OpenAI requires “more capital than we could imagine” to go non-profit

OpenAI said Friday that when it transitions to a new nonprofit structure in 2025, the company will create a public benefit corporation to oversee commercial operations, removing some nonprofit restrictions and allowing it to function more like a high-growth startup.

“The hundreds of billions of dollars that large companies are now investing in the development of artificial intelligence shows that OpenAI will indeed be needed to continue to fulfill its mission,” the OpenAI board wrote in a statement. “Once again, we need to raise more capital than we ever imagined. Investors want to support us, but at this scale of capital they need conventional capital and less structural individuality.’

The pressure on OpenAI stems from its $157 billion valuation two years after the launch of the viral chatbot ChatGPT and the start of the generative artificial intelligence boom. OpenAI closed its latest $6.6 billion round in Octoberpreparing to compete aggressively with Elon Musk xAI as well Microsoft, Google, Amazon and Anthropic in such a market according to forecasts, will exceed 1 trillion dollars in income for ten years.

Developing the large language models that underlie ChatGPT and other generative AI products requires ongoing investment in powerful processors, which are mostly provided by Nvidiaand cloud infrastructure, which OpenAI mainly gets from Microsoft’s main support.

OpenAI expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC reported confirmed in September. These numbers are growing rapidly.

After becoming a PBC of Delaware “with common stock,” OpenAI says it can pursue commercial activities, separately hiring staff for its nonprofit arm and allowing that wing to pursue philanthropic activities in health, education and science.

The nonprofit will have a “significant interest” in PBC “at a fair valuation determined by independent financial advisors,” OpenAI wrote.

The complex structure of OpenAI that exists today is the result of its creation as a non-profit organization in 2015. It was founded by CEO Sam Altman, Musk and others as a research lab focused on Artificial General Intelligence, or AGI, which was quite a futuristic concept at the time.

In 2019, OpenAI sought to shed its role as a purely research lab in hopes of operating more like a startup, so it created a so-called limited-profit model in which a non-profit organization still controls the entire organization.

“Our current structure does not allow the Board to directly consider the interests of those who will fund the mission, nor does it allow nonprofits to easily do more than oversee commercial ones,” OpenAI wrote in a Friday post.

OpenAI added that the change “will allow us to raise the capital we need on the same terms as our competitors.”

OpenAI’s restructuring efforts face some major obstacles. The most significant is Musk, which is located in the middle of a heated legal battle with Altman, which could significantly affect the future of the company.

In recent months, Musk has sued OpenAI and – asked the court stop the conversion of the company from non-profit to for-profit. In posts on X, he described the effort as a “total fraud” and claimed that “OpenAI is evil.” Earlier this month, OpenAI clapped back, arguing that in 2017, Musk “not only wanted, but created a non-profit organization” that would serve as the company’s proposed new structure.

In addition to the confrontation with Musk, OpenAI is dealing with an exodus of high-level talent, in part due to concerns that the company has focused on bringing commercial products to market at the expense of security.

At the end of September, the chief technology officer of OpenAI, Meera Murati, announced this leave the company after 6 and a half years. That same day, head of research Bob McGrew and Barrett Zoff, vice president of research, also announced they were leaving. A month earlier, the co-founder John Shulman said he was leaving for rival startup Anthropic.

During an interview at Italian Tech Week in September, Altman said the recent executive departures were not related to a potential restructuring of the company: “We’ve been thinking about it—our board of directors—for almost a year independently, thinking about what it takes to get to of our next stage,” he said.

These were not the first exits of famous names. In May, OpenAI co-founder Ilya Sutzkever and former head of security Jan Leicke announced their departureand Leicke also joined Anthropic.

At the time, Leicke wrote in a social media post that his decision stemmed from disagreements with management over the company’s priorities.

“In recent years, safety culture and processes have taken a back seat to shiny products,” he said wrote.

One employee who worked under Leicke quit shortly after him, having started writing on X in September that “OpenAI was structured as a nonprofit but operated as a nonprofit.” The employee added: “You shouldn’t trust OpenAI when it promises to do the right thing later.”