A decade after it began life as a non-profit organisation, OpenAI, now the most valuable unlisted company in the world, has finally completed its metamorphosis into a for-profit entity.
The long-anticipated shift marks the beginning of a conventional corporate chapter, which can help monetise its AI models better and bankroll its superintelligence ambitions. It will also redefine its relationship with its biggest backer, Microsoft.
The regulators have given their blessings as well. After a year of negotiations, the attorneys general of California and Delaware changed their stance and approved the restructuring.
Here’s a look at what changes:
OpenAI 2.0
In 2019, OpenAI formed a for-profit subsidiary to scale its research and development efforts, governed by the original nonprofit formed in 2015.
Under the new structure, the non-profit has been christened the OpenAI Foundation, whereas the for-profit has become a ‘public benefit corporation’ with the moniker OpenAI Group PBC.
As a public benefit corporation, OpenAI Group PBC has to develop artificial general intelligence (AGI) and “consider the broader interests of all stakeholders”, the company said in a blog.
The change will help put in place a structure for OpenAI “to raise capital and attract and retain the talent” it needs to make AGI a reality. Rising AI demand, efforts towards AGI, and under-development AI hardware need significant computing power and skilled professionals.
Who owns what
As earlier, the nonprofit OpenAI Foundation will continue to control OpenAI Group PBC with a 26% stake. Microsoft remains the largest investor with a 27% shareholding worth $135 billion, valuing the AI major at 500 billion. The remaining 47% will be with current and former employees and investors, OpenAI said.
OpenAI Foundation will also hold a warrant to receive additional shares of OpenAI Group, positioning it as the “single largest long-term beneficiary of OpenAI’s success.”
The OpenAI Foundation will be governed by a board of directors comprising chairperson Bret Taylor, Adam D’Angelo, Sue Desmond-Hellmann, Zico Kolter, retired US Army general Paul M Nakasone, Adebayo Ogunlesi, Nicole Seligman, and Larry Summers. CEO Sam Altman will also have a seat on the board.
Also Read: OpenAI says CEO Altman will not get a stake in newly restructured firm
Microsoft: Companion to competitor
Microsoft first joined OpenAI as an investor in 2019 with an infusion of $13.75 billion. As OpenAI changes, so does its relationship with the Windows operating system maker.
Per the new agreement, Microsoft will have exclusive intellectual property rights to OpenAI’s models and products through 2032, and includes models post-AGI. The ChatGPT parent’s claims of superintelligence will have to be verified by an independent panel of experts. The revenue share agreement between the two companies will remain effective till the verification.
OpenAI can rope in third-party compute providers besides Azure, and Microsoft will not have the right of first refusal. OpenAI can also partner with others to develop AI products. However, API products developed under such arrangements will be exclusive to Microsoft’s Azure, whereas non-API products can be on any cloud provider.
Lastly, Microsoft will be free to develop AGI on its own or with players other than OpenAI.
Also Read: From non-profit roots to for-profit ambitions: the OpenAI saga
The long-anticipated shift marks the beginning of a conventional corporate chapter, which can help monetise its AI models better and bankroll its superintelligence ambitions. It will also redefine its relationship with its biggest backer, Microsoft.
The regulators have given their blessings as well. After a year of negotiations, the attorneys general of California and Delaware changed their stance and approved the restructuring.
Here’s a look at what changes:
OpenAI 2.0
In 2019, OpenAI formed a for-profit subsidiary to scale its research and development efforts, governed by the original nonprofit formed in 2015.
Under the new structure, the non-profit has been christened the OpenAI Foundation, whereas the for-profit has become a ‘public benefit corporation’ with the moniker OpenAI Group PBC.
As a public benefit corporation, OpenAI Group PBC has to develop artificial general intelligence (AGI) and “consider the broader interests of all stakeholders”, the company said in a blog.
The change will help put in place a structure for OpenAI “to raise capital and attract and retain the talent” it needs to make AGI a reality. Rising AI demand, efforts towards AGI, and under-development AI hardware need significant computing power and skilled professionals.
Who owns what
As earlier, the nonprofit OpenAI Foundation will continue to control OpenAI Group PBC with a 26% stake. Microsoft remains the largest investor with a 27% shareholding worth $135 billion, valuing the AI major at 500 billion. The remaining 47% will be with current and former employees and investors, OpenAI said.
OpenAI Foundation will also hold a warrant to receive additional shares of OpenAI Group, positioning it as the “single largest long-term beneficiary of OpenAI’s success.”
The OpenAI Foundation will be governed by a board of directors comprising chairperson Bret Taylor, Adam D’Angelo, Sue Desmond-Hellmann, Zico Kolter, retired US Army general Paul M Nakasone, Adebayo Ogunlesi, Nicole Seligman, and Larry Summers. CEO Sam Altman will also have a seat on the board.
Also Read: OpenAI says CEO Altman will not get a stake in newly restructured firm
Microsoft: Companion to competitor
Microsoft first joined OpenAI as an investor in 2019 with an infusion of $13.75 billion. As OpenAI changes, so does its relationship with the Windows operating system maker.
Per the new agreement, Microsoft will have exclusive intellectual property rights to OpenAI’s models and products through 2032, and includes models post-AGI. The ChatGPT parent’s claims of superintelligence will have to be verified by an independent panel of experts. The revenue share agreement between the two companies will remain effective till the verification.
OpenAI can rope in third-party compute providers besides Azure, and Microsoft will not have the right of first refusal. OpenAI can also partner with others to develop AI products. However, API products developed under such arrangements will be exclusive to Microsoft’s Azure, whereas non-API products can be on any cloud provider.
Lastly, Microsoft will be free to develop AGI on its own or with players other than OpenAI.
Also Read: From non-profit roots to for-profit ambitions: the OpenAI saga
