OpenAI has announced plans to reorganize its organization into a public benefit corporation, aiming to attract heavy new investment to fuel the ambitious AI development goals set by the company. In a move disclosed on Friday, the maker of the ChatGPT has indicated a significant shift for it as it transitions from a nonprofit-backed model to an organization that balances profit and societal impact.
The reorg was necessary since OpenAI came to realize a need for far more capital than was envisaged earlier. According to the startup, the landscape is getting stiff in competition at AI. The bigger industry players continue to shower billions of dollars in pursuit of research and development.
The firm recently acquired $6.6 billion in funding in its final valuation of $157 billion, but profit caps in removal and acceptance of the PBC structure were subject to further investments.
The planned restructuring will convert OpenAI’s for-profit arm into a Delaware-based public benefit corporation. This structure mandates the company to consider public welfare alongside shareholder interests. Meanwhile, its nonprofit entity will retain a significant stake in the PBC through shares, ensuring that the nonprofit remains among the best-resourced of its kind.
OpenAI wants to raise ‘big’ capital to convert into public benefit corporation
“We need to raise much more capital than we initially thought,” OpenAI said in a blog post. “Investors are keen to back us but demand conventional equity at this level of funding.”
This puts OpenAI in league with competitors such as Anthropic and xAI, which have followed similar arrangements to secure large-scale funding. For example, Amazon recently invested $4 billion in Anthropic, and xAI, owned by Elon Musk, raised $6 billion last month.
However, the restructuring faces opposition. Musk, a co-founder of OpenAI turned vocal critic, has filed a lawsuit claiming the company prioritizes profits over public good. Meta has also urged California’s attorney general to block OpenAI’s conversion, citing concerns over its commitment to its mission.
According to legal experts, while being a PBC is an expression of dedication to profit and purpose alignment, its enforcement remains the willingness of shareholders to pursue the mission as expressed.
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