OpenAI outlines new for-profit structure to stay ahead in costly AI race

BENGALURU: OpenAI on Friday outlined plans to revamp its structure, saying it would create a public benefit corporation that would make it easier to raise capital and remove the restrictions imposed on the startup by its current nonprofit parent.

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.

The nonprofit meanwhile will have a “significant interest” in the PBC in the form of shares as determined by independent financial advisers, OpenAI said in a blogpost, adding that it would be one of the “best resourced nonprofits in history.”

OpenAI started in 2015 as a research-focused non-profit but created a for-profit unit four years later to secure funding for the high costs of AI development. Its unusual structure gave control of the for-profit unit to the nonprofit and was in focus last year when Sam Altman was fired as CEO only to return days later after employee outrage on the move.

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.

Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors, Reuters has reported.

“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 on Friday.