OpenAI said to be in early talks with regulators to become for-profit business
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Justin Sullivan
OpenAI is looking at turning into a for-profit business from its current nonprofit structure, sources familiar with the matter told Bloomberg, for which the $157B startup has begun preliminary talks with the California attorney general’s office.
This will likely involve regulatory scrutiny into how Microsoft (MSFT)-backed OpenAI values its lucrative intellectual property, including ChatGPT. The Delaware attorney general has also been in communication with OpenAI regarding the restructuring.
OpenAI was originally founded in 2015 as a nonprofit AI research organization, but a for-profit structure would be more attractive to investors.
“While our work remains ongoing as we continue to consult independent financial and legal advisors, any potential restructuring would ensure the nonprofit continues to exist and thrive, and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission,” the startup’s nonprofit board chairman Bret Taylor told Bloomberg.
The company set up a capped for-profit unit to help fund costly AI model development in 2019. OpenAI strategy chief Jason Kwon recently told employees that the new structure would preserve a nonprofit arm that owns a material stake in the for-profit entity.
This stake as well as the value of OpenAI’s assets will be important factors in securing regulatory approvals for restructuring, which will likely take time.
Under the terms of the OpenAI’s latest funding round, it has two years to turn into a for-profit business or its funding will convert into debt, The New York Times reported last month.