OpenAI Restructures as Public Benefit Corporation to Fuel AI Ambitions and Attract Major Investments
1min read OpenAI has announced a significant restructuring, setting its sights on becoming a public benefit corporation (PBC) in Delaware. This move is aimed at enhancing its ability to attract investment more efficiently. The company's board is currently considering a plan to transition its existing for-profit operations into a PBC structure, which would oversee OpenAI's business activities and operations. Meanwhile, OpenAI's nonprofit arm will retain equity in the new PBC, with these shares being valued according to an independent financial advisor's assessment.
Established in 2015 as a nonprofit, OpenAI ventured into a hybrid structure in 2019 by creating a for-profit subsidiary to secure investments. The company's foray into consumer-facing AI technology with the launch of ChatGPT in November 2022 spurred widespread interest in AI, with major players like Microsoft, Google, Meta, and Apple joining the fray. Additionally, startups such as Anthropic and Elon Musk's xAI have emerged as formidable rivals, further intensifying competition in the field.
The development and maintenance of advanced AI models demand substantial financial resources. OpenAI finds itself in urgent need of more funding, a realization that its current organizational complexity is hindering. The company stated, "We again find ourselves requiring more funds than initially anticipated. Investors are eager to support us, but this level of capital necessitates traditional equity and fewer structural constraints."
In response to these challenges, OpenAI completed a new fundraising round this fall, amassing $6.6 billion and nearly doubling its valuation to $157 billion since the beginning of the year. Earlier this year, during a secondary share sale by employees, OpenAI's valuation stood at $86 billion.
OpenAI notes that adopting the new corporate structure will enable it to raise essential capital in a traditional manner similar to others in the AI sector, referencing Anthropic and xAI as examples that have adopted comparable organizational approaches. This strategic shift reflects OpenAI's continued commitment to staying competitive and fostering its innovative endeavors, despite its reported estimated revenue of $3.7 billion against a projected $5 billion loss for the year.
