OpenAI Unveils Plans for Major Restructuring to Secure Vast Capital for AI Development

OpenAI Admits It Needs Vastly More Money Than It Thought

The former entirely-nonprofit-company known as OpenAI says it needs a boatload of more cash as it plans to transform its corporate structure to prioritize making money. In an announcement Friday, the ChatGPT maker argued that by creating a for-profit corporation to control its commercial enterprises, it can make the dough it needs to keep up with other leading AI developers. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI's board of directors wrote in a blog post. "We once again need to raise more capital than we'd imagined," they continued. "Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness." The announcement confirms reports in September from the Financial Times and others that OpenAI was finally moving to drop its original nonprofit status that it was founded with. At the time, OpenAI denied the reports and upheld the nonprofit arm as "core" to its mission. Now, with its newly proposed corporate structure, the Microsoft-backed startup won't be ditching its nonprofit aims entirely, but it's fair to say that altruism will no longer be the sole priority. The restructuring calls for its existing "capped-profit" arm to be transformed into a Delaware-based public benefit corporation, a type of corporate entity whose goals are ostensibly to serve the benefit of society while generating profits. The newly-christened corporation, which will have "ordinary shares of stock," will control all of OpenAI's operations and business, while the non-profit side will be in charge of hiring a leadership team and staff to pursue its charitable initiatives. In effect, the for-profit arm will be gaining far more power than it once had, if not all practical means of control. OpenAI frames this as a "stronger non-profit supported by the for-profit's success," but it's clear which side the division of power favors. "The key to the announcement is that the for-profit side of OpenAI 'will run and control OpenAI's operations and business,'" Gil Luria, analyst at investment DA Davidson & Co, told Reuters. "This is the critical step the company needs to make in order to continue fund raising." The startup's gripe with its current structure is that it doesn't "allow the Board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do more than control the for-profit." The upshot is that OpenAI wants to court more backing by showing investors that they can now make more returns on the money they put in. As profits on expensive large language models remain elusive, OpenAI has depended on these investments, and especially the munificent backing of Microsoft, to fund its AI development. Its latest funding round secured over $6.6 billion in investment. The restructuring could run into legal hurdles, however. Earlier this year, Elon Musk sued OpenAI, which he helped cofound in 2015, for pursuing profits over benefiting humanity -- and has attempted to block its formal transition into a money-making corporation in court.

OpenAI announces structural changes to facilitate funding for its AI - Softonic

The company needs a lot of money if it wants to continue developing advanced AI models OpenAI, the company behind ChatGPT, revealed last Friday its plans to reform its corporate structure, transforming its for-profit arm into a public benefit corporation (PBC) in Delaware, United States. According to the company, this change would allow for greater investment by removing the limitations imposed by its non-profit parent. Additionally, the measure would help OpenAI secure funds in a context where the development of high-capacity artificial intelligences requires multimillion-dollar investments. The reorganization addresses the financial challenges of achieving a general artificial intelligence (AGI) that surpasses human intelligence. In October, the company raised 6.6 billion dollars in its latest funding round and was valued at 157 billion, depending, of course, on this restructuring and removing the profit cap for investors in two years. However, OpenAI assured that the non-profit entity will retain a "significant interest" in the new PBC through shares, making it one of the best-funded non-profit organizations in the world. The decision has not been without controversy. Elon Musk, co-founder of OpenAI and now one of its main critics, has attempted to block the plan, claiming it prioritizes profits over the public good. Musk even sued the company, stating it violated contractual agreements. Additionally, Meta asked the California attorney general to stop the transformation to PBC. However, OpenAI maintains that the changes are necessary to continue developing its mission. Although becoming a PBC involves balancing social objectives with profit generation, some experts like Ann Lipton, a corporate law professor, warn that this structure does not guarantee the fulfillment of its mission. "In practice, it is the majority shareholders who decide how faithful a public benefit corporation is to its mission," she explained. Analysts consider this change essential to compete with rivals like Anthropic and xAI, which recently raised billions in funding. "This is the critical step for OpenAI to continue attracting capital," noted Gil Luria, an analyst at DA Davidson & Co, although he added that the move "does not necessarily imply that OpenAI will go public".

OpenAI says it needs 'more capital than we'd imagined' as it lays out for-profit plan

Sam Altman, chief executive officer of OpenAI, during a fireside chat organized by Softbank Ventures Asia in Seoul, South Korea, on Friday, June 9, 2023. OpenAI said Friday that in moving toward a new for-profit structure in 2025, the company will create a public benefit corporation to oversee commercial operations, removing some of its nonprofit restrictions and allowing it to function more like a high-growth startup. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI's board wrote in the post. "We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness." The pressure on OpenAI is tied to its $157 billion valuation, achieved in the two years since the company launched its viral chatbot, ChatGPT, and kicked off the boom in generative artificial intelligence. OpenAI closed its latest $6.6 billion round in October, gearing up to aggressively compete with Elon Musk's xAI as well as Microsoft, Google, Amazon and Anthropic in a market that's predicted to top $1 trillion in revenue within a decade. Developing the large language models at the heart of ChatGPT and other generative AI products requires an ongoing investment in high-powered processors, provided largely by Nvidia, and cloud infrastructure, which OpenAI largely receives from top backer Microsoft. OpenAI expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC confirmed in September. Those numbers are increasing rapidly. By transforming into a Delaware PBC "with ordinary shares of stock," OpenAI says it can pursue commercial operations, while separately hiring a staff for its nonprofit arm and allowing that wing to take on charitable activities in health care, education and science. The nonprofit will have a "significant interest" in the PBC "at a fair valuation determined by independent financial advisors," OpenAI wrote.

OpenAI may become a for-profit because it needs 'more capital than imagined'

OpenAI has revealed a plan to restructure its operations and more cleanly separate the for-profit and non-profit arms of its business as it seeks to raise more cash. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI's board wrote in a new blog post. "We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness." Under OpenAI's current structure, the company's investors are issued equity by its for-profit arm, which is overseen by its non-profit board, whose "principal beneficiary is humanity, not OpenAI investors." The company announced its "capped profit" structure in 2019, after founding the company in 2015 as a non-profit. "As we enter 2025, we will have to become more than a lab and a startup -- we have to become an enduring company," OpenAI wrote, adding that its plans "enable us to raise the necessary capital with conventional terms like others in this space." The ChatGPT maker's new plan includes establishing the for-profit arm of OpenAI as a public benefit company (PBC), mirroring a step taken by xAI -- helmed by OpenAI founder Elon Musk -- as well as Anthropic. Although such companies have a stated goal of positively impacting society, the pivot to establish AI firms as PBCs has led to accusations of "ethicswashing." By setting up the for-profit arm as a PBC, OpenAI's current board will be able to consider the interests of investors more easily, which could help it win over potential shareholders. xAI, despite being less than two years old, raised $6 billion at a $50 billion valuation earlier this month, while Anthropic has raised almost $14 billion in venture capital since it was founded in 2021 by ex-OpenAI employees. Although details were not revealed by OpenAI on Friday, previous discussions had explored giving CEO Sam Altman about $150 billion of equity, according to Reuters. The non-profit side of the business will hire its own leadership team and staff to engage in charity involving the healthcare, education, and science sectors, according to OpenAI. It will also own "significant interest" in the for-profit side through stock determined at a "fair evaluation" determined by third-party advisors. OpenAI's plans face a few hurdles, including a slew of recent executive departures and a revived lawsuit from Musk, who wants to stop the company from becoming a for-profit. In November, Musk expanded his lawsuit against the AI startup and several of its co-founders, accusing it of anticompetitive behavior and calling it a "market-paralyzing gorgon." Later in the month, Musk's attorneys filed a preliminary injunction against the AI startup, several of its co-founders, and Microsoft to stop its transition to a for-profit company.

OpenAI lays out plan to shift to for-profit corporate structure

AI company, which makes ChatGPT, says in blogpost 'we once again need to raise more capital than we'd imagined' OpenAI has laid out a plan to revamp its corporate structure next year, saying it would create a public benefit corporation to manage its growing business and ease the restrictions imposed by its current non-profit parent. Rumors have swirled that OpenAI was in the process of shifting to a largely for-profit company, but this is the first time it has detailed the proposal publicly. Under the proposed structure, the public benefit corporation, which is a for-profit corporate entity, will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff for charitable initiatives in sectors such as healthcare, education and science. This new structure will give the for-profit arm of OpenAI much more control. In a blogpost, the company said it is "a stronger non-profit supported by the for-profit's success". OpenAI added that the structure will allow it to "raise the necessary capital" like other businesses in this space. OpenAI, the maker of the extremely popular ChatGPT chatbot and one of the world's most valuable startups, started in 2015 as a research-focused non-profit. But over the past year, it has been looking to make structural changes to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that it says will surpass human intelligence. OpenAI's latest $6.6bn funding round, at a valuation of $157bn, was contingent on whether it could upend its corporate structure and remove a profit cap for investors. "Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," OpenAI said in the blogpost. Microsoft is OpenAI's biggest investor, with a 49% stake, but this structure becomes complicated when OpenAI transitions to a for-profit company. Both businesses have hired investment banks to guide them through the process and help determine how much of stake Microsoft will own in a newly structured OpenAI, according to the Wall Street Journal. OpenAI's rivals in the generative AI space include Anthropic and Elon Musk-owned xAI, which use the same public-benefit-corporation structure. OpenAI said changing its business to this structure will help it better compete. "The hundreds⁠ of⁠ billions⁠ of⁠ dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI said in the blogpost. "We once again need to raise more capital than we'd imagined."

