OpenAI reveals plans to restructure its business by transitioning into public benefit company
Date
12/29/2024 6:49:20 AM
(MENAFN) OpenAI revealed plans to restructure its business by transitioning into a public benefit company (PBC), aiming to raise more capital and overcome limitations imposed by its nonprofit parent. This restructuring is part of an effort to secure additional investment for its ambitious pursuit of Artificial General Intelligence (AGI), a technology that exceeds human intelligence. The move echoes a Reuters report from September that sparked widespread discussion, including among prominent tech figures like Elon Musk. Critics are particularly concerned about how OpenAI will balance profit-making with public benefit as it develops AI, and how the allocation of resources will change between the for-profit entity and its nonprofit parent.
As part of the restructure, OpenAI's profit-making division will become a Delaware-based PBC, which will aim to serve both shareholder interests and community welfare. This change comes as the company seeks funding to support the expensive endeavor of AGI development. A recent $6.6 billion funding round valued OpenAI at $157 billion, but the investment was contingent upon removing the profit cap within two years. Despite the shift, OpenAI's nonprofit entity will retain a significant stake in the new public benefit company, making it one of the best-funded nonprofits ever. Originally founded in 2015 as a nonprofit research organization, OpenAI created a for-profit unit in 2019 to meet the high costs associated with AI development. This restructuring follows a period of turbulence, including the firing and subsequent return of CEO Sam Altman after a staff protest.
The company explained that, to continue its mission, it needs to attract substantial investment, and investors prefer a traditional equity structure. OpenAI emphasized that the billions being invested in AI development by large companies show the scale of funding required to achieve its goals.
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