In an attempt to make ChatGPT-maker OpenAI appeal to more investors, the start-up is working on a plan to restructure its core business model into a for-profit entity, a move that will leave its CEO and co-founder Sam Altman billions of dollars richer.
The OpenAI non-profit board that currently controls business decisions will no longer have the same power, but instead will own a minority stake in the for-profit company, sources told Reuters on Wednesday.
The sources also revealed that as part of the restructuring strategy, Altman will be given equity in the Microsoft-backed company for the first time since he founded the company with Elon Musk and others in 2015.
When all is said and done, Altman’s equity could be worth a cool $150 billion, the anonymous source familiar with the matter said.
"Being a leader at OpenAI is all-consuming. On one hand, it’s a privilege to build AGI and be the fastest-growing company that gets to put our advanced research in the hands of hundreds of millions of people," Altman said in an X post on Wednesday.
Appearing on an episode of the All-In Podcast back in May, the CEO had mentioned if the company were to go 'for-profit' he would give himself 7% of the company, which according to its valuation of $150B at the time, would equal $10.5B in shares.
At the time, Altman had also previously declared, "I have no equity in OpenAI...I'm doing this [job] because I love it," while speaking before a US senate panel on AI regulations, reposted on X as the news of the potential billion-dollar equity package spread across social media.
Sam Altman on May 16, 2023:
undefined Smoke-away (@SmokeAwayyy) September 26, 2024
undefinedI have no equity in OpenAI.undefined
undefinedI'm doing this because I love it.undefinedpic.twitter.com/Ks1tRGoTKu
Removing the non-profit board’s control over decision-making would likely be seen as a welcome sign to current and future investors that the AI company will be operating more like a typical startup.
And, as part of the restructuring, OpenAI said it will also try and remove any limits on returns for investors, although the company said the plan is still being hashed out between lawyers and shareholders, with the timeline for completion uncertain.
"We remain focused on building AI that benefits everyone, and we’re working with our board to ensure that we’re best positioned to succeed in our mission. The non-profit is core to our mission and will continue to exist," an OpenAI spokesperson said.
Approach to AI safety
The current board changes have left some questions as to how the company’s management will handle AI risks moving forward.
Yet, in addition to profit returns for investors, the aim is to attract investors that support social responsibility and sustainability, the company said.
The original, yet unusual business model was installed so non-profit board members would have full control of the start-up to guarantee its core mission to safely advance artificial intelligence for the benefit of humanity.
The changes would make OpenAI business structure more similar to rival for-benefit AI companies, Google’s Anthropic and Musk’s xAI.
Musk, who left OpenAI and stepped down from the board in 2018, has been vocal in his claims that Altman has turned his back on ethical AI development by seeking to change the company from 'non-profit' to 'for-profit.' going so far as to file several lawsuits against Altman.
After withdrawing his first lawsuit filed in March, Musk revived the suit against Altman for the second time last month, claiming he was bamboozled into creating the company with Altman under false pretenses.
Last November, OpenAI made headlines after the nine-member board ousted Altman from his position after being kept in the dark over questionable AI development practices, proving to be one of the biggest tech boardroom dust-ups in Silicon Valley.
Altman was reinstated five days lantern backed by the majority of employees and investors.
Executive exodus connection?
Meantime, three top tech executives at the Microsoft-backed OpenAI tendered their resignations on Wednesday, including chief technology officer (CTO) Mira Murati, one of the public faces of the company.
i just posted this note to openai:
undefined Sam Altman (@sama) September 26, 2024
Hi All–
Mira has been instrumental to OpenAI’s progress and growth the last 6.5 years; she has been a hugely significant factor in our development from an unknown research lab to an important company.
When Mira informed me this morning that…
In response to the C-suite exodus, Altman on X claimed the leadership changes, although “abrupt,” are a “natural part” of the growing process for companies that experience rapid expansion.
While it's not entirely clear if the restructuring and Murati’s departure are connected, Altman on Thursday said the board had been mulling over restructuring for at least a year.
The timing of the changeover “makes sense,” so that we can work together for a smooth handover to the next generation of leadership,” Altman said in the X post from Wednesday.
Vice President of Research P Barret Zoph, and Chief Research Officer Bob McGrew are the two other executives who announced their resignations on Wednesday, leaving only three higher-ups out of the original 13 that have been with the company since its founding.
Greg Brockman, OpenAI's president, had also announced he was taking an extended leave at the beginning of August after nine years.
Since the OpenAI release of its signature chatbot in 2022, ChatGPT has recorded over 200 million weekly active users this summer.
Along with ChatGPT's success, OpenAI's valuation has skyrocketed from $14 billion in 2021 to $150 billion, according to Reuters. Altman is already a billionaire from his multiple startup investments.
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