OpenAI to Stay Under Nonprofit Control While Pursuing New For-Profit Structure for Investment
OpenAI announced on Monday that it will remain under the control of its nonprofit parent organization, while moving forward with plans to restructure its for-profit arm to attract more funding and stay competitive in the AI industry.
This decision comes after public criticism and legal pressure, including a lawsuit from Elon Musk, who accused the company of abandoning its original mission to serve humanity through artificial intelligence.
In a blog post, OpenAI stated the nonprofit will retain control after conversations with civic leaders and the Attorneys General of California and Delaware. The company also said it will collaborate with Microsoft, regulators, and newly appointed nonprofit board members to finalize the changes.
Back in December, OpenAI revealed plans to shift to a public benefit corporation (PBC) model, which it believed would allow for greater fundraising flexibility. However, concerns were raised about how this shift would impact the balance between profit-making and serving the public good.
Under the updated plan, OpenAI’s nonprofit parent will continue to oversee the public benefit corporation and hold a significant ownership stake in it. PBCs are hybrid entities that aim to balance financial goals with positive societal impact.
Board chair Bret Taylor said this approach maintains a structure “extremely close” to OpenAI’s current setup. CEO Sam Altman described it as a workable compromise that reassures investors.
As OpenAI races toward developing artificial general intelligence (AGI), it is seeking substantial investment. In March, the company said it planned to raise up to $40 billion in funding, led by SoftBank, at a $300 billion valuation. However, the fundraising depended on OpenAI transitioning to a fully for-profit structure by the end of the year.
Both Microsoft and SoftBank have not yet commented on the latest development.
Some analysts warn that keeping nonprofit control could limit OpenAI’s fundraising potential. “The nonprofit status significantly reduces OpenAI’s ability to raise capital,” said Gil Luria of D.A. Davidson, noting that it complicates returns for investors.
OpenAI’s unusual structure has drawn attention before, especially during a leadership crisis in November 2023, when CEO Sam Altman was briefly ousted by the nonprofit board before being reinstated five days later following strong internal and external support.