OpenAI says it needs 'more capital than we'd imagined' as it...

OpenAI said it needs "more capital than we'd imagined" as the Sam Altman-led artificial intelligence pioneer outlined plans for revamping into a for-profit company. Under the proposed structure, the ChatGPT maker's existing for-profit arm will become a Delaware public benefit corporation (PBC) -- a company that is structured to consider the interests of society in addition to shareholder value. As the expensive pursuit of artificial general intelligence, or AI that surpasses human intelligence, heats up, OpenAI has been looking to make changes to attract ever more investment. "We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," the Microsoft-backed startup said Friday. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission." Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the firm can upend its corporate structure and remove a profit cap for investors, Reuters has reported. The company said the PBC will oversee commercial operations, and it will hire a separate staff for its nonprofit branch that will "pursue charitable initiatives" in healthcare, education and science. The PBC will have "ordinary shares of stock" and the nonprofit will hold a "significant interest" at a "fair valuation determined by independent financial advisors," OpenAI said. The transformation into a PBC would align the startup with rivals such as Anthropic and Elon Musk-owned xAI that use a similar structure and recently raised billions in funding. Anthropic garnered another $4 billion investment from existing investor Amazon last month, while xAI raised around $6 billion in equity financing earlier in December. "The key to the announcement is that the for-profit side of OpenAI 'will run and control OpenAI's operations and business,'" DA Davidson & Co analyst Gil Luria said. "This is the critical step the company needs to make in order to continue fund raising," Luria said, although he added that the move did "not necessitate OpenAI going public." The startup could, however, face some hurdles in the plan. Musk, an OpenAI co-founder who later left and is now one of the startup's most vocal critics, is trying to stop the plan and in August sued OpenAI and Altman. The Tesla and SpaceX founder - who has become a key adviser to President-elect Donald Trump -- has called the conversion to a for-profit entity a "textbook tale of altruism versus greed." OpenAI earlier this month asked a federal judge to reject Musk's request and published a trove of messages with Musk to argue that he initially backed for-profit status for OpenAI before walking away from the company after failing to get a majority equity stake and full control. Meta Platforms is also urging California's attorney general to block OpenAI's planned conversion to a for-profit company, the Wall Street Journal reported earlier this month. OpenAI also has been dealing with internal turmoil after an exodus of top talent. In May, OpenAI co-founder Ilya Sutskever and former safety leader Jan Leike left the company over disagreements about the firm's direction. Leike, who joined rival Anthropic, wrote that safety procedures at OpenAI had "taken a backseat to shiny products." Another employee who worked under Leike quit soon after, accusing OpenAI of acting like a for-profit company. "Over the past years, safety culture and processes have taken a backseat to shiny products," he wrote in a post on X. Co-founder John Schulman also left OpenAI to join Anthropic. In late September, OpenAI Chief Technology Officer Mira Murati said she was leaving the company after six-and-a-half years. Two research executives announced their departures that same day. Altman has previously said the departures are not related to the potential restructuring.

OpenAI outlines plans to becoming for-profit company

ChatGPT-maker OpenAI laid out plans Friday for a new corporate structure shifting away from control by a non-profit -- an issue of contention for the artificial intelligence trailblazer. OpenAI was founded as a non-profit in 2015 and has since switched to a "capped" for-profit enterprise allowing for a limited level of money making. But it has been seeking to become a for-profit public benefit corporation (PBC), which could attract more investment. In a blog post, the company said it plans to restructure as a PBC, which "requires the company to balance shareholder interests, stakeholder interests, and a public benefit interest in its decision making." "It will enable us to raise the necessary capital with conventional terms like others in this space," OpenAI added. It said that it needs to raise more capital than imagined, citing the hundreds and billions of dollars that major firms are now putting into artificial intelligence development. "Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," OpenAI said. Currently, its structure does not allow the board to directly consider the interests of those who would finance its mission. The structure also "does not enable the non-profit to easily do more than control the for-profit," the company said. With the restructuring, the PBC will control OpenAI's operations and business. Its non-profit arm will build up a team to pursue charitable initiatives in areas like health care. OpenAI is under high scrutiny as an artificial intelligence powerhouse, reaching a staggering $157 billion valuation in recent times. The company, led by Sam Altman, has become one of the most successful startups in Silicon Valley history -- propelled to headlines in 2022 when it released ChatGPT, its generative AI chatbot. But its corporate set-up imploded in late 2023 when the board fired Altman out-of-the-blue. Staff rebelled and Altman was eventually reinstated, while those involved in his ouster left the company. Alarmed by the situation, new investors have demanded that OpenAI become a more classic for-profit outfit within two years. Its restructuring efforts will likely face obstacles, with Elon Musk reportedly asking a US court to stop OpenAI from converting into a for-profit enterprise.

OpenAI lays out plans for its for-profit transformation

Amid growing competition and skyrocketing compute requirements necessary to support the next generation of AI models, OpenAI is shaking up its corporate structure - again. The ChatGPT creator on Thursday outlined its plan to establish a public benefit corporation (PBC), which it argued would clear the way for large-scale investment, hamstrung by its current organizational structure. Under the new structure, OpenAI plans to convert its for-profit wing into a Delaware-based PBC, which will run and control OpenAI's operations and business, while its non-profit arm will be responsible for hiring and directing charitable initiatives for healthcare, education, science, and other fields. The shift reflects OpenAI's ongoing transition away from its non-profit roots. Since its founding in 2015 OpenAI's status as a non-profit corporation has been rather fluid. "In those early days, we thought that progress relied on key ideas produced by top researchers and that supercomputing clusters were less important," the ChatGPT maker explained in a blog post on Friday. By 2019, it became clear that massive quantities of compute would be required to achieve OpenAI's mission of advancing digital intelligence. "We would need far more compute, and therefore far more capital, than we could obtain with donations in order to pursue our mission." And so in 2019, the AI model builder transitioned to an unorthodox structure, establishing a for-profit business controlled by the non-profit. This approach aimed to drive profits to provide capped returns to investors and employees, with the remainder being funneled into the overarching non-profit. The change opened the door to massive shareholder investment including Microsoft's $1 billion investment that same year. In the five years since this structure was enacted, the AI space has exploded, with OpenAI now facing stiff competition from rival model builders like Anthropic, Meta, and Google. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," the blog post explained. "We once again need to raise more capital than we'd imagined. Investors want to back us, but at this scale of capital, need conventional equity and less structural bespokeness." In other words: OpenAI's corporate structure has become inconvenient given the competitive landscape, and so once again, it's altering the deal. OpenAI's latest structural shift, planned for 2025, will effectively see the for-profit wing take the reins of the AI giant's operations and business. It's not clear to what degree the non-profit portion of the outfit will have any meaningful control, though the blog post suggests that it would retain "significant interest in the existing for-profit," taking the form of shares in the PBC at a valuation that will be "determined by independent financial advisors." The new corporate structure comes just months after OpenAI raised $6.6 billion in new funding, which drove its valuation to $157 billion. The funding is expected to further the development of more advanced models, including OpenAI's o-series of models, which it says demonstrate "new reasoning capabilities." But while OpenAI makes the case this latest transition is imperative to the success of the firm going forward, not everyone is a fan of the move. OpenAI has faced ongoing criticism from Elon Musk, who initially funded the model builder before founding rival AI firm xAI. Musk has previously launched legal challenges to OpenAI's structure, and earlier this month filed for an injunction against the AI firm to prevent it from morphing into an entirely for-profit business. Speaking of xAI, the Musk-backed startup raised $6 billion in a series-C funding round this week, which it says will support the expansion of its Colossus supercomputer. The startup currently plans to expand the machine to 200,000 GPUs with ambitions to eventually grow it to a million accelerators. The machine will power the development of future Grok models as well as its Aurora image-gen models. ®

OpenAI Says It Needs More Money as the ChatGPT Maker Moves Toward For-Profit Structure

It plans to maintain a non-profit arm that will undertake charitable initiatives. Artificial intelligence (AI) startup OpenAI said Friday it needs to raise more money than expected to meet its goals, and laid out plans for transitioning toward a for-profit structure. OpenAI was founded as a non-profit with the stated mission of "building safe and beneficial artificial general intelligence for the benefit of humanity." However, it has since shifted to a hybrid "capped profit" structure with a for-profit subsidiary controlled by its non-profit arm, in order to raise the funds to support its work. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI said in a blog post Friday, adding that means it needs "to raise more capital than we'd imagined." The ChatGPT maker said it plans to restructure next year as a public benefit corporation (PBC) with ordinary shares of stock. The PBC will run and control OpenAI's operations, while its non-profit arm will hire a leadership team and staff "to pursue charitable initiatives." The new structure will better "equip each arm to do its part," it said.

