OpenAI to Transform into Public Benefit Corporation, Pursuing Commercial Operations and Nonprofit Arm
OpenAI, the company behind the viral chatbot ChatGPT, announced on Friday that it plans to transform into a public benefit corporation (PBC) by 2025. This change will allow the company to oversee commercial operations and create a nonprofit arm, allowing it to function more like a high-growth startup.
According to OpenAI’s board, the company’s current nonprofit structure does not permit the board to consider the interests of those who would finance its mission, nor does it enable the nonprofit to easily do more than control the for-profit arm. The proposed change will “enable us to raise the necessary capital with conventional terms like our competitors,” OpenAI wrote in a post.
The company has faced significant pressure to restructure due to its $157 billion valuation, achieved in the two years since ChatGPT was launched. Investors have been keen to back the company, but at this scale of capital, they require conventional equity and less structural bespoke arrangements.
OpenAI expects to generate $3.7 billion in revenue this year, with $5 billion in losses. The company has already closed a $6.6 billion funding round in October, which will enable it to aggressively compete with rival companies such as xAI, Microsoft, Google, Amazon, and Anthropic.
The PBC structure will see OpenAI separate its commercial operations from its nonprofit arm, with the nonprofit being responsible for charitable activities in healthcare, education, and science. The nonprofit will have a “significant interest” in the PBC at a fair valuation determined by independent financial advisors.
The change is expected to face hurdles, including a legal battle with Elon Musk, who has opposed the restructuring. Musk has accused OpenAI of being “evil” and claimed that the proposed change is a “total scam.” OpenAI has responded, alleging that Musk wanted to create a for-profit structure for the company in 2017.
