By Milcah Tanimu
OpenAI is exploring a significant shift from its non-profit origins to a for-profit model. This change follows a recent $6.6 billion funding round. The company has begun discussions with regulators in California and Delaware.
Sources familiar with the situation say that OpenAI is talking with the California attorney general’s office about the complexities of changing its corporate structure. The attorney general of Delaware also engages with OpenAI and requests detailed plans for the potential restructuring. These discussions will focus on valuing OpenAI’s lucrative intellectual property, including its proprietary ChatGPT technology.
OpenAI was established in 2015 as a non-profit organization with a mission to develop AI for the greater good. Its shift to a for-profit model raises questions about its commitment to societal benefit. Bret Taylor, chairman of the nonprofit board, assured that the nonprofit will continue to play a role in any restructured entity. He stated that any potential restructuring would ensure the nonprofit continues to exist and thrive.
This transition follows OpenAI’s 2019 decision to create a capped for-profit subsidiary to address the high costs of AI development. This change has created tensions within the organization. Concerns exist about balancing AI safety with commercial goals. This tension became public in 2023 when CEO Sam Altman faced a brief ousting amid a dispute over commercialization.
Legal experts warn that the regulatory process could become complicated. California law requires organizations to properly value their nonprofit assets. The law also mandates that these assets serve a charitable purpose. Given OpenAI’s substantial intellectual property portfolio, compliance with these requirements will prove crucial.
Jason Kwon, OpenAI’s Chief Strategy Officer, informed staff during a September meeting about the restructuring. He stated that it would aim to preserve a nonprofit entity with a meaningful stake in the for-profit company. Determining the exact percentage of this stake and valuing the assets will be vital for securing regulatory approval.
Earlier this year, billionaire Elon Musk filed a lawsuit against OpenAI and its co-founders. Musk, a co-founder and early backer of the company, argued that OpenAI should remain a non-profit focused on developing AI for humanity. He claimed that the founding agreement required OpenAI to make its technology “freely available” to the public.
