OpenAI has announced that it needs “more capital than we’d imagined” as it prepares to transition into a for-profit company. Led by Sam Altman, the AI pioneer revealed plans to restructure its existing for-profit arm into a Delaware public benefit corporation (PBC). This new structure is designed to balance societal interests with shareholder value.
Pursuit of More Investment
The shift comes as OpenAI faces mounting costs in its pursuit of artificial general intelligence (AGI), which aims to surpass human intelligence. The company, backed by Microsoft, explained the need for conventional equity to attract large-scale investments.
“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,” OpenAI stated.
The company highlighted that “hundreds of billions of dollars” invested by major firms into AI development demonstrate the scale required to continue its mission.
Details of the New Structure
Under the new structure, the PBC will handle commercial operations while the nonprofit branch will focus on charitable initiatives in healthcare, education, and science. The PBC will issue ordinary shares of stock, with the nonprofit holding a significant interest based on a fair valuation determined by independent advisors.
This restructuring aligns OpenAI with competitors like Anthropic and xAI, which operate under similar models. Anthropic recently secured $4 billion from Amazon, and xAI raised $6 billion earlier in December.
Analyst Views and Fundraising
Gil Luria, an analyst at DA Davidson & Co., remarked that the move is critical for OpenAI’s ability to raise funds. However, he noted that it doesn’t necessarily mean the company will go public.
Challenges and Criticism
The restructuring plan has faced opposition from notable figures and organizations. Elon Musk, a co-founder of OpenAI and now one of its fiercest critics, has filed a lawsuit to block the transition, calling it a “textbook tale of altruism versus greed.” OpenAI has countered Musk’s claims, publishing messages that show he initially supported for-profit status before leaving the company.
Meta Platforms has also urged California’s attorney general to halt OpenAI’s conversion to a for-profit entity.
Internal Struggles
OpenAI has recently faced internal challenges, including the departure of several top executives. In May, co-founder Ilya Sutskever and former safety leader Jan Leike left due to disagreements over the company’s direction. Leike, who joined rival Anthropic, criticized OpenAI for prioritizing products over safety.
Other high-profile exits include co-founder John Schulman and Chief Technology Officer Mira Murati, who departed in late September after six-and-a-half years with the company.
Altman has denied any connection between the departures and the restructuring plan, though internal tensions remain a concern.