OpenAI details plans for becoming a for-profit company

In a company blog post published Friday, OpenAI said it planned to restructure as a public benefit corporation, or PBC, which is a for-profit corporation designed to create public and social good. OpenAI rivals like Anthropic and Elon Musk's xAI use a similar structure.OpenAI revealed details Friday about its plans to adopt a new corporate structure that will remove the company from control by a nonprofit that has been the focus of contention. OpenAI's leaders have been privately discussing a change for several months but had provided few specifics. In a company blog post published Friday, OpenAI said it planned to restructure as a public benefit corporation, or PBC, which is a for-profit corporation designed to create public and social good. OpenAI rivals like Anthropic and Elon Musk's xAI use a similar structure. "The PBC 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," the company said. "It will enable us to raise the necessary capital with conventional terms like our competitors." A year ago, the board of the nonprofit tried to fire CEO Sam Altman. It failed, but the incident spooked OpenAI's investors, including Microsoft. In the months since, Altman and his colleagues have been working toward a new structure. With the change in structure, Altman and his colleagues must find ways to compensate the nonprofit for its loss of control. OpenAI said the nonprofit would receive shares in the PBC but added that the value it would receive was still being negotiated by independent financial advisers. The plan "would result in one of the best resourced nonprofits in history," the company said in its blog. OpenAI's latest funding round valued the company at $157 billion. OpenAI set off the generative artificial intelligence boom in late 2022 with the release of its online chatbot ChatGPT, which can answer questions in a near humanlike manner. In the months that followed, startups and tech giants like Google, Meta and Amazon raced to build similar technologies. Altman founded OpenAI as a nonprofit in 2015 with several AI researchers and entrepreneurs, including Musk. The aim, Altman and his co-founders said, was to build AI for the benefit of humanity -- not for corporate shareholders. But by 2018, OpenAI's founders realized that building powerful AI technology would require far more money than they could raise through a nonprofit. Early that year, Musk left the lab. When Altman took over as CEO, he created a for-profit company able to take on investors and promise them financial return while still answering to the nonprofit board. Eventually, it raised more than $13 billion in funding from Microsoft and others. As OpenAI's largest investor, Microsoft also negotiated a partnership that has tightly bound the two companies as they compete with other AI companies. Microsoft supplies the raw computing power needed to build OpenAI technologies and it has an exclusive license to use these technologies in its own products. But Microsoft and other investors grew unhappy with the nonprofit's control over the startup when its board tried to remove Altman in November 2023. The board said it no longer trusted Altman to build AI for the benefit of humanity. Musk sued OpenAI this year, claiming that the company and two of its founders, Altman and Greg Brockman, breached the company's founding contract by putting commercial interests ahead of the public good. OpenAI has denied the claim. (The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to AI systems. The two companies have denied the suit's claims.)

OpenAI Mulls Plan for a More Conventional For-Profit Business

(Bloomberg) -- OpenAI, founded a decade ago as a research organization, is considering a change to the AI company's structure that would create a more conventional money-making corporation alongside a nonprofit arm. The board is evaluating a plan that would turn OpenAI's business into a public benefit corporation -- an entity free to pursue income but with the goal of bettering society -- while retaining a nonprofit side, according to a blog post Friday. As part of the new structure, the nonprofit arm would hold shares in the moneymaking entity. Bloomberg previously reported that the company was considering such a move and has been in talks with regulators in California and Delaware about the potential change. Friday's announcement signals that the board is poised to move forward with a restructuring. OpenAI's existing for-profit arm is currently controlled by its nonprofit organization. Under the proposal, the business would become a Delaware Public Benefit Corp., or PBC. The nonprofit entity would continue to exist as one of the "best-resourced nonprofits in history" and would then hold a "significant interest" in the for-profit arm, in the form of shares determined by independent financial advisers at a fair valuation, OpenAI's board said. When OpenAI was founded in 2015, it adopted the idealistic mission of building artificial intelligence that would be safe and beneficial to humanity. In 2019, OpenAI created the for-profit subsidiary to help fund the high costs of AI model development. By 2022, when OpenAI debuted its ChatGPT chatbot, the company became a superpower in the artificial intelligence industry -- and put its operations under greater scrutiny. A simplified for-profit structure is considered more attractive to investors, although it could raise questions about whether the San Francisco-based company is sticking with its original public mission. Elon Musk, a co-founder and early investor in OpenAI, filed a lawsuit against the company in August accusing it of breaching an agreement to operate as a nonprofit. Musk recently asked a federal court to block OpenAI from pursuing a conversion to a for-profit business while his legal fight plays out. OpenAI's board said the proposed plan will ensure the company's for-profit arm is successful in the long term. It will help the nonprofit raise funds and better execute on its mission, according to the post. "We once again need to raise more capital than we'd imagined," the board said. "Investors want to back us but, at this scale of capital,need conventional equity and less structural bespokeness." The board said the plan that it's considering would better equip OpenAI's nonprofit to pursue charitable initiatives in sectors such as health care, education and science.

OpenAI lays out its for-profit transition plans

OpenAI says its corporate structure must evolve to advance its mission of ensuring artificial general intelligence (AGI) -- AI that can complete most tasks humans can -- benefits all humanity. OpenAI currently has a for-profit org controlled by a nonprofit, with a "capped profit" share for investors and employees. But in a blog post published Friday, the company says it plans to begin transitioning its existing for-profit into a Delaware Public Benefit Corporation (PBC), with ordinary shares of stock and the OpenAI mission as its public benefit interest. Those details have been reported elsewhere. In December, The New York Times revealed that OpenAI was in discussions to pay its nonprofit billions of dollars for it to cede control. However, it's the first time OpenAI has laid out its transition plans in a public memo. "As we enter 2025, we will have to become more than a lab and a startup -- we have to become an enduring company," the OpenAI wrote in its post. "The world is moving to build out a new infrastructure of energy, land use, chips, data centers, data, AI models, and AI systems for the 21st century economy. We seek to evolve in order to take the next step in our mission." OpenAI says establishing the PBC would enable it to "balance shareholder interests, stakeholder interests, and a public benefit interest" in its decision-making while allowing it to "raise the necessary capital with conventional terms." It would also create one of the best-resourced nonprofits in history, OpenAI claims; OpenAI's existing nonprofit would receive shares in the PBC "at a fair valuation determined by independent financial advisors." "We have a nonprofit and a for-profit today, and we will continue to have both," OpenAI wrote. "Our current structure does not allow the board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do more than control the for-profit. The PBC will run and control OpenAI's operations and business, while the nonprofit will hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education, and science." OpenAI was founded in 2015 as a nonprofit research lab. But as its experiments became increasingly capital-intensive, it created its current structure, taking on outside investments from VCs and companies including Microsoft. In October, OpenAI raised $6.6 billion at a $157 billion valuation. The company still expects to lose money this year, however -- $5 billion, according to CNBC -- and the terms of its latest funding round require that it completes its for-profit transition within two years to avoid the investment converting to debt. The plan faces hurdles. One of OpenAI's co-founders, billionaire Elon Musk, has filed for an injunction to halt the company's transition to a for-profit, accusing OpenAI of abandoning its original philanthropic mission. Musk has also alleged that OpenAI has deprived Musk's AI company, xAI, of capital by extracting promises from investors not to fund it and the competition. OpenAI has called Musk's complaints "baseless" and simply a case of sour grapes. Facebook's parent company and AI rival, Meta, is also supporting efforts to block OpenAI's conversion from a nonprofit organization into a for-profit one. In December, Meta sent a letter to California attorney general Rob Bonta, arguing that allowing the shift would have "seismic implications for Silicon Valley." "If OpenAI's new business model is valid, nonprofit investors would get the same for-profit upside as those who invest the conventional way in for-profit companies while also benefiting from tax write-offs bestowed by the government," Meta wrote in the letter. OpenAI competitors like xAI and Anthropic are structured as PBCs, but lack a nonprofit component. OpenAI's structure as it exists today is what ultimately led to the abrupt ousting of CEO Sam Altman last November. It also gives the board the power to determine exactly when OpenAI has achieved AGI, and exempts this AGI from the licensing agreements the company has in place with customers. One of those customers is Microsoft -- and Microsoft and OpenAI have a specific, internal definition of AGI. According to The Information, the two companies signed an agreement last year stating OpenAI has only achieved AGI when it develops AI systems that can generate at least $100 billion in profits. OpenAI continues to deal with an outflow of high-level talent due in part to concerns that the company is prioritizing commercial products at the expense of safety. One former employee, Carroll Wainwright, who researched aligning AI systems with safety policies, wrote in a post on X this fall that OpenAI "was structured as a non-profit [but] acted like a for-profit" and "should not [be trusted] when it promises to do the right thing later."

