by - OpenAI is one step closer to becoming a for-profit company.
- The AI startup is in preliminary discussions with the California attorney general’s office, Bloomberg reported.
- A for-profit structure would be much more conventional for the investors OpenAI is courting.
OpenAI is one step closer to changing the governance structure from nonprofit to for-profit.
The AI startup is conducting preliminary discussions with California Attorney General’s Office about the process of becoming a for-profit entity, Bloomberg reported Monday, citing two people familiar with the matter.
In September, the Sam Altman-led company, worth $157 billion, announced it planned to go all-in on profits. The announcement came nearly a decade after its launch as a nonprofit research organization focused on creating secure artificial intelligence.
Reports of California’s attorney general’s involvement in the process indicate the company is one step closer to formalizing the unprecedented shift, which requires the attorney general’s approval.
A person familiar with the situation told Bloomberg that OpenAI will submit details of its restructuring plan to Attorney General Rob Bonta after the proposal is finalized.
Neither OpenAI nor the California attorney general’s office immediately responded to Business Insider’s request for comment.
OpenAI told Bloomberg that the company’s nonprofit would persevere in future restructurings. BI previously reported that the nonprofit would retain only a minority stake if the company started making a profit.
“While our work continues and we continue to consult with independent financial and legal advisors, any potential restructuring would ensure that the nonprofit continues to exist and thrive and receives full value for its current interest in the OpenAI for-profit organization with an enhanced ability to pursue its objectives. mission,” Bret Taylor, president of the nonprofit OpenAI, told Bloomberg.
In 2019, OpenAI added a for-profit arm to raise money for its mission. Over the next few years, tensions grew between those at the company who supported completely non-profit makeup and those eager to develop new products. The pressure boiled over last November when the company’s board briefly ousted OpenAI CEO Sam Altman.
A year later, many of those who disagreed with Altman’s approach are no longer with the company, and OpenAI has secured historic levels of funding. The company raised a record $6.6 billion in its most recent funding round, putting it on par with several major publicly traded companies.
A for-profit structure would be much more conventional for the big investors OpenAI is increasingly courting, including Microsoft and Nvidia.
The process of shifting from nonprofit to for-profit will likely involve a regulator’s investigation into how OpenAI values its services, including the popular ChatGPT model, Bloomberg reported.
The shift requires OpenAI to change its structure under the law of Delaware, where many companies are incorporated, as well as its certificate of incorporation.