OpenAI Will Remain a Nonprofit

OpenAI CEO Sam Altman has been working on wriggling out from under the control of the company’s nonprofit board ever since they (briefly) fired him. But, after several efforts to prevent the move, including a lawsuit filed by OpenAI co-founder Elon Musk, the company announced on Monday that it will keep its structure for now.

The desire to ditch its nonprofit structure stems primarily from one thing: money. Being organized as a nonprofit means that OpenAI isn’t driven by providing a return on investment for shareholders (at least in theory), but instead focused on its stated mission of ensuring “artificial general intelligence benefits all of humanity.” Being a nonprofit has also led to some complications for OpenAI’s fundraising efforts. The company secured $40 billion in funding, primarily from SoftBank, earlier this year, but that money was contingent on OpenAI completing its planned restructuring to a for-profit entity. Now that funding is in limbo.

OpenAI will continue to operate a commercial subsidiary, which is the part of the company that Altman heads. But it will be transitioning from an LLC to a Public Benefit Corporation (PBC), per the company. The reason for that change, some theorize, is that it will make it easier for OpenAI to eventually become publicly traded. The nonprofit board will be a primary shareholder of the PBC and will continue to oversee and control the company. The shift will also seemingly shed the capped-profit structure that the company operated with while an LLC, which restricted the return that it could pay back to investors at 100x.

The attempt to restructure to a for-profit entity was met with opposition at basically every turn for OpenAI, though obviously the reasons for that pushback were not always altruistic. Musk, for instance, seemed to mostly be carrying out his lawsuit to stop the restructuring as part of a grudge against Sam Altman after the two had a falling out. Meta also fought the change, though it’s hard to imagine that’s not at least in part due to the fact that the company is creating its own ChatGPT competitor and would like to hamper OpenAI’s ability to raise money. Other nonprofits also took issue with OpenAI’s attempted shift, concerned that the company would use money that was supposed to be used for the “public good” to just maximize its own profits instead.

Given that Altman managed to successfully oust the board that tried to remove him for allegedly lying to them and now has other members in his back pocket, it’s probably fair to wonder if he’s actually making good on the nonprofit’s stated mission or if he’s just trying to maximize the bottom line with the go-ahead of a board that is more aligned with him and stands to make a lot of money one way or another.