OpenAI proposes public benefit corporation model to drive AI development

OpenAI, the artificial intelligence powerhouse founded in 2015 as a research-focused nonprofit, is exploring a significant organisational shift that could establish a more conventional revenue-generating corporation alongside its nonprofit foundation.

In a blog post on Friday, the company’s board revealed it is evaluating a proposal to convert its business operations into a Delaware Public Benefit Corporation (PBC). This structure would allow the for-profit arm to pursue profits while maintaining a societal mission. The nonprofit arm would retain a significant stake in the profit-driven entity, holding shares valued by independent financial advisers.

The ambitious plan

The proposed transformation comes as OpenAI seeks to address the dual demands of advancing its ambitious AI development goals and raising substantial investment. According to the board, the new structure would facilitate greater investor interest while preserving the nonprofit's ability to execute charitable initiatives in areas such as healthcare, education, and science.

OpenAI’s journey has been marked by an evolution from its idealistic beginnings to its current status as a global leader in artificial intelligence. Originally founded to ensure AI development prioritised safety and public benefit, the organisation introduced a for-profit subsidiary in 2019 to manage the immense costs of developing advanced AI models. By 2022, OpenAI had become a dominant force in the field, with its ChatGPT chatbot reshaping public and industry perceptions of AI.

The decision to consider restructuring follows consultations with regulators in California and Delaware. While this move could simplify operations and attract investors, it has also sparked controversy. Co-founder Elon Musk recently filed a lawsuit against OpenAI, alleging a breach of its original nonprofit agreement and seeking to prevent its conversion to a for-profit entity while legal proceedings continue.

The board defended the proposal, stating it would secure long-term success for the for-profit arm while enabling the nonprofit to better fulfil its mission. “We once again need to raise more capital than we’d imagined,” the board explained, noting that investors prefer conventional equity structures.

(With inputs from Bloomberg)