OpenAI Confirms Nonprofit Oversight amid Restructuring for AI Investment

By Evans Momodu, updated 21:23

OpenAI announces it will stay under nonprofit control while restructuring its for-profit arm to attract investment. Learn how this impacts AI development and future funding in the following paragraphs.

OpenAI has reaffirmed that its nonprofit entity will remain in control, even as the company restructures its for-profit arm to attract larger investments in the race toward artificial general intelligence (AGI).

In a blog post on Monday, OpenAI stated that it made the decision after engaging with civic leaders and legal authorities, including the Attorneys General of California and Delaware. The company emphasized that its new structure will allow it to remain aligned with its founding mission of developing AI that benefits humanity—while making room for significant capital raising.

To strike a balance between mission and growth, OpenAI plans to transition its for-profit subsidiary into a Public Benefit Corporation (PBC). This hybrid model enables companies to generate profits while staying committed to public good initiatives. Under this plan, the nonprofit parent will maintain majority control and become a key shareholder in the restructured entity.

Chairman Bret Taylor commented that the new model will keep OpenAI’s structure “extremely close” to what it has been, while giving room for necessary expansion. CEO Sam Altman described it as a "compromise that satisfies investors enough to keep funding our vision."

OpenAI has already signaled ambitious goals for raising funds. In March, the company revealed plans to raise up to $40 billion in a funding round led by SoftBank, aiming for a valuation of $300 billion. The round, however, was contingent on a move to a more investor-friendly for-profit structure.

While major backers like Microsoft have yet to comment, analysts note that nonprofit oversight could present challenges. “The nonprofit status significantly reduces OpenAI’s ability to raise capital, as investors prefer returns that are harder to secure under such control,” said Gil Luria, analyst at D.A. Davidson.

The announcement comes amid growing scrutiny and legal disputes. A recent lawsuit by Elon Musk accuses OpenAI of deviating from its original nonprofit mission. The internal governance issues also came to light in November 2023, when the board of the nonprofit temporarily ousted Altman, citing communication breakdowns and a loss of trust—only for him to be reinstated days later due to overwhelming support.

As OpenAI races to develop AGI—AI systems that surpass human intelligence—the company finds itself walking a tightrope. It must meet investor expectations while preserving the ethical principles that once made it stand out in the AI landscape.

This new structure may offer a path forward that allows OpenAI to scale responsibly without losing sight of its mission.
Source: CNN