OpenAI, the company behind the popular AI Chatbot ChatGPT, is reportedly preparing for a significant restructuring to transition from its nonprofit roots to a for-profit model, which could see the company’s valuation soar.
The move to restructure comes alongside a new multi-billion-dollar funding round led by high-profile investors, which is expected to significantly boost the company’s valuation to as much as $150 billion.
According to Reuters, this move comes amid growing commercial interests in artificial intelligence (AI) and high-profile executive departures, raising questions about the future direction of the company and its commitment to its original mission. This shift could also grant CEO Sam Altman significant equity in the company for the first time, as he would receive a 7% equity stake, which would be worth about $10.5 billion at OpenAI’s new valuation.
Tekedia Mini-MBA edition 15 (Sept 9 – Dec 7, 2024) has started registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The restructuring comes nearly a year after a major boardroom shakeup that saw OpenAI’s board vote to fire Altman over concerns about a lack of transparency. This saw some of the investors who backed OpenAI with $1 billion in 2019 unhappy with the board’s decision to fire Altman, openly considered taking legal action against them.
Five days after his sack, Altman was rehired with overwhelming support from employees and investors, but the aftermath led to the departure of several board members.
Fast forward to May, a prominent figure at the company Ilya Sutskever, OpenAI’s co-founder, left the company to start his own AI safety venture, Safe Superintelligence (SSI), which recently secured $1 billion in venture funding. In September 2024, CTO Mira Murati announced her resignation, followed by chief research officer Bob McGrew and research leader Barret Zoph. Altman has since promised to announce Murati’s successor soon.
OpenAI’s structure, which gives control of the for-profit subsidiary to its nonprofit arm, was initially designed to ensure the mission of creating “safe AGI that is broadly beneficial.” AGI, or artificial general intelligence, refers to AI that is at or exceeds human intelligence.
The restructuring has sparked mixed reactions from stakeholders within the AI industry. While investors view the move positively, noting that it allows for “normal expectation of pursuing profit from AI,” critics are concerned about the potential impact on AI safety and ethical use. Hyoun Park, CEO of Amalgam Insights, noted that this shift could enhance OpenAI’s partnerships with tech giants like Microsoft, Apple, and Nvidia.
However, critics worry the transition may lead to less transparency and a stronger focus on commercial interests. Tesla CEO Elon Musk, an early investor and co-founder of OpenAI, has been particularly vocal, labeling the transition from nonprofit to for-profit as “illegal”.
Musk in a lawsuit filed in a San Francisco court, paints a picture of betrayal and contractual breach, alleging that OpenAI reneged on its founding commitments to him and the broader public. Musk, a prominent figure in the AI industry and an early supporter of OpenAI asserts that he was persuaded to contribute to the establishment and funding of the organization in 2015 under the premise that it would operate exclusively as a non-profit entity.
The controversy primarily stems from concerns that OpenAI’s shift towards profitability could jeopardise its commitment to responsible and safe AI development. Also, critics argue that the quest for profit could incentivise a more aggressive push towards deploying powerful AI systems without sufficient safeguards.
It’s been quite the week for OpenAI, with the departure of several key leaders — including CTO Mira Murati — and reports that the company is trying to go for-profit. CEO Sam Altman denied that the move would grant him equity, telling employees that there are “no current plans” for him to receive a “giant equity stake,” CNBC reports, per an anonymous source. Chair Bret Taylor seemed to back him up, revealing that OpenAI’s board hasn’t reached a decision on the matter. Meanwhile, CFO Sarah Friar is working to reassure investors the firm is still on track to close a major new funding round. – LinkedIn News