OpenAI Details Plans for Becoming a For-Profit Company

Cade Metz has covered artificial intelligence for more than 15 years. OpenAI revealed details on Friday about its plans to adopt a new corporate structure that will remove the company from control by a nonprofit that has been the focus of contention. OpenAI's leaders have been privately discussing a change for several months but have provided few specifics. In a company blog post published on Friday, OpenAI said it planned to restructure as a public benefit corporation, or P.B.C., which is a for-profit corporation designed to create public and social good. OpenAI rivals like Anthropic and Elon Musk's xAI use a similar structure. "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," the company said. "It will enable us to raise the necessary capital with conventional terms like our competitors." A year ago, the board of the nonprofit tried to fire the company's chief executive, Sam Altman. It failed, but the incident spooked OpenAI's investors, including the tech giant Microsoft. In the months since, Mr. Altman and his colleagues have been working toward a new structure. With the change in structure, Mr. Altman and his colleagues must find ways to compensate the nonprofit for its loss of control. OpenAI said the nonprofit would receive shares in the P.B.C. but added that the value it would receive was still being negotiated by independent financial advisers. The plan "would result in one of the best resourced nonprofits in history," the company said in its blog. OpenAI's latest funding round valued the company at $157 billion. OpenAI set off the generative A.I. boom in late 2022 with the release of its online chatbot ChatGPT, which can answer questions in a near humanlike manner. In the months that followed, start-ups and tech giants like Google, Meta and Amazon raced to build similar technologies. Mr. Altman founded OpenAI as a nonprofit in 2015 with several A.I. researchers and entrepreneurs, including Elon Musk. The aim, Mr. Altman and his co-founders said, was to build A.I. for the benefit of humanity -- not for corporate shareholders. But by 2018, OpenAI's founders realized that building powerful A.I. technology would require far more money than they could raise through a nonprofit. Early that year, Mr. Musk left the lab. When Mr. Altman took over as chief executive, he created a for-profit company able to take on investors and promise them financial return while still answering to the nonprofit board. Eventually, it raised more than $13 billion in funding from Microsoft and others. As OpenAI's largest investor, Microsoft also negotiated a partnership that has tightly bound the two companies as they compete with other artificial intelligence companies. Microsoft supplies the raw computing power needed to build OpenAI technologies and it has an exclusive license to use these technologies in its own products. But Microsoft and other investors grew unhappy with nonprofit's control over the start-up when its board tried to remove Mr. Altman in November 2023. The board said it no longer trusted Mr. Altman to build A.I. for the benefit of humanity. Mr. Musk sued OpenAI this year, claiming that the company and two of its founders, Mr. Altman and Greg Brockman, breached the company's founding contract by putting commercial interests ahead of the public good. OpenAI has denied the claim. (The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The two companies have denied the suit's claims.)

OpenAI's for-profit plan includes a public benefit corporation

The move would strip the company's non-profit of its oversight role. Following months of speculation, OpenAI has finally shared how it plans to become a for-profit company. In a blog post penned by its board of directors, OpenAI said Thursday it plans to transform its for-profit arm into a Public Benefit Corporation sometime in 2025. PBCs or B Corps are for-profit organizations that attempt to balance the interests of their stakeholders while making a positive impact on society. "As we enter 2025, we will have to become more than a lab and a startup -- we have to become an enduring company," OpenAI said, adding that many of its competitors are registered as PBCs, including Anthropic and even Elon Musk's own xAI. "[The move] would enable us to raise the necessary capital with conventional terms like others in this space." As part of the transformation, OpenAI's nonprofit division would retain a stake in the for-profit unit in the form of shares "at a fair valuation determined by independent financial advisors," but would lose direct oversight of the company. "Our plan would result in one of the best resourced non-profits in history," claims OpenAI. Following the reorganization, the for-profit division would be responsible for overseeing OpenAI's "operations and business," while the nonprofit arm would operate separately with its own leadership team and a focus on charitable efforts in health care, education and science. OpenAI did not state whether CEO Sam Altman would receive an equity stake as part of the restructuring. Last year, OpenAI's board of directors briefly fired Altman before bringing him back, in the process sparking the institutional crisis that led to this week's announcement. According to some estimates, OpenAI's for-profit arm could be worth as much as $150 billion. In 2019, OpenAI estimated it would need to raise at least $10 billion to build artificial general intelligence. In October, the company secured $6 billion in new funding. "The hundreds⁠ of billions⁠ of⁠ dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI said. "We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness." Despite this week's announcement, OpenAI is likely to face multiple roadblocks in implementing its plan. In addition to its ongoing legal feud with Elon Musk, Meta recently sent a letter to California's attorney general urging him to stop OpenAI from converting to a for-profit company, saying the move would be "wrong" and "could lead to a proliferation of similar start-up ventures that are notionally charitable until they are potentially profitable."

OpenAI lays out plan to shift to new for-profit structure

(Reuters) - OpenAI on Friday laid out a plan to revamp its corporate structure next year, saying it would create a public benefit corporation to manage its growing business and ease the restrictions imposed by its current non-profit parent. Under the proposed structure, the public benefit corporation (PBC) will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff for charitable initiatives in sectors such as health care, education and science. OpenAI, among the world's most valuable startups, started in 2015 as a research-focused non-profit but has since been looking to make structural changes to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that surpasses human intelligence. Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. "We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," the Microsoft-backed startup said in a blogpost. OpenAI plans to turn its existing for-profit arm into a public benefit corporation, incorporated in Delaware, it said. OpenAI's non-profit arm would take shares in the PBC at a fair valuation determined by independent financial advisers. Its rivals such as Anthropic and Elon Musk-owned xAI use a similar structure. "(The structure) will enable us to raise the necessary capital with conventional terms like others in this space," OpenAI said. (Reporting by Arsheeya Bajwa in Bengaluru; Editing by Anil D'Silva)

OpenAI lays out plan to shift to new for-profit structure

Dec 27 (Reuters) - OpenAI on Friday laid out a plan to revamp its corporate structure next year, saying it would create a public benefit corporation to manage its growing business and ease the restrictions imposed by its current non-profit parent. Under the proposed structure, the public benefit corporation (PBC) will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff for charitable initiatives in sectors such as health care, education and science. OpenAI, among the world's most valuable startups, started in 2015 as a research-focused non-profit but has since been looking to make structural changes to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that surpasses human intelligence. Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors. "We once again need to raise more capital than we'd imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," the Microsoft-backed startup said in a blogpost. OpenAI plans to turn its existing for-profit arm into a public benefit corporation, incorporated in Delaware, it said. OpenAI's non-profit arm would take shares in the PBC at a fair valuation determined by independent financial advisers. Its rivals such as Anthropic and Elon Musk-owned xAI use a similar structure. "(The structure) will enable us to raise the necessary capital with conventional terms like others in this space," OpenAI said. Reporting by Arsheeya Bajwa in Bengaluru; Editing by Anil D'Silva Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

OpenAI outlines plans to becoming for-profit company

WASHINGTON (AFP) - ChatGPT-maker OpenAI laid out plans for a new corporate structure shifting away from control by a non-profit - an issue of contention for the artificial intelligence (AI) trailblazer. OpenAI was founded as a non-profit in 2015 and has since switched to a "capped" for-profit enterprise allowing for a limited level of money making. But it has been seeking to become a for-profit public benefit corporation (PBC), which could attract more investment. In a blog post, the company said it plans to restructure as a PBC, which "requires the company to balance shareholder interests, stakeholder interests, and a public benefit interest in its decision making." "It will enable us to raise the necessary capital with conventional terms like others in this space," OpenAI added. It said that it needs to raise more capital than imagined, citing the hundreds and billions of dollars that major firms are now putting into artificial intelligence development. "Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness," OpenAI said. Currently, its structure does not allow the board to directly consider the interests of those who would finance its mission. The structure also "does not enable the non-profit to easily do more than control the for-profit," the company said. With the restructuring, the PBC will control OpenAI's operations and business. Its non-profit arm will build up a team to pursue charitable initiatives in areas like health care. OpenAI is under high scrutiny as an AI powerhouse, reaching a staggering USD157 billion valuation in recent times.

OpenAI pivots to for-profit model to secure massive AI funding

OpenAI, one of the world's most valuable startups, originally began in 2015 as a nonprofit focused on AI research. But as the cost of achieving artificial general intelligence (AGI) -- AI that could surpass human intelligence -- soars, the company is shifting gears to attract more funding. On December 26, OpenAI announced in a blog post that it plans to set up a public benefit corporation (PBC) for its commercial operations, while keeping its nonprofit arm focused on charitable initiatives. The proposed transformation will enable OpenAI's existing for-profit division to function as a Delaware PBC "with ordinary shares of stock." This shift is designed to attract the substantial investments required for the company's ambitious projects. "The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission," OpenAI's board explained. They emphasized the need for "conventional equity" to secure funding at this scale. OpenAI's latest $6.6 billion funding round at a valuation of $157 billion hinged on whether the company could restructure its corporate model to remove a profit cap for investors. The board highlighted the importance of aligning its structure to sustain both its nonprofit goals and the for-profit capital needed to advance AI technologies. The nonprofit arm will retain a significant stake in the PBC, with its valuation determined by independent financial advisors. This structure aims to balance OpenAI's mission-driven goals with the flexibility to raise capital effectively.

