OpenAI is preparing to overhaul its current structure as it moves towards a traditional for-profit model by 2025. The expected shift may prepare the AI-focused company for a valuation of $150 billion, which is in line with the profit-oriented agenda of other Silicon Valley firms.
OpenAI CEO Sam Altman disclosed the changes to the employees in a recent meeting but offered few specifics of what is planned. As reported by Fortune, Altman claimed that the company had “outgrown” the current structure and was all set to transition out of the nonprofit model.
Investors push for removal of profit cap to enable growth
OpenAI, which currently operates as a capped for-profit LLC overseen by a nonprofit, is facing constraints in its structure as it expands. This ‘structure’ enabled the nonprofit board to suspend Altman from his post in late 2023 on grounds of lack of transparency and improper governance.
The board charged him with concealing information regarding his stake in the OpenAI startup fund. Altman was later reinstated and gained control over the company’s newly formed safety team.
There are claims that investors want OpenAI to scrap the profit ceiling linked to its nonprofit status, which limits returns. According to a report from Reuters, recent and potential investors such as Apple and Microsoft are offering injections of capital that are dependent on the company’s willingness to remove the current constraints. If OpenAI’s restrictions are lifted, this could open up even more potential avenues for the company to grow and raise more significant funding rounds.
While details surrounding the changes remain unclear, sources familiar with the plan say the plan to reorganize the company may include changing or even abolishing the nonprofit organization that oversees it.
OpenAI’s commercial activities and user base continue to expand
Despite the looming changes, OpenAI has maintained that its nonprofit mission will continue to play a critical role in its future. In a statement to Fortune and Reuters, an OpenAI spokesperson noted that the nonprofit is still ‘central’ to the mission of the company. OpenAI also reaffirmed its focus on creating AI for the good of all as it has done with the previous statements about ethical and safety precautions.
OpenAI has also grown a lot in its commercial activities since its launch a few years back. Some of the company’s popular paid services include ChatGPT which has garnered more than 200 million users globally. This change in focus towards commercialization has led to higher revenues thus making the company more profitable for investors even with the profit cap.
OpenAI has secured over $10 billion in funding in the recent past with Microsoft being one of the biggest investors. The company was last estimated to be worth $80 billion in a tender offer that was led by Thrive Capital in February. This valuation is expected to rise considerably in the current financing round if the corporate restructuring is approved.
