OpenAI plans tectonic shift from nonprofit to for-profit, giving Altman equity

Under plans that have attracted criticism, shift may give Altman a stake in the firm.

On Wednesday, Reuters reported that OpenAI is working on a plan to restructure its core business into a for-profit benefit corporation, moving away from control by its nonprofit board. The shift marks a dramatic change for the AI company behind ChatGPT, potentially making it more attractive to investors while raising questions about its commitment to sharing the benefits of advanced AI with "all of humanity," as written in its charter.

A for-profit benefit corporation is a legal structure that allows companies to pursue both financial profits and social or environmental goals, ostensibly balancing shareholder interests with a broader mission to benefit society. It's an approach taken by some of OpenAI's competitors, such as Anthropic and Elon Musk's xAI.

In a notable change under the new plan, CEO Sam Altman would receive equity in the for-profit company for the first time. Bloomberg reports that OpenAI is discussing giving Altman a 7 percent stake, though the exact details are still under negotiation. This represents a departure from Altman's previous stance of not taking equity in the company, which he had maintained was in line with OpenAI's mission to benefit humanity rather than individuals.

The restructuring would see OpenAI's nonprofit arm continue to exist but own only a minority stake in the new for-profit entity. Meanwhile, OpenAI is exploring a new funding round that could value the company at $150 billion, according to sources familiar with the matter that spoke with Reuters.

The proposed restructuring also aims to remove the cap on returns for investors, potentially making OpenAI more appealing to venture capitalists and other financial backers. Microsoft, which has invested billions in OpenAI, stands to benefit from this change, as it could see increased returns on its investment if OpenAI's value continues to rise.

Transformation over time

OpenAI's journey from a nonprofit research organization founded in 2015 to its current status as an AI market leader has been marked by rapid growth and increasing commercial success. The company added a for-profit subsidiary, OpenAI LP, in 2019 to help fund its research and development efforts. However, the nonprofit board retained full control over the for-profit arm, a structure designed to ensure the company's focus on developing safe and beneficial artificial general intelligence (AGI).

While the restructuring may streamline decision-making and attract more investment, it could also complicate OpenAI's commitment to its original mission, as Musk and former OpenAI board member Helen Toner have claimed.

Musk, an original co-founder of OpenAI, sued the company and Altman in March, claiming that OpenAI’s alliance with Microsoft had broken its agreement to make a major breakthrough in AI "freely available to the public." Musk withdrew the suit in June, then revived it in August under similar complaints about the company abandoning its commitment to truly open source releases of AI tech.

In November 2023, after internal dissent over the increasingly commercial direction of OpenAI and how it handled product releases, the company experienced a brief but intense boardroom drama that saw Altman ousted and then quickly reinstated as CEO after overwhelming support from employees and investors.

OpenAI's moves since then have seemed to hinge on goals that would be beneficial to Altman getting a tighter rein on the company and transforming it into more of a consumer tech corporation than a research organization. These include de-emphasizing "AI safety" research that focused on sci-fi-like existential threats (previously led by a cohort of employees that sometimes challenged public AI model releases, providing impediments to commercial growth), attracting Altman-loyal board members and allowing people who originally participated in firing Altman from the company to leave (the departure of Ilya Sutskever for example), and positioning the company toward a rapid increase in company valuation, going hand-in-hand with Altman's ambitious plans toward expanding world infrastructure for AI models.

These changes have coincided with a significant upheaval in OpenAI's leadership. On Wednesday, longtime Chief Technology Officer Mira Murati announced her departure from the company, as we covered in a separate piece. Murati, who played a key role in developing products like ChatGPT and DALL-E, stated she was leaving to "create the time and space to do my own exploration." She also reportedly played a major role in Altman's ouster last year despite later voicing support for him. Her exit follows those of other senior figures, including the temporary departure of co-founder and President Greg Brockman, who is currently on leave.