The world’s most high-profile technology startup, OpenAI, has been in the news again, this time because of a new funding round that has increased its valuation to $150bn.
Microsoft, SoftBank, and NVIDIA joined the fundraising alongside Thrive Capital, Khosla Ventures, and MGX, the new Abu-Dabhi investment firm. Alongside this news, OpenAI also announced plans to move to a full-blown for-profit governance structure to attract more investment.
OpenAI switched its governance structure from non-profit to a “capped-profit” vehicle in 2019, after Microsoft, which has so far sunk $13bn in the startup, became its main investor. OpenAI is therefore currently split into two parts, with a non-profit arm at the helm, and a for-profit subsidiary to raise capital and hire talent, but still subject to the direction of the nonprofit arm.
The for-profit’s equity structure has caps that limit the maximum financial returns to investors and employees. Because of this unusual structure, investors remain wary of putting money into the startup, whose insatiable hunger for computing infrastructure to train its GenAI models makes it reliant on investors with deep pockets. The recent changes are therefore aimed at putting financial benefactors at ease.
Mira Murati’s resignation
However, all these changes have led to increasing turmoil at the helm of OpenAI, and after CTO Mira Murati unexpectedly abandoned the company last month, a fresh onslaught of senior departures took place.
Murati was the brains behind the launch of ChatGPT as a standalone product driven by the underlying LLM technology. She was also instrumental in salvaging the company during a dizzying week of leadership changes in which CEO Sam Altman was ousted and reinstated within a few days in November 2023. Her sudden departure was received with consternation, and followed by the resignations of CRO Bob McGrew, and Barret Zoph, VP of research.
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By GlobalDataOnly two out of 11 founders remain active in the company now, suggesting the wounds made manifest during last year’s crisis are yet to heal.
Safety concerns
OpenAI has been mired in controversy regarding safety in developing its AI systems. It launched its Safety and Security Committee to make recommendations on critical safety and security decisions in May 2024, but even this move was greeted with scepticism, resulting in high-profile CEO Sam Altman being forced to announce he was quitting the committee to ensure its independence.
A former senior employee at OpenAI stated the company is chasing “shiny products” and neglecting safety. Its most recent release, o1, was impacted by rumours about safety. These new series of models are designed to “reason” through complex tasks and solve harder problems than previous AI systems in science, coding, and math. The technology is closer to a more advanced type of LLM aimed at mimicking more deliberate and analytical thinking.
Competitive landscape and OpenAI
GlobalData analyst Beatriz Valle comments: “OpenAI needs to be careful not to lose sight of safety and other ethical considerations in the frantic attempt to retain its first-mover advantage against competitors such as Google, Amazon, Anthropic, and Meta. The transition to a full for-profit structure, a requisite to continue receiving much-needed cash, adds another layer of complexity to its competitive strategy in what is already a ferocious landscape, GenAI technologies. Rivals have kept busy in the meantime, with Meta launching its first multimodal platform, Llama 3.2, which can use a combination of images and text prompts, last month. And we can expect Google to come up with its own AI releases before the end of the year.”
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