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OpenAI is reportedly exploring changes to its corporate structure, potentially lifting the cap on investor profits, in a move aimed at attracting new investments, according to the Financial Times.
OpenAI Considering Changes to Structure
The Financial Times reports that OpenAI, which has Microsoft's backing, is thinking about modifying its legal structure to attract new investors.
Since bringing AI to the forefront in 2022, the company has been actively growing its service offerings. Some have voiced their disapproval of its present structure, which includes a nonprofit model supervising a for-profit section; Elon Musk is among those who have spoken out against it.
OpenAI Seeks to Simplify Operations
According to three sources cited by the FT, OpenAI is currently considering "simplifying" its operation in order to remove restrictions on investors' ability to earn money. However, a final decision is still far off.
Unlike ChatGPT, which didn't gain traction until late 2022 or early 2023, OpenAI has been developing AI for quite some time.
Per WCCFTECH, after receiving funding from prominent figures in Silicon Valley, the company was established in 2015 and dedicated its time to creating artificial intelligence technologies. The ownership structure of OpenAI started to change as the company's products took form, especially with the 2019 release of GPT-2.
2019 Cap on Investor Profits Faces Reconsideration
In March 2019, the firm established OpenAI LLP. As a result, it capped investor payouts at 100 times the investment.
The company rationalized the move by saying it had to "invest billions of dollars" in AI development infrastructure and that it needed to do so to compete with Google and other tech giants who offered stock options to its staff. The "original OpenAI Nonprofit entity" would be the rightful owner of any profits over and above the due payouts, as stated in the document.
In an effort to attract new investors, OpenAI is reorganizing its organizational structure, and the 2019 cap is at the heart of this discussion. The Wall Street Journal previously reported that OpenAI was valued at $100 billion in a funding round, and that Apple was interested in investing in the company.
Investors Discuss Removing Profit Restrictions
The most recent story in the Financial Times cites three people who all agree that OpenAI wants to change the company's structure. The magazine mentions an OpenAI investor who believes that all preferred investors have a profit cap. The investor adds that there is a lot of discussion about making the investment more traditional so that they are not limited in their upside potential.
The latest earnings reports from artificial intelligence GPU maker NVIDIA failed to please investors on the fronts of growth and cost control, but the firm is still worth about $3 trillion. Claims of a $100 billion valuation have circulated in recent investment talks.
Elon Musk Sues Over OpenAI's Mixed Structure
The newspaper was informed by OpenAI, who emphasized that they are "focused on building AI that benefits everyone," and that the "non-profit is core to our mission and will continue to exist." Among OpenAI's early backers was Elon Musk, who is now suing the firm over its conflicting nonprofit and for-profit structures.
According to the Financial Times, this was also a key factor in OpenAI CEO Altman's ouster and subsequent return last year. This occurred after investors, namely Microsoft, in the for-profit portion of the company, managed to have a decision made by the nonprofit board overturned.
