OpenAI Reveals Plans To Operate With New Structure For Startup Growth
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OpenAI stated that it will change to a new for-profit setup. The company will build a public benefit corporation to run its business operations, eliminating some rules from its nonprofit setup and allowing it to act more like a fast-growing startup.
OpenAI’s board noted that major companies are investing billions of dollars into AI, showing what OpenAI needs to keep working toward its mission. The team said they needed to raise more money than they thought, and investors wanted to support it, but they needed regular shares and fewer special rules.
The Company Raised $6.6 Billion In October And Plans To Compete With Big Companies
The burden on OpenAI comes from its $157 billion value, which it reached in just two years since launching its popular chatbot, ChatGPT, and kicking off the boom in AI. OpenAI finished a $6.6 billion funding round in October and is getting ready to compete with top companies like Elon Musk’s xAI, Microsoft, Amazon, Google, and Anthropic in a market that’s expected to make over $1 trillion in the next ten years.
Building the models behind ChatGPT and other AI tools needs a lot of money for powerful processors, mostly from Nvidia, and cloud services, mostly from Microsoft, OpenAI’s big supporter. OpenAI expects to lose about $5 billion this year while earning $3.7 billion in revenue, and those numbers are growing quickly.
By changing to a Delaware Public Benefit Corporation with regular shares, OpenAI says it can focus on business. The company also wants to hire a team for its nonprofit arm to work on charity projects like education, health, and science. According to OpenAI, the nonprofit will have an “important interest” in the PBC, with its value decided by outside financial experts.
Musk Filed A Complaint Against OpenAI, Calling The Move A Total Scam
OpenAI’s present setup comes from its founding as a nonprofit in 2015. It was created by Chief Executive Officer Sam Altman, Musk, and others to focus on artificial general intelligence (AGI), which was a new idea at the time. In 2019, OpenAI wanted to be more like a startup and created a capped-profit model, with the nonprofit still in control.
OpenAI said in its post that the current structure doesn’t let the board think about the interests of investors, and doesn’t allow the nonprofit to do more than manage the for-profit. The company said the change will let it raise money with regular terms like its competitors.
The firm faces some big challenges in this process. The biggest is Musk, who is in a legal fight with Altman that could affect the company’s future. Musk has filed a complaint against OpenAI and requested a court to prevent the company from becoming a for-profit. He called it a total scam and said, OpenAI is evil. OpenAI responded, saying Musk wanted to create a for-profit in 2017 for the company’s new structure.