OpenAI becomes a for-profit company to raise more cash amid losses

In a new blog post, OpenAI outlines its plans to become a for-profit organization while maintaining its core mission of "ensuring that Artificial General Intelligence (AGI) benefits all of humanity." The move is a significant shift from its non-profit roots in 2015, which later transformed into a "capped" for-profit, with the non-profit arm spearheading the company's operations in line with its mission. However, these ambitions have been spoiled by the rising costs of running AI; server racks equipped with Nvidia's Blackwell chips reportedly cost $3 million or more. This transition towards a for-profit has ignited unwanted controversy despite being inevitable for competitive reasons. OpenAI currently operates as a capped for-profit company with two divisions: the for-profit and the non-profit. The non-profit arm and its board members govern OpenAI and its activities. While the for-profit has the power to issue equity to raise capital, it still falls under the governance of the non-profit. To attract more investment, OpenAI is now moving towards a for-profit model. Potential investors see the existing profit cap as a barrier, reportedly 100 times the initial investment. All residual value created above this cap will be returned to the non-profit wing. Likewise, the existing structure does not allow the board to address shareholders' financial expectations and interests. Statistics and reports suggest that OpenAI is projected to incur a substantial $5 billion loss this year compared to $3.7 billion in revenue. This financial picture might have also affected OpenAI's decision to become a for-profit company and secure the necessary funding, helping it maintain its competitive edge. OpenAI plans to transform its existing for-profit subsidiary into a Delaware Public Benefit Corporation (PBC), a for-profit corporate entity created for the social and public good. The firm has stated that ordinary shares of stock and the OpenAI mission will be the public benefit interests of this entity. For context, other players in the AI industry, such as Anthropic and xAI, also employ a PBC-esque structure. Moreover, the new PBC will supervise and run the company's business activities. On the other hand, the non-profit will remain dedicated to its philanthropic goals in sectors such as healthcare, education, and science. The non-profit will have a "significant interest" in the PBC in the form of shares at a fair valuation by independent advisors. OpenAI claims this structure would position its non-profit division as one of the best-resourced non-profits in history. Over the past few years, as generative AI has advanced, so has the cost and expenditure of the underlying hardware. While transitioning to a for-profit structure offers better incentives for shareholders, the non-profit will continue to uphold the firm's foundational principles.

OpenAI Officially Announces For-Profit Transition

OpenAI has officially announced its shift to a for-profit structure, amid fierce opposition from the likes of Elon Musk and Meta. In a blog post announcing the move, OpenAI said it plans to turn its existing for-profit segment into a Delaware Public Benefit Corporation (PBC). A public benefit corporation is a particular type of corporate structure where a company must balance making a profit for shareholders, stakeholder interests, and a public benefit interest in its decision-making. It's a structure that is being commonly deployed in the AI world, for example, by OpenAI competitor and Claude-maker Anthropic, and by Elon Musk's AI start-up xAI, which makes X's chatbot Grok. OpenAI says its plan "would result in one of the best-resourced non-profits in history" and allow it to raise funds with "conventional terms," like its competitors. OpenAI was founded in 2015 as a nonprofit research lab, but later adopted a hybrid structure that includes both a nonprofit and a commercial arm. The start-up would later go on to raise huge sums of money from the likes of Microsoft, and its total funding raised hit $17.9 billion in October per Crunchbase following its latest round, two years after it launched its flagship product, ChatGPT. Reports have circulated about OpenAI transitioning into a fully for-profit firm for months, though this is the first time the firm has publicly announced the move. "Our current structure does not allow the board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do more than control the for-profit," wrote OpenAI in the blog post. "The PBC will run and control OpenAI's operations and business, while the nonprofit will hire a leadership team and staff to pursue charitable initiatives in sectors such as healthcare, education, and science." OpenAI says that the nonprofit's part of the organization's interest in the existing for-profit will "take the form of shares in the PBC at a fair valuation determined by independent financial advisors." This could potentially, according to some sources, give founder Sam Altman a multibillion-dollar 7% stake in the company. The move comes as Musk, who co-founded OpenAI, is now suing the start-up over its plans to ditch its nonprofit status, among other things. Meta has also pledged their support to the request, saying that the move would represent a "seismic shift" for Silicon Valley.

OpenAI defends for-profit shift as critical to sustain humanitarian mission

OpenAI has finally shared details about its plans to shake up its core business by shifting to a for-profit corporate structure. On Thursday, OpenAI posted on its blog, confirming that in 2025, the existing for-profit arm will be transformed into a Delaware-based public benefit corporation (PBC). As a PBC, OpenAI would be required to balance its shareholders' and stakeholders' interests with the public benefit. To achieve that, OpenAI would offer "ordinary shares of stock" while using some profits to further its mission -- "ensuring artificial general intelligence (AGI) benefits all of humanity" -- to serve a social good. To compensate for losing control over the for-profit, the nonprofit would have some shares in the PBC, but it's currently unclear how many will be allotted. Independent financial advisors will help OpenAI reach a "fair valuation," the blog said, while promising the new structure would "multiply" the donations that previously supported the nonprofit. "Our plan would result in one of the best resourced nonprofits in history," OpenAI said. (During its latest funding round, OpenAI was valued at $157 billion.) OpenAI claimed the nonprofit's mission would be more sustainable under the proposed changes, as the costs of AI innovation only continue to compound. The new structure would set the PBC up to control OpenAI's operations and business while the nonprofit would "hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education, and science," OpenAI said. Some of OpenAI's rivals, such as Anthropic and Elon Musk's xAI, use a similar corporate structure, OpenAI noted. Critics had previously pushed back on this plan, arguing that humanity may be better served if the nonprofit continues controlling the for-profit arm of OpenAI. But OpenAI argued that the old way made it hard for the Board "to directly consider the interests of those who would finance the mission and does not enable the non-profit to easily do more than control the for-profit.

Confirming reports, OpenAI details plans to turn into a for-profit company - SiliconANGLE

Confirming reports, OpenAI details plans to turn into a for-profit company OpenAI today detailed plans to turn its for-profit arm, which oversees its artificial intelligence development efforts, into a standalone company. The move is not unexpected. Rumors that OpenAI plans to spin off its for-profit arm have been swirling since August. The restructuring was reportedly a condition of the ChatGPT developer's recently closed $6.6 billion funding round: investors can ask for their money back if OpenAI doesn't complete the reorganization within two years. OpenAI launched in 2015 as a nonprofit AI research lab. It raised $137 million in cash donations to support its development efforts, plus more than $100 million worth of cloud credits and discounts from the major infrastructure-as-a-service providers. Four years later, OpenAI formed the for-profit arm that currently leads its AI development and commercialization efforts. The launch of the for-profit arm paved the way to the two multibillion-dollar funding rounds that OpenAI has closed since the start of 2023. Before its latest $6.6 billion raise, the ChatGPT developer nabbed a $10 billion investment from Microsoft Corp. in January 2023. Under OpenAI's current nonprofit structure, there is a cap on the returns that its backers can realize. Additionally, investors reportedly had to sign an agreement that states it "would be wise to view any investment in [OpenAI's for-profit subsidiary] in the spirit of a donation." As part of the planned restructuring, OpenAI will incorporate its for-profit arm as a standalone public benefit corporation, or PBC. This is a type of company that balances shareholder interests with a public benefit interest. According to OpenAI, the move will make it easier to raise the capital necessary to support its AI development efforts. The nonprofit parent organization that currently oversees the for-profit arm's work will receive shares in the new PBC. "Our plan would result in one of the best resourced non-profits in history," OpenAI stated today. "The non-profit will hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education, and science." Before it proceeds with the restructuring, OpenAI will have to convince a federal court that the move should be approved. Some of the $137 million in donations that OpenAI raised at the time of its 2015 launch was provided by Elon Musk. In August, Musk sued the AI provider for alleged breach of contract. According to the complaint, OpenAI's launch of a for-profit arm breached a commitment it had made to operate as a nonprofit developer of open-source AI models. In late November, Musk asked the federal court presiding over the case to block OpenAI from turning into a for-profit company. A few days later, Meta Platforms Inc. submitted a similar request to California Attorney General Rob Bonta. Last year, Musk launched a large language model startup called xAI Corp. that competes with OpenAI. Meta, in turn, offers a line of open-source LLMs called Llama that competes with products from both OpenAI and xAI.

OpenAI Announces For-Profit Business Model - Will Create A Public Benefit Corporation

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. With 2024 coming to a close, OpenAI, the AI lab responsible for kicking off the current surge in interest around AI, has shared its plans to become a for-profit entity. In a fresh blog post, OpenAI revealed that it plans to split into a public benefit corporation (PBC) and a non-profit entity to simultaneously allow investors to generate returns and "pursue charitable initiatives." Throughout 2024, OpenAI has sought to generate capital to invest in expensive AI infrastructure, and multiple reports have claimed that the firm's existing legal structure has limited investors' ability to invest in it. OpenAI's current structure sees the company's for-profit division controlled by a non-profit arm that is overseen by a board of directors. This board, headed by CEO Sam Altman, was at the center of significant controversy in 2023 following Altman's sudden ouster and equally quick comeback. Now, to "raise more capital than we'd imagined," OpenAI is planning to shake up its operating structure once again. In its blog post, the firm outlines that investors "need conventional equity and less structural bespokeness" to invest billions of dollars into the firm for the next phase of AI development. As a result, OpenAI now aims to transform its for-profit division into a public benefit corporation, or PBC. PBCs are different from traditional corporations in the sense that they have the legal cover to make decisions that might not align solely with investors' insistence on profit maximization. OpenAI's latest announcement appears to try to balance its foundational aim of providing AI for humanity's benefit with the need to generate profits and satiate investors. The firm's plans to change its ownership structure have been reported multiple times in 2024 and have attracted criticism from several quarters including Elon Musk accusing it of deviating from the original goal of being a non-profit entity. According to OpenAI, the PBC will issue ordinary shares, and the non-profit arm will own these shares. The firm adds that the reason it is considering a structural change is because the "current structure does not allow the Board to directly consider the interests of those who would finance the mission and does not enable the non-profit to easily do more than control the for-profit." On the other hand, OpenAI believes that the new structure, through which the non-profit owns shares of the for-profit, will lead to one of the "best resourced non-profits in history." Under the new structure, the "PBC will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education, and science," outlines the firm. A new ownership structure that creates equity in the PBC will also allow OpenAI's members and employees to amass equity stakes in the firm. These include CEO Sam Altman, who multiple reports have claimed will enjoy a sizable portion of the new company, which has solicited investment interest from big-ticket names such as Apple.

