OpenAI, the company known for its AI language model ChatGPT, has announced a significant transformation in its corporate structure. On Friday, OpenAI revealed plans to establish itself as a public benefit corporation (PBC), a shift aimed at facilitating capital raising and alleviating the restrictions imposed by its current nonprofit parent. This development adds a new dimension to the discussions surrounding artificial intelligence (AI) and its commercialisation.
This restructuring will see OpenAI's existing for-profit arm transitioning into a Delaware public benefit corporation. The PBC designation indicates that the company intends to balance its mission of fostering societal benefits alongside shareholder interests. OpenAI has stated that the nonprofit portion of the entity will retain a substantial shareholding in the PBC, the specifics of which will be determined by independent financial advisers. They are aiming to establish the nonprofit as one of the "best resourced nonprofits in history," as highlighted in a blogpost by OpenAI.
The evolution of OpenAI's structure comes as a response to the surging costs associated with the pursuit of artificial general intelligence (AGI), which is AI that outstrips human intelligence. OpenAI has been navigating the intricacies of its funding and operational framework since its inception in 2015 as a research-oriented nonprofit. In 2019, it launched a for-profit unit to attract the capital required for the substantial expenses linked to AI development. The control of the for-profit arm has always been under the nonprofit, a situation that garnered attention last year during the controversial temporary removal of CEO Sam Altman, which was met with backlash from employees.
The company's announcement comes in conjunction with a recently secured funding round, reportedly amounting to $6.6 billion, which raised OpenAI's valuation to approximately $157 billion. However, this raise was contingent on the successful reconfiguration of its corporate structure and the lifting of a profit cap for investors. OpenAI communicated through its blogpost that "we once again need to raise more capital than we'd imagined," indicating a growing urgency to satisfy investor expectations.
According to analysts such as Gil Luria from DA Davidson & Co, the shift to a PBC is a critical move for OpenAI. Luria stated that this change is essential for the company as it continues its efforts to attract further investments while maintaining operational control within its for-profit side. However, he noted that this restructuring does not necessarily mean that OpenAI intends to pursue a public offering.
The creation of a PBC aligns OpenAI with other prominent players in the AI field, including Anthropic and xAI, both of which have adopted a similar business framework and have recently secured significant funding. For instance, Anthropic received a further $4 billion investment from Amazon last month, while xAI raised approximately $6 billion in equity financing.
As the AI landscape continues to evolve, the implications of this restructured approach by OpenAI could influence business practices and investment strategies within the sector, potentially accelerating the pace of developments in AI technologies.
Source: Noah Wire Services