024. He previously worked at Forbes magazine, where he was a staff writer covering venture capital and startups. He received a Best in Business award from the Society for Advancing Business Editing and Writing in 2023. He is a graduate of Duke University.

New report details OpenAI's plan to switch to for-profit mode

CEO Sam Altman will also receive equity in the company for the first time. A major shakeup is in the works at OpenAI. reported that the artificial intelligence research company is restructuring its business from a non-profit board into a for-profit corporation. The publication also says Sam Altman would be given equity in the new corporation. OpenAI's move to for-profit wouldn't eliminate its non-profit entity entirely. The non-profit would own a stake in the new for-profit venture but it won't have nearly the power as it did. An OpenAI spokesperson gave a statement that's identical to the one they gave to Fortune's initial report about the restructuring. Couldn't they at least have used OpenAI's software to word a different statement? The move to for-profit would also provide a big payday for chief executive officer Sam Altman. Reuters says he would receive equity in the company once the restructuring is complete. The for-profit company's worth could go as high as $150 billion, according to . The for-profit model would also remove the cap on investors' returns. Altman has reportedly been trying to move OpenAI to a more traditional for-profit company for . It's not known exactly when the switch will happen since details of the deal are still going through all of the legal motions.