OpenAI mulls restructuring

OpenAI is mulling a corporate restructuring designed to help coordinate the artificial intelligence developer's nonprofit and for-profit arms, OpenAI said. The ChatGPT maker has faced fierce pushback, including lawsuits, for a 2019 decision to create a for-profit business unit to operate alongside its original nonprofit foundation. OpenAI is considering converting its for-profit division into a Delaware Public Benefit Corporation (PBC), a legal structure for private enterprises producing public goods, according to a Dec. 27 blog post. "The PBC is a structure⁠ used⁠ by many⁠ others⁠ that requires the company to balance shareholder interests, stakeholder interests, and a public benefit interest in its decisionmaking," OpenAI said in the post, adding: "It will enable us to raise the necessary capital with conventional terms like others in this space." The proposed restructuring would also enable the nonprofit to "hire a leadership team and staff to pursue charitable initiatives in sectors such as healthcare, education, and science," the AI developer added. In 2024, Tesla CEO Elon Musk, who co-founded OpenAI in 2015, sued the AI developer's leadership, including CEO Sam Altman, for allegedly "violating terms of Musk's "foundational contributions to the charity," according to a Nov. 30 court filing. In the lawsuit, Musk alleges Altman "intentionally courted and deceived Musk, preying on Musk's humanitarian concern about the existential dangers posed by artificial intelligence" and "assiduously manipulated Musk into co-founding their spurious nonprofit venture, OpenAI, Inc." In a March blog post, OpenAI said creating the for-profit entity was "necessary" for raising capital to amass the "vast quantities of compute" needed to run AI models. Musk has since launched xAI -- the firm behind AI chatbot Grok -- which he said is falling victim to OpenAI's anti-competitive practices. United States President-elect Donald Trump's presumptive "White House AI and Crypto Czar," David Sacks, has close ties to Musk and is also a critic of OpenAI. In October, Sacks said OpenAI has "gone from nonprofit philanthropy to piranha, for-profit company." In 2025, AI agents -- including those built using ChatGPT models -- "are expected to take on a more prominent role within decentralized communities," J.D. Seraphine, CEO of Web3 AI developer Raiinmaker, told Cointelegraph in December. Asset manager VanEck expects upward of 1 million AI agents to populate blockchain networks by the end of 2025.

To Further Its Mission of Benefitting Everyone, OpenAI Will Become Fully for-Profit

The corporate transition will allow OpenAI to raise more money and finally give its board the freedom to consider what its investors want. The thing you need to know about OpenAI, according to OpenAI, is that its only goal is to solve "the most important challenge of our time" in order to benefit all of humanity and the whole world. That will continue to be the case, the organization said in an announcement on Friday, even as it restructures itself from a corporation controlled by a nonprofit to a stand-alone corporation that happens to throw a lot of money at an affiliated nonprofit. How does this restructuring help OpenAI fulfill its mission of benefiting all humans and things non-human? Well, it's simple. OpenAI's "current structure does not allow the Board to directly consider the interests of those who would finance the mission." Under the new structure, OpenAI's leadership will finally be able to raise more money and pay attention to the needs of the billionaires and trillion-dollar tech firms that invest in it. Voila, everyone benefits. Not mentioned in the press release is the fact that a year ago the non-profit board that oversaw OpenAI unsuccessfully tried to give CEO Sam Altman the boot for "outright lying" in ways that, according to former board member Helen Toner, made it difficult for the board to ensure that the company's "public good mission was primary, was coming firstâ€"over profits, investor interests, and other things," With its new structure, OpenAI wants to maintain at least a facade of altruism. The for-profit company will be incorporated as a Delaware Public Benefit Corporation, which means that its board can consider how the company's actions impact stakeholders like employees and customers in addition to its fiduciary responsibility to shareholders (Corporate law experts have pointed out that normal corporations are also perfectly free to do this). Other publicly traded Delaware Public Benefit Corporations include Laureate Education, which operates a string of for-profit universities around the world, including one that was accused multiple times of misleading students about the cost of its degree programs (Laureate sold Walden University prior to the university settling a class action lawsuit earlier this year for $28.5 million). Another is Lemonade Inc., an insurance company that once advertised, and quickly apologized for, an AI feature it claimed could detect fraudulent customers by analyzing their faces. Mixed in with all the effective accelerationist saviorism in OpenAI's announcement, is the clear message that the new company plans to raise a ton more money to further its drive toward artificial general intelligence (AGI). According to reporting from The Information, OpenAI and Microsoft have defined AGI as systems that can generate at least $100 billion in profits. You know, the hallmark of intelligence. What will become of the nonprofit that currently oversees the company is less clear, although it certainly won't be pinching pennies. It wasn't a very traditional nonprofit to begin with, having quickly churned through $137 million in donated cash from Elon Musk and other tech moguls in addition to more than $100 million in free computing from Google, Microsoft, and others in order to create generative AI systems that now benefit for-profit corporations. After the corporate transition is complete, the nonprofit won't have any oversight duties at OpenAI but it will receive shares in the new for-profit company and be "one of the best-resourced non-profits in history," according to OpenAI's press release. That will allow it to "pursue charitable initiatives in sectors such as health care, education, and science." Needless to say, it won't be long before we all start benefitting from its charity.

OpenAI Board Considering Transforming For-Profit Into Delaware Public Benefit Corporation | PYMNTS.com

OpenAI's board of directors plans 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). The organization will continue to have a structure that includes both a non-profit and a for-profit, as it does now, but it is evolving that structure in order to strengthen both arms, OpenAI said in a Thursday (Dec. 26) blog post outlining the change its board is considering. "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 post said. "We would need far more compute, and therefore far more capital, than we could obtain with donations in order to pursue our mission." As it considers how to structure OpenAI, the board said it aims to transform the for-profit into a PBC with ordinary shares of stock and OpenAI's mission as its public benefit interest, saying this structure would be best for the mission's long-term success. Under the plan being considered, the non-profit's interest in the for-profit would become shares in the PBC, with the valuation being determined by independent financial advisors; the PBC would run and control OpenAI's operations and business; and the non-profit would hire leaders and staff and focus on charitable initiatives, per the post. "The PBC is a structure used by many others that requires the company to balance shareholder interests, stakeholder interests, and a public benefit interest in its decisionmaking," the post said. "It will enable us to raise the necessary capital with conventional terms like others in this space." It was reported Thursday (Dec. 26) that OpenAI and its largest investor, Microsoft, have been in talks since October about how to restructure the AI firm. In September, it was reported that OpenAI planned to restructure its core business into a for-profit benefit corporation, with the OpenAI non-profit owning a minority stake. The restructuring would make the company more attractive to investors, as it would operate more like a typical startup, the report said.

Sam Altman's OpenAI Plans Major Restructuring to Non-Profit Structure Amid Rising Costs - Alphabet (NASDAQ:GOOG), Advanced Micro Devices (NASDAQ:AMD)

Elon Musk opposes OpenAI's shift, claiming it abandons nonprofit roots. ChatGPT parent OpenAI is exploring restructuring its corporate framework in 2025, transforming it into a Delaware Public Benefit Corporation (PBC). Sam Altman's artificial intelligence company initially focused on advancing AI without financial constraints. However, by 2019, it became clear that developing large-scale language models required substantial investments, prompting the company to introduce a hybrid structure. OpenAI raised $1 billion from Microsoft Corp MSFT. The company highlighted the need for "hundreds of billions of dollars" in capital to sustain its mission. Also Read: Elon Musk's xAI To Expand With New Chatbot App The current valuation of $157 billion and competition from Microsoft, Alphabet Inc GOOGL GOOG, and Anthropic, prompted OpenAI to issue traditional equity through its new structure, CNBC reports. Transitioning to a PBC will allow OpenAI to attract conventional equity investments, while the nonprofit arm will focus on charitable initiatives in education, healthcare, and science. Under the proposed model, OpenAI's nonprofit will hold a significant interest in the for-profit PBC, valued by independent financial advisors. However, OpenAI's move has sparked opposition from co-founder Elon Musk, who has filed legal challenges against the restructuring. Musk, owner of OpenAI's rival xAI, charged OpenAI of ditching its nonprofit roots. Internal challenges have also emerged, with key executives like Chief Technology Officer Mira Murati and Research Chief Bob McGrew exiting the company. Developing and scaling generative AI models like ChatGPT requires massive resources, including high-powered processors from Nvidia Corp NVDA and cloud infrastructure provided by key backer Microsoft. OpenAI expects $5 billion in losses on $3.7 billion in revenue in 2024. Interestingly, OpenAI recently revealed old emails from Musk that depicted his advocacy for a profit-making business model. Musk's AI company, xAI, announced on Monday that it raised $6 billion in funding, marking its second major funding round in 2024. The investment features strategic backing from Nvidia Corp NVDA and Advanced Micro Devices, Inc AMD. xAI plans to use the funding to expand its Colossus supercomputer, which currently runs on 100,000 Nvidia Hopper GPUs. The company aims to double its capacity to 200,000 GPUs. Also Read: Netflix's NFL Debut Brings Record Streams But Lags Traditional TV: Report Photo via Shutterstock AMDAdvanced Micro Devices Inc$125.180.09%Overview Rating:Speculative37.5%Technicals Analysis660100Financials Analysis200100WatchlistOverviewGOOGAlphabet Inc$194.07-1.54%GOOGLAlphabet Inc$192.64-1.51%MSFTMicrosoft Corp$429.82-1.89%NVDANVIDIA Corp$136.61-2.37%Market News and Data brought to you by Benzinga APIs

