OpenAI to end non-profit control, Sam Altman to get equity

OpenAI, the company behind the popular AI chatbot ChatGPT, is planning to change how it operates to attract more investors. Led by CEO Sam Altman, OpenAI is currently controlled by a non-profit board, but the company is looking to switch to a for-profit structure. This change is expected to make OpenAI more appealing to people who want to invest money in the company, as it continues to grow quickly in the AI industry.

The non-profit arm of OpenAI will continue to exist, but it will own only a minority stake in the newly formed for-profit company. This restructuring is seen as a way to bring in more capital while also addressing some governance issues that have come up over time. The timeline for completing the restructuring is still uncertain, as OpenAI is working with lawyers and shareholders to finalize the details.

CEO Sam Altman to receive equity for the first time

One major change under the new structure is that OpenAI’s CEO, Sam Altman, will receive equity in the for-profit company for the first time. The value of the restructured company could reach as high as $150 billion, according to sources. Altman, already a billionaire from his previous investments in tech startups, has previously said he didn’t take an equity stake because he wanted the company’s board to have independent directors with no financial interests. However, the new structure could make it possible for Altman to receive a significant stake in the company.

Despite these changes, OpenAI has reiterated its commitment to creating AI that benefits everyone. “We remain focused on building AI that benefits everyone, and we’re working with our board to ensure that we’re best positioned to succeed in our mission. The non-profit is core to our mission and will continue to exist,” an OpenAI spokesperson said.

The Governance shift and AI safety concerns

OpenAI’s restructuring comes at a time when the company is undergoing several changes in leadership. Mira Murati, the company’s longtime chief technology officer, abruptly left OpenAI recently. Greg Brockman, the president of OpenAI, has also been on leave, adding to the sense of transition at the company.

Founded in 2015 as a non-profit AI research organization, OpenAI introduced a for-profit subsidiary in 2019 called OpenAI LP. This subsidiary was created to raise money for the company’s AI research, and it secured significant investment from Microsoft. The company shot to global fame with the launch of ChatGPT in late 2022, a chatbot capable of producing human-like responses to text inputs.

ChatGPT became one of the fastest-growing applications in history, with over 200 million weekly active users. This rapid success has attracted major investors and has pushed the company’s valuation up from $14 billion in 2021 to a potential $150 billion under the new structure.

The proposed changes to OpenAI’s structure would reduce the control of its non-profit board over the for-profit subsidiary. Initially, this governance structure was put in place to ensure that OpenAI would remain focused on developing safe artificial general intelligence (AGI), an AI that could reach or surpass human intelligence. However, removing non-profit control could make OpenAI function more like a typical startup—a shift that has been welcomed by many investors.

Still, there are concerns from the AI safety community about whether OpenAI will maintain strong governance and accountability in its pursuit of AGI. Earlier this year, OpenAI disbanded its “super alignment” team, which focused on managing the long-term risks of AI. Critics worry that without enough oversight, the company could prioritize profits over ensuring the safe development of its technology.

leadership changes and investor appeal

The restructuring comes less than a year after a major boardroom conflict at OpenAI in November 2023, when members of the non-profit board ousted CEO Sam Altman due to a breakdown in communication and loss of trust. Altman was reinstated after five days, backed by overwhelming support from employees and investors. Since then, OpenAI has made changes to its board, bringing in more tech executives, including Bret Taylor, the former co-CEO of Salesforce, who now serves as the board chair.

Any corporate changes to OpenAI need to be approved by its nine-person non-profit board, which oversees the for-profit subsidiary. Investors, including Thrive Capital and Apple, have expressed interest in OpenAI as it restructures, and the removal of non-profit control could make the company even more attractive to these and other potential investors.

OpenAI’s new structure will resemble that of its competitors like Anthropic and xAI, companies that are also registered as benefit corporations. Benefit corporations aim to balance profit-making with social responsibility, a structure that OpenAI hopes will allow it to grow while staying committed to its mission of building AI that benefits humanity.

As OpenAI continues to expand and evolve, the company faces the challenge of balancing rapid growth, investor expectations, and its core mission of developing safe and beneficial AI. The upcoming changes could shape not only the future of OpenAI but also the broader field of AI development.

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