OpenAI unveiled its new corporate structure as the tech giant seeks finance the high costs of AI development — and, in particular, artificial general intelligence (AGI).
In long-rumored plans, OpenAI will transform its for-profit arm into a public benefit corporation (PBC), using revenue from that unit to fund a non-profit arm.
The structure of OpenAI has been the subject of heated debate—whether the future of AI should be driven by revenue or social benefit (or safety), and corporate drama and lawsuits.
Now, OpenAI has revealed plans to change the company’s corporate structure to “best support the mission of delivering artificial general intelligence (AGI) for the benefit of all humanity.”
The company reported in blog post the plans had three objectives: to select a structure that would work best in the long term; ensure the sustainability of the non-profit division; and “to equip each hand to do its part.”
“Today we have a nonprofit and a for-profit organization, and we will continue to have both, with the success of the for-profit organization allowing the nonprofit to be well-funded, better supported, and in a stronger position for mission,” the post said.
Here’s what drove the restructuring, how it will work and what it means for the future AI.
What’s behind the move to OpenAI?
OpenAI was founded as a non-profit organization in 2015based on $137 million in donations, a third of which from Elon Musk, and credits and rebates from cloud companies, including $1.8 million from Amazon and $50 million or more from Microsoft Azure and Google Cloud , the company said in a statement.
But in 2019, OpenAI pivoted from a research lab to a startup, creating a commercial arm largely to raise funds—the company said at the time it estimated it would cost $10 billion to create AGI. The first round of funding raised $100 million. followed by the first billion from Microsoft.
The commercial division was controlled by the non-profit division. But the success of ChatGPT, which launched in 2022, sparked subsequent discussions about the company’s future, as well as a lawsuit from Elon Musk and the chaotic ouster of Sam Altman as CEO. although he was quickly reinstated.
Rumors about the latest restructuring have been swirling for months, and OpenAI said the goal is to continue its evolution from a lab, then a startup, to a “sustainable company” in order to raise more funds.
“We again need to raise more capital than we anticipated,” the statement said. “Investors want to support us, but at this scale of capital they want regular equity capital and fewer structural changes.”
OpenAI managed to raise Its most recent funding round was $6.6 billion last year.But Reuters reported at the time that the company promised investors it would lift the profit cap within two years.
The high cost of AI development means that any delays in funding could undermine the company’s ability to compete with a growing number of competitors, some of which are backed by industry heavyweights such as AWS.
Public benefit corporation
Under the restructuring plans, OpenAI will transform its existing commercial arm into a so-called public benefit corporation (PBC). This corporate structure requires the company to consider the impact of technology and its operation on society and to create shareholder value.
The framework is used by rival artificial intelligence companies, including Anthropic and Musk’s xAI, the blog post notes. This structure allows OpenAI to raise funds more easily, but requires it to consider the company’s existing mission, as well as shareholders, when making decisions.
“The PBC is a framework used by many other companies that requires a company to balance shareholder interests, stakeholder interests, and public benefit interests when making decisions,” the blog notes. “This will allow us to raise the capital we need on normal terms, in line with others in this space.”
The nonprofit arm will have a significant stake in PBC, making it “one of the best-resourced nonprofit organizations in history,” the company said. “This will multiply the resources our donors have provided.”
In addition to the funding, the nonprofit will have a separate leadership team dedicated to AI-focused work in healthcare, education and more, the company said.
Commercial call
Those plans have been criticized by Musk as well as Meta, which has filed legal complaints that OpenAI is becoming increasingly commercial-focused, Musk said. Reuters.
These complaints have received support from others in the technology industry, as well as Nobel laureate Geoffrey Hinton, who raised serious concerns About the move in the application.
“OpenAI was founded as a non-profit organization with an explicit security focus and made many security-related promises in its charter… It received numerous tax and other benefits due to its non-profit status,” he said.
“Allowing it to disrupt the whole thing when it becomes inconvenient would send a very bad signal to others in the ecosystem.”
While PBCs are designed to help companies focus on a social mission, there is nothing in their design that forces any specific action.
Anne Lipton, professor of corporate law at Tulane Law School, said Reuters that People’s Bank of the Bank “doesn’t really have any real enforcement powers” – instead, shareholders decide how to run the company.