OpenAI announces significant changes in its structure - Softonic

Neither Elon Musk nor Mark Zuckerberg would agree with OpenAI's plans The board of directors of OpenAI has confirmed that there will be significant changes in the company's structure. Through a post published on December 26, OpenAI has explained that, among other things, it plans to become a for-profit company. The Board of Directors believes that this could "ensure that generative artificial intelligence benefits all of humanity". According to the publication, the company has three objectives to achieve. The first is to choose a structure (whether for-profit or non-profit) that can ensure that AI benefits humanity. The second is that OpenAI wants to make the non-profit part sustainable. The third and final is to ensure that each area of the organization fulfills its purpose. For OpenAI, this move could help attract investors and obtain money to fund its AI models. According to Bloomberg, Sam Altman, CEO of OpenAI, would receive a 7% stake in the company as part of this plan. However, Altman denied this information. According to the Council's plan, the non-profit part of OpenAI would receive shares of the for-profit company. This change has generated concern about the board's control of the non-profit arm, especially after the contentious dismissal and subsequent reinstatement of Altman.

Sam Altman's OpenAI Plans Major Revamp Of Corporate Structure - Alphabet (NASDAQ:GOOG), Advanced Micro Devices (NASDAQ:AMD)

Elon Musk opposes OpenAI's shift, claiming it abandons nonprofit roots. ChatGPT parent OpenAI is exploring restructuring its corporate framework in 2025, transforming it into a Delaware Public Benefit Corporation (PBC). Sam Altman's artificial intelligence company initially focused on advancing AI without financial constraints. However, by 2019, it became clear that developing large-scale language models required substantial investments, prompting the company to introduce a hybrid structure. OpenAI raised $1 billion from Microsoft Corp MSFT. The company highlighted the need for "hundreds of billions of dollars" in capital to sustain its mission. Also Read: Elon Musk's xAI To Expand With New Chatbot App The current valuation of $157 billion and competition from Microsoft, Alphabet Inc GOOGL GOOG, and Anthropic, prompted OpenAI to issue traditional equity through its new structure, CNBC reports. Transitioning to a PBC will allow OpenAI to attract conventional equity investments, while the nonprofit arm will focus on charitable initiatives in education, healthcare, and science. Under the proposed model, OpenAI's nonprofit will hold a significant interest in the for-profit PBC, valued by independent financial advisors. However, OpenAI's move has sparked opposition from co-founder Elon Musk, who has filed legal challenges against the restructuring. Musk, owner of OpenAI's rival xAI, charged OpenAI of ditching its nonprofit roots. Internal challenges have also emerged, with key executives like Chief Technology Officer Mira Murati and Research Chief Bob McGrew exiting the company. Developing and scaling generative AI models like ChatGPT requires massive resources, including high-powered processors from Nvidia Corp NVDA and cloud infrastructure provided by key backer Microsoft. OpenAI expects $5 billion in losses on $3.7 billion in revenue in 2024. Interestingly, OpenAI recently revealed old emails from Musk that depicted his advocacy for a profit-making business model. Musk's AI company, xAI, announced on Monday that it raised $6 billion in funding, marking its second major funding round in 2024. The investment features strategic backing from Nvidia Corp NVDA and Advanced Micro Devices, Inc AMD. xAI plans to use the funding to expand its Colossus supercomputer, which currently runs on 100,000 Nvidia Hopper GPUs. The company aims to double its capacity to 200,000 GPUs. Also Read: Netflix's NFL Debut Brings Record Streams But Lags Traditional TV: Report Photo via Shutterstock AMDAdvanced Micro Devices Inc$125.160.08%Overview Rating:Speculative37.5%Technicals Analysis660100Financials Analysis200100WatchlistOverviewGOOGAlphabet Inc$193.98-1.58%GOOGLAlphabet Inc$192.65-1.51%MSFTMicrosoft Corp$430.39-1.76%NVDANVIDIA Corp$136.94-2.13%Market News and Data brought to you by Benzinga APIs

OpenAI Weighs For-Profit Move Amid Talks With Microsoft | PYMNTS.com

OpenAI is reportedly planning to become a for-profit company and is discussing the details of that transition with major investor Microsoft. According to a Thursday (Dec. 26) report from The Information, the two companies have been in talks since October about how to restructure the artificial intelligence (AI) firm. Microsoft is OpenAI's largest investor, having supported the company with $13 billion. Citing a person who has spoken with OpenAI CEO Sam Altman about the Microsoft discussions, The Information said the talks have centered on four topics: Microsoft's equity stake in the for-profit entity; whether Microsoft will continue to be OpenAI's exclusive cloud provider; how long Microsoft will maintain its rights to use OpenAI's intellectual property in its products; and whether Microsoft will continue to take 20% of OpenAI's revenue. OpenAI and Microsoft did not immediately reply to PYMNTS' request for comment. OpenAI announced in September its plans to restructure into a for-profit benefit corporation that won't be controlled by its nonprofit board, PYMNTS reported at the time. Asked about the report by Reuters at the time, 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 company's restructuring efforts also face another obstacle in the form of a lawsuit from Elon Musk, who sued to stop the transition, PYMNTS reported earlier this month. The billionaire and his AI startup xAI filed for a preliminary injunction in federal court to prevent the conversion and prevent OpenAI from blocking its investors from funding its rivals, a group that includes Musk's company. Musk's attorneys argued that OpenAI should be blocked from "benefitting from wrongfully obtained competitively sensitive information or coordination via the Microsoft-OpenAI board interlocks." Separately, OpenAI Chief Commercial Officer Giancarlo "GC" Lionetti said the company is growing its sales staff amid a "paradigm shift" in corporate AI spending. The company has been signing new contracts with healthcare, manufacturing and legal companies, among them vaccine maker Moderna and home improvement company Lowe's, Lionetti said, according to a Nov. 27 report from The Information. "We believe AI products are truly a paradigm shift, and that starts to unlock these new ways of working that you're referring to here," he said. "Users and customers are finding a new way to work."

OpenAI Lays Out Its For-Profit Transition Plans, Says It Must Evolve To Advance Its AGI Mission - Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META)

Microsoft Corp.-backed MSFT OpenAI has outlined its plans to transition its for-profit entity into a Delaware Public Benefit Corporation (PBC). What Happened: Making the announcement, OpenAI said that it needs to evolve to align with its mission of ensuring artificial general intelligence (AGI) that benefits all humanity. The company, currently structured with a nonprofit controlling a for-profit, intends to balance shareholder and stakeholder interests while maintaining its public benefit mission. OpenAI's existing nonprofit will receive shares in the new PBC, valued by independent financial advisors. OpenAI's blog post emphasized the need to evolve beyond a lab and startup to become an enduring company as the world builds new infrastructure for the 21st-century economy. The transition is expected to help OpenAI raise the necessary capital with conventional terms. "As we enter 2025, we will have to become more than a lab and a startup -- we have to become an enduring company," said OpenAI. Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. "The world is moving to build out a new infrastructure of energy, land use, chips, datacenters, data, AI models, and AI systems for the 21st century economy. We seek to evolve in order to take the next step in our mission, helping to build the AGI economy and ensuring it benefits humanity." However, the plan faces opposition. Billionaire and OpenAI co-founder Elon Musk has filed for an injunction to halt the transition, accusing OpenAI of straying from its original mission. Additionally, Meta Platforms Inc. META has also expressed concerns, arguing that the shift could have significant implications for Silicon Valley. See Also: Tech Bull Predicts 26% Upside For Apple Stock, Sees 'Golden Era Of Growth' For Cupertino With AI-Driven iPhone Upgrade Cycle OpenAI's current structure led to the ousting of CEO Sam Altman last November, causing investor dissatisfaction, particularly from Microsoft. The company continues to face challenges, including talent outflow and concerns about prioritizing commercial products over safety. Why It Matters: The transition of OpenAI into a for-profit entity has sparked significant controversy, particularly from Musk, who has taken legal action to block the move. Musk, a co-founder of OpenAI, has been vocal about his concerns, arguing that the transition could divert the company's focus from its original mission. Adding to the complexity, Mark Zuckerberg-led Meta has sided with Musk, highlighting the potential misuse of assets developed under OpenAI's nonprofit status. This alliance is notable given Musk's recent public disagreements with Meta's Mark Zuckerberg over AI advancements. Check out more of Benzinga's Consumer Tech coverage by following this link. Read Next: Trump Asks Supreme Court to Delay TikTok Ban As He Pursues A 'Political Resolution' Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock Market News and Data brought to you by Benzinga APIs

