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.
With Post wires
