OpenAI has been trying to switch from a nonprofit business model to a for-profit corporation for a while now, drawing intense criticism along the way. That’s no longer happening now, thanks to the latest development coming from Sam Altman & Co. But because OpenAI wants to develop AGI, and because people use so much ChatGPT AI that OpenAI can’t keep up, the company is switching to a Public Benefit Corporation (PBC) structure that will be under the full control of the nonprofit entity.
Obviously, they’re also doing it because this structure will allow better compensation for employees who want equity and the growing list of investors who are pouring billions into OpenAI and will want to make money off of ChatGPT in the long run.
OpenAI announced the change in a blog post that contains a short message from Bret Taylor, Chair of the OpenAI Board of Directors, and a longer letter from Sam Altman, OpenAI’s CEO.
“We made the decision for the nonprofit to retain control of OpenAI after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California,” Taylor said in his remarks.
“We thank both offices and we look forward to continuing these important conversations to make sure OpenAI can continue to effectively pursue its mission of ensuring AGI benefits all of humanity. Sam wrote the letter below to our employees and stakeholders about why we are so excited for this new direction.”
Altman further expanded on OpenAI’s structure change, explaining that the company still wants to “ensure that artificial general intelligence (AGI) benefits all of humanity.” That’s the goal, but getting there will require a lot of resources—the kind the original OpenAI team didn’t imagine when they began building AI about a decade ago.
Getting to AGI and delivering better ChatGPT products will eventually require trillions of dollars. Altman said people are using ChatGPT for a lot right now, but OpenAI can’t meet all the demand, which is why there are caps on usage:
People are using ChatGPT to increase their productivity as scientists, coders, and much more(opens in a new window). People are using ChatGPT to solve serious healthcare challenges they are facing and learn more than ever before. People are using ChatGPT to get advice about how to handle difficult situations. We are very proud to offer a service that is doing so much for so many people; it is one of the most direct fulfillments of our mission we can imagine.
But they want to use it much more; we currently cannot supply nearly as much AI as the world wants, and we have to put usage limits on our systems and run them slowly. As the systems become more capable, they will want to use it even more, for even more wonderful things.
Adopting a PBC appears to be the way OpenAI can raise the money it needs for ChatGPT and safe AGI development, and make those products more widely available. In the process, Altman said OpenAI wants the nonprofit, which will still control the PBC, “to be the largest and most effective nonprofit in history that will be focused on using AI to enable the highest-leverage outcomes for people.”
Altman also noted that the PBC will have a “normal capital structure where everyone has stock,” while pointing out that rivals like Anthropic and X.ai also operate as PBCs. The “normal capital structure” is an important detail for both OpenAI employees and investors. Under the previous setup, with the nonprofit managing the for-profit LLC, OpenAI used a “complex capped-profit structure.”
The most recent round of investment, which saw OpenAI raise capital to the tune of $40 billion, with SoftBank leading the wave, includes a clause that requires OpenAI to become a for-profit organization to receive the full amount. Half of that sum would not be awarded unless OpenAI switches to an OpenAI model. The PBC structure should help meet that requirement.
Per MarketWatch, Altman said during a Monday press conference that OpenAI will receive $30 billion under the updated structure. OpenAI got $10 billion out of that $40 billion funding round. If it fails to become a for-profit corporation by the end of the year, it would forfeit $20 billion of the remaining $30 billion.