Explainer: Why OpenAI plans transition to public benefit corporation

Dec 27 (Reuters) - OpenAI on Friday laid out a plan to transition its for-profit arm into a Delaware public benefit corporation (PBC) to help it raise capital and stay ahead in the costly AI race against companies such as Google. OpenAI's new structure aims to potentially make a more investor-friendly corporation, while maintaining a mission of funding a related charity. Rivals including Anthropic have also adopted the PBC structure to balance societal interests along with shareholder value. WHAT IS A PUBLIC BENEFIT CORPORATION? While both PBCs and traditional corporations are for-profit entities, PBCs are legally required to pursue one or more public benefits, including social and environmental goals. Delaware amended its general corporation law to allow the formation of PBCs in 2013 and as of December 2023, there were 19 publicly traded PBCs, according to research by Jens Dammann of the University of Texas. In its blog, OpenAI described the current structure as "a for-profit, controlled by the non-profit, with a capped profit share for investors and employees". Under the new organization, the non-profit will own shares in the for-profit, similar to outside investors, and the for-profit will fund the charitable mission of the non-profit. "The PBC will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff to pursue charitable initiatives in sectors such as healthcare, education, and science," it said. DIFFERENCE BETWEEN A PBC AND OTHER CORPORATE STRUCTURES Unlike PBCs, non-profit corporations do not have shareholders and reinvest profits into their mission rather than distributing them to individuals. PBCs do not receive special tax exemptions or incentives, while non-profits are generally exempted from federal income taxes if they meet certain requirements. LIMITATIONS OF PBCs Becoming a benefit corporation does not guarantee a company will put its stated mission above profit, as the law only legally requires the board to "balance" its mission and profit-making interests, said Ann Lipton, a corporate law professor at Tulane Law School. Delaware law does require the company to report on its progress towards the goals to shareholders, who, in practice, dictate how closely a PBC sticks to its mission, Lipton said. "The only reason to choose benefit form over any other corporate form is the declaration to the public. It doesn't actually have any real enforcement power behind it," Lipton added. Some legal experts also say that publicly traded PBCs are more susceptible to takeovers, as bidders can argue the company lacks profit maximization or that its public benefit goals conflict with the bidder's objectives. SOME EXISTING PBCs Anthropic and xAI: OpenAI's rivals, Anthropic and Elon Musk's xAI have also adopted PBCs. Allbirds: Allbirds (BIRD.O), opens new tab is a San Francisco-based PBC that sells sustainable shoes and apparel made from natural materials. Kickstarter: Kickstarter is a New York-based PBC that maintains a global crowdfunding platform for creative projects. Patagonia: Patagonia is a California-based retailer of outdoor recreation clothing, equipment and food. The company has contributed over $230 million to environmental organizations, according to its website. Warby Parker: Warby Parker (WRBY.N), opens new tab is a New York-based manufacturer and retailer of eyewear products. The company's "Buy a Pair, Give a Pair" policy aims to help people in need. Reporting by Jaspreet Singh and Rishi Kant in Bengaluru and Jody Godoy in New York; Editing by Vijay Kishore Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial IntelligenceMedtech

Why OpenAI Plans Transition to Public Benefit Corporation

Delaware amended its corporation permitting formation of PBCs in 2013 OpenAI on Friday laid out a plan to transition its for-profit arm into a Delaware public benefit corporation (PBC) to help it raise capital and stay ahead in the costly AI race against companies such as Google. OpenAI's new structure aims to potentially make a more investor-friendly corporation, while maintaining a mission of funding a related charity. Rivals including Anthropic have also adopted the PBC structure to balance societal interests along with shareholder value. What is a Public Benefit Corporation While both PBCs and traditional corporations are for-profit entities, PBCs are legally required to pursue one or more public benefits, including social and environmental goals. Delaware amended its general corporation law to allow the formation of PBCs in 2013 and as of December 2023, there were 19 publicly traded PBCs, according to research by Jens Dammann of the University of Texas. In its blog, OpenAI described the current structure as "a for-profit, controlled by the non-profit, with a capped profit share for investors and employees". Under the new organisation, the non-profit will own shares in the for-profit, similar to outside investors, and the for-profit will fund the charitable mission of the non-profit. "The PBC will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff to pursue charitable initiatives in sectors such as healthcare, education, and science," it said. Difference Between a PBC and Other Corporate Structures Unlike PBCs, non-profit corporations do not have shareholders and reinvest profits into their mission rather than distributing them to individuals. PBCs do not receive special tax exemptions or incentives, while non-profits are generally exempted from federal income taxes if they meet certain requirements. Limitations of PBCs Becoming a benefit corporation does not guarantee a company will put its stated mission above profit, as the law only legally requires the board to "balance" its mission and profit-making interests, said Ann Lipton, a corporate law professor at Tulane Law School. Delaware law does require the company to report on its progress towards the goals to shareholders, who, in practice, dictate how closely a PBC sticks to its mission, Lipton said. "The only reason to choose benefit form over any other corporate form is the declaration to the public. It doesn't actually have any real enforcement power behind it," Lipton added. Some legal experts also say that publicly traded PBCs are more susceptible to takeovers, as bidders can argue the company lacks profit maximisation or that its public benefit goals conflict with the bidder's objectives. Some Existing PBCs Anthropic and xAI: OpenAI's rivals, Anthropic and Elon Musk's xAI have also adopted PBCs. Allbirds: Allbirds is a San Francisco-based PBC that sells sustainable shoes and apparel made from natural materials. Kickstarter: Kickstarter is a New York-based PBC that maintains a global crowdfunding platform for creative projects. Patagonia: Patagonia is a California-based retailer of outdoor recreation clothing, equipment and food. The company has contributed over $230 million to environmental organisations, according to its website. Warby Parker: Warby Parker is a New York-based manufacturer and retailer of eyewear products. The company's "Buy a Pair, Give a Pair" policy aims to help people in need. © Thomson Reuters 2024

Why OpenAI plans transition to public benefit corporation

(Reuters) - OpenAI on Friday laid out a plan to transition its for-profit arm into a Delaware public benefit corporation (PBC) to help it raise capital and stay ahead in the costly AI race against companies such as Google. OpenAI's new structure aims to potentially make a more investor-friendly corporation, while maintaining a mission of funding a related charity. Rivals including Anthropic have also adopted the PBC structure to balance societal interests along with shareholder value. WHAT IS A PUBLIC BENEFIT CORPORATION? While both PBCs and traditional corporations are for-profit entities, PBCs are legally required to pursue one or more public benefits, including social and environmental goals. Delaware amended its general corporation law to allow the formation of PBCs in 2013 and as of December 2023, there were 19 publicly traded PBCs, according to research by Jens Dammann of the University of Texas. In its blog, OpenAI described the current structure as "a for-profit, controlled by the non-profit, with a capped profit share for investors and employees". Under the new organization, the non-profit will own shares in the for-profit, similar to outside investors, and the for-profit will fund the charitable mission of the non-profit. "The PBC will run and control OpenAI's operations and business, while the non-profit will hire a leadership team and staff to pursue charitable initiatives in sectors such as healthcare, education, and science," it said. DIFFERENCE BETWEEN A PBC AND OTHER CORPORATE STRUCTURES Unlike PBCs, non-profit corporations do not have shareholders and reinvest profits into their mission rather than distributing them to individuals. PBCs do not receive special tax exemptions or incentives, while non-profits are generally exempted from federal income taxes if they meet certain requirements. LIMITATIONS OF PBCs Becoming a benefit corporation does not guarantee a company will put its stated mission above profit, as the law only legally requires the board to "balance" its mission and profit-making interests, said Ann Lipton, a corporate law professor at Tulane Law School. Delaware law does require the company to report on its progress towards the goals to shareholders, who, in practice, dictate how closely a PBC sticks to its mission, Lipton said. "The only reason to choose benefit form over any other corporate form is the declaration to the public. It doesn't actually have any real enforcement power behind it," Lipton added. Some legal experts also say that publicly traded PBCs are more susceptible to takeovers, as bidders can argue the company lacks profit maximization or that its public benefit goals conflict with the bidder's objectives. SOME EXISTING PBCs Anthropic and xAI: OpenAI's rivals, Anthropic and Elon Musk's xAI have also adopted PBCs. Allbirds: Allbirds is a San Francisco-based PBC that sells sustainable shoes and apparel made from natural materials. Kickstarter: Kickstarter is a New York-based PBC that maintains a global crowdfunding platform for creative projects. Patagonia: Patagonia is a California-based retailer of outdoor recreation clothing, equipment and food. The company has contributed over $230 million to environmental organizations, according to its website. Warby Parker: Warby Parker is a New York-based manufacturer and retailer of eyewear products. The company's "Buy a Pair, Give a Pair" policy aims to help people in need. (Reporting by Jaspreet Singh and Rishi Kant in Bengaluru and Jody Godoy in New York; Editing by Vijay Kishore)