OpenAI has announced plans to establish a public benefit corporation (PBC) to facilitate capital raising and remove current restrictions from its non-profit parent.
This move aims to enhance its ability to secure funding for the development of artificial general intelligence (AGI), a costly endeavour that seeks to surpass human intelligence.
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The proposed restructuring involves transforming OpenAI’s existing for-profit arm into a Delaware-based PBC, a structure that aims to balance societal interests with shareholder value.
The company recently raised $6.6bn at a $157bn valuation, which, according to Reuters, was contingent on changing its corporate structure and removing profit caps for investors within two years.
OpenAI’s nonprofit will maintain a “significant interest” in the PBC, with shares determined by independent financial advisers.
Founded in 2015 as a research-focused nonprofit, OpenAI created a for-profit unit in 2019 to fund AI development costs.
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By GlobalDataIn a blog post, the ChatGPT maker said: “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.
“We once again need to raise more capital than we had imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”
The transition to a PBC aligns OpenAI with competitors such as Anthropic and Elon Musk’s xAI, which have similar structures and have recently secured significant funding.
Anthropic received a $4bn investment from Amazon in September, while xAI raised $6bn in equity financing in December.
However, OpenAI’s plan faces challenges.
Musk, an OpenAI co-founder and critic, is attempting to block the plan, alleging contract violations prioritising profit over public good.
OpenAI has requested a federal judge to dismiss Musk’s claims, citing his initial support for a for-profit status before leaving the company.
Additionally, Meta Platforms is urging California’s attorney general to prevent OpenAI’s conversion to a for-profit entity, reported Reuters, citing a letter.
