OpenAI Restructures to Form Public Benefit Corporation, Eyes New Capital

OpenAI is restructuring to raise more capital, announcing plans to establish a public benefit company (PBC).

This shift aims to make fundraising easier and remove limitations imposed by its nonprofit parent.

The move follows a September Reuters report that sparked discussions among tech leaders like Elon Musk.

The main concern is how OpenAI will balance profit-making with its mission of generating social good, especially as it develops advanced AI.

Under the plan, OpenAI’s for-profit unit will become a Delaware-based PBC, which balances societal interests with shareholder value.

This change comes as OpenAI seeks new investment to fund its expensive pursuit of artificial general intelligence (AGI), a field that is intensifying globally.

OpenAI’s latest funding round, worth $6.6 billion, valued the company at $157 billion, contingent on restructuring and lifting the profit cap for investors within two years.

The nonprofit arm will retain a “significant interest” in the PBC, becoming one of the best-resourced nonprofits in history.

Founded in 2015 as a nonprofit, OpenAI created a for-profit unit in 2019 to support its costly AI ambitions.

The unique structure gave the nonprofit control over the for-profit arm, which came under scrutiny last year during CEO Sam Altman’s brief firing and return.

In a statement, OpenAI explained the need to raise more capital to scale its operations. “Investors want to back us but require conventional equity,” it said. The new structure would align OpenAI with competitors like Anthropic and xAI, which have adopted similar models and raised billions in recent months.

Analysts see this shift as critical for securing future funding. “The for-profit side of OpenAI will run the business,” said Gil Luria, an analyst at DA Davidson & Co. “This is a crucial step for continued fundraising.”

However, OpenAI faces resistance. Co-founder Elon Musk, who is a vocal critic, is suing the company over concerns that profit is prioritized over the public good.

Meanwhile, Meta Platforms is pushing California’s attorney general to block the conversion.

While the PBC status does not guarantee a focus on social impact over profit, experts note that it offers no real enforcement power.

According to Ann Lipton, a corporate law professor at Tulane University, the board’s actions ultimately determine how closely a PBC adheres to its mission.