OpenAI's $40 Billion Funding Round Hinges on For-Profit Transition by Year-End

OpenAI must complete for-profit transition by year-end to raise full $40 billion

March 28 (Reuters) - OpenAI must transition to a for-profit company by the end of the year to secure the full $40 billion funding led by SoftBank it is in the final stages of raising, a person familiar with the matter said on Friday. SoftBank (9984.T), opens new tab can pare back the size of the funding round to $20 billion if Microsoft-backed (MSFT.O), opens new tab OpenAI fails to restructure into a for-profit company by the end of the year. The Wall Street Journal was the first to report the news earlier in the day. This would mark an accelerated deadline for OpenAI to pull off its complicated transition. It was under a two-year deadline from its last round of financing with investors. The startup has said its transition to a for-profit entity is required to secure the capital it needs to develop the best AI models. OpenAI did not immediately respond to a Reuters request for comment. Reporting by Jaspreet Singh in Bengaluru; Editing by Pooja Desai Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence 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.

OpenAI funding round could be cut by $10 billion if for-profit conversion doesn't occur by year-end

Sam Altman, CEO of OpenAI, at Station F, is seen through glass, during an event on the sidelines of the Artificial Intelligence Action Summit in Paris, France, Feb. 11, 2025. OpenAI's massive private funding round could be slashed by as much as $10 billion if the company doesn't restructure into a for-profit entity by Dec. 31, CNBC has confirmed. The full size of the round would decrease from $40 billion to $30 billion, according to a person familiar with the matter who asked not to be named because the details are confidential. The Wall Street Journal was first to report on the terms of the deal, which would value OpenAI at $300 billion, including the fresh capital. SoftBank's piece of the round would shrink from $30 billion to $20 billion, while contributions by the remaining syndicate of investors, including Microsoft, would remain at $10 billion, the person said. The provision ramps up the pressure on OpenAI to convert into a for-profit entity, a plan that will need the blessing of Microsoft and the California Attorney General, and has been challenged in court by Elon Musk, who was one of the co-founders of OpenAI in 2015, when it was started as a non-profit research lab. Investors backing OpenAI will receive convertible notes that convert into traditional equity after the restructuring, the person said. Part of the funding is expected to be used for OpenAI's commitment to Stargate, the joint venture between SoftBank, OpenAI and Oracle announced by President Donald Trump in January. Last week, OpenAI announced some key changes in the C-suite, with CEO Sam Altman shifting his focus away from day-to-day operations and focusing more on research and product. Operating chief Brad Lightcap's role will expand to oversee "business and day-to-day operations." CNBC confirmed that OpenAI expects revenue will triple to $12.7 billion in 2025.

OpenAI must complete for-profit transition by year-end to raise full $40 billion

SoftBank can pare back the size of the funding round to $20 billion if Microsoft-backed OpenAI fails to restructure into a for-profit company by the end of the year.OpenAI must transition to a for-profit company by the end of the year to secure the full $40 billion funding led by SoftBank it is in the final stages of raising, a person familiar with the matter said on Friday. SoftBank can pare back the size of the funding round to $20 billion if Microsoft-backed OpenAI fails to restructure into a for-profit company by the end of the year. The Wall Street Journal was the first to report the news earlier in the day. This would mark an accelerated deadline for OpenAI to pull off its complicated transition. It was under a two-year deadline from its last round of financing with investors. The startup has said its transition to a for-profit entity is required to secure the capital it needs to develop the best AI models. OpenAI did not immediately respond to a Reuters request for comment.

Report: Half of OpenAI's Pending $40 Billion Funding Round Depends on Restructuring | PYMNTS.com

Twenty billion dollars in funding is reportedly riding on OpenAI's efforts to restructure into an independent for-profit company. OpenAI is finalizing a $40 billion funding round that includes a condition that if it fails to complete that restructuring by the end of the year, the round could be dialed back by $20 billion, The Wall Street Journal (WSJ) reported Monday (March 31), citing unnamed sources. CNBC reported on the provision Monday but said it would cut the funding round by $10 billion, from $40 billion to $30 billion, citing unnamed sources. OpenAI did not immediately reply to PYMNTS' request for comment. The company's restructuring efforts require the approval of both its largest shareholder, Microsoft, and the California attorney general, according to the WSJ report. It also faces a lawsuit in which Elon Musk is attempting to block the restructuring. In addition, OpenAI told investors in its funding round that closed in the fall that if it does not complete its restructuring within two years, it would return their money, per the report. It was reported March 26 that OpenAI was close to finalizing a $40 billion round that would be the largest funding round of all time. The round would value the company at $300 billion, a figure that is nearly twice the $157 billion valuation it achieved with its October funding round. OpenAI reportedly generated $3.7 billion in revenue in 2024 and expects sales to reach $29.4 billion in 2026. The company said in a Dec. 26 blog post that OpenAI's board of directors planned to transform the organization's for-profit arm into a Delaware Public Benefit Corporation (PBC) in order to raise the capital it needs to continue developing artificial general intelligence (AGI). "Eventually it became clear that the most advanced AI would continuously use more and more compute and that scaling large language models was a promising path to AGI rooted in an understanding of humanity," the company said in the post. "We would need far more compute, and therefore far more capital, than we could obtain with donations in order to pursue our mission."

OpenAI must complete for-profit transition by year-end to raise full $40 billion

(Reuters) - OpenAI must transition to a for-profit company by the end of the year to secure the full $40 billion funding led by SoftBank it is in the final stages of raising, a person familiar with the matter said on Friday. SoftBank can pare back the size of the funding round to $20 billion if Microsoft-backed OpenAI fails to restructure into a for-profit company by the end of the year. The Wall Street Journal was the first to report the news earlier in the day. This would mark an accelerated deadline for OpenAI to pull off its complicated transition. It was under a two-year deadline from its last round of financing with investors. The startup has said its transition to a for-profit entity is required to secure the capital it needs to develop the best AI models. OpenAI did not immediately respond to a Reuters request for comment. (Reporting by Jaspreet Singh in Bengaluru; Editing by Pooja Desai)