OpenAI, one of the world’s most valuable startups, originally began in 2015 as a nonprofit focused on AI research. But as the cost of achieving artificial general intelligence (AGI)—AI that could surpass human intelligence—soars, the company is shifting gears to attract more funding. On December 26, OpenAI announced in a blog post that it plans to set up a public benefit corporation (PBC) for its commercial operations, while keeping its nonprofit arm focused on charitable initiatives.
Most Read from Fast Company
The proposed transformation will enable OpenAI’s existing for-profit division to function as a Delaware PBC “with ordinary shares of stock.” This shift is designed to attract the substantial investments required for the company’s ambitious projects. “The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission,” OpenAI’s board explained. They emphasized the need for “conventional equity” to secure funding at this scale.
OpenAI’s latest $6.6 billion funding round at a valuation of $157 billion hinged on whether the company could restructure its corporate model to remove a profit cap for investors. The board highlighted the importance of aligning its structure to sustain both its nonprofit goals and the for-profit capital needed to advance AI technologies.
The nonprofit arm will retain a significant stake in the PBC, with its valuation determined by independent financial advisors. This structure aims to balance OpenAI’s mission-driven goals with the flexibility to raise capital effectively.
OpenAI has experienced exponential growth, achieving the $157 billion valuation within two years of launching its groundbreaking chatbot, ChatGPT. Recent McKinsey research suggests that generative AI could contribute between $2.6 trillion and $4.4 trillion annually to the global economy, reflecting the immense potential of AI technologies.
But despite generating $3.7 billion in revenue this year, OpenAI anticipates losses of $5 billion, underscoring the need for additional capital to sustain its trajectory.
This post originally appeared at fastcompany.com
Subscribe to get the Fast Company newsletter: http://fastcompany.com/newsletters