By Aditya Soni, Arsheeya Bajwa, Krystal Hu
(Reuters) -OpenAI on Friday outlined plans to revamp its structure, saying it would create a public benefit corporation to make it easier to "raise more capital than we'd imagined," and remove the restrictions imposed on the startup by its current nonprofit parent.
The acknowledgement and detailed rationale behind its high-profile restructuring confirmed a Reuters report in September, which sparked debate among corporate watchdogs and tech moguls including Elon Musk. At issue were the implications such a move might have on whether OpenAI would allocate its assets to the nonprofit arm fairly, and how the company would strike a balance between making a profit and generating social and public good as it develops AI.
Under the proposed plan, the ChatGPT maker's existing for-profit arm would become a Delaware-based public benefit corporation (PBC) - a structure designed to consider the interests of society in addition to shareholder value.
OpenAI has been looking to make changes to attract further investment, as the expensive pursuit of artificial general intelligence, or AI that surpasses human intelligence, heats up.
Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the ChatGPT-maker could upend its corporate structure and remove a profit cap for investors within two years, Reuters reported in October.
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 blog post, adding that it would be one of the "best resourced nonprofits in history."
OpenAI started in 2015 as a research-focused nonprofit 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 employees rebelled.
'CRITICAL STEP'
"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.
"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 plans to create a PBC would align the startup with rivals such as Anthropic and the Musk-owned xAI, which use a similar structure and recently raised billions in funding.