OpenAI abandons plan to become for-profit firm

OpenAI has abandoned its plan to shift to a fully for-profit structure, with chief executive officer (CEO) Sam Altman on Monday confirming that his company will maintain nonprofit control over operations.

The artificial intelligence (AI) pioneer’s decision to shift to a for-profit structure had drawn criticism from AI safety advocates, former employees, and legal experts.

Monday’s announcement comes after months of internal debate, external scrutiny, and feedback from civic leaders, and discussions with the attorneys general of California and Delaware.

Altman made the announcement in a letter to employees, maintaining that the organization would continue to operate under nonprofit oversight.

“We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the attorneys general of California and Delaware,” Altman wrote.

Founded in 2015 as a nonprofit with a mission to safely develop AI, OpenAI later introduced a ‘capped-profit’ model to attract investor funding.

Under this structure, the company created a for-profit arm, and allowed limited financial returns while keeping overall governance under a nonprofit board.

The company has since grown into a $300 billion enterprise, with its AI chatbot, ChatGPT, reaching 400 million weekly users.

The latest decision comes after OpenAI initially proposed transitioning into a public benefit corporation (PBC), a legal structure that balances shareholder profit with social good.

Under the revised plan, the for-profit arm will still become a PBC, but its board will remain under the authority of the nonprofit entity.

“We believe this sets us up to continue to make rapid, safe progress and to put great AI in the hands of everyone,” Altman said.

Bret Taylor, chair of OpenAI’s nonprofit board, said shareholders will receive equity as part of the restructuring, and some existing profit caps for investors will be lifted.

He added that the nonprofit will appoint the board of the new PBC, and it is expected to initially resemble the current nonprofit board.

PBCs were first recognized in Delaware in 2013, and require companies to seek a public mission alongside profit. Similar models have been adopted by AI companies such as Anthropic and Elon Musk’s xAI.

However, OpenAI’s previous attempt to formalize the change had triggered legal and ethical concerns.

Musk, a co-founder who left OpenAI in 2018, filed a lawsuit alleging that the proposed governance overhaul violated the company’s founding mission.

While a federal judge dismissed some of the claims, others are expected to go to trial next year.

Those criticizing the for-profit move have warned that investor influence could undermine OpenAI’s commitment to public interest.

Meanwhile, in March, Japanese investment firm SoftBank announced plans to invest up to $30 billion in OpenAI, depending on the company’s conversion to a for-profit model.

A clause in the deal allows SoftBank to reduce its investment to $20 billion if the restructuring is not completed by the end of the year.

The funds are expected to support OpenAI’s expanding computing needs.

“There’s so much more demand to use AI tools than we thought,” Altman said. “This just sets us up to be a more understandable structure to do the things that a company of our scope has to do.”

Despite the pressures, Altman said the company is still committed to its public mission and acknowledged the scale of funding needed to support its goals.

“We don’t want to be a fully normal company,” he said. “We believe this is well over the bar of what we need to be able to fundraise.”