OpenAI to remain under non-profit control in change of restructuring plans

Originally Published MAY ET Updated MAY ET By Reuters CNN OpenAI mentioned on Monday it would remain under the control of its nonprofit parent while pushing ahead with plans to change the structure of its for-profit arm to allow more capital-raising to keep pace in the artificial-intelligence race The announcement follows a storm of criticism and legal challenges including a high-profile lawsuit filed by rival Elon Musk who has accused the company of straying from its founding mission to develop AI for the benefit of humanity 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 the startup noted in a blog post It added that it would work with major backer Microsoft regulators and newly appointed nonprofit commissioners to finalize the updated plan The company had outlined plans in December to revamp its structure to become a residents benefit corporation saying that would help it to raise more capital than we d imagined and remove the restrictions imposed on the startup by its current nonprofit parent The move had raised concerns about whether OpenAI would allocate its assets to the nonprofit arm fairly and how the company would strike a balance between making a profit and generating social and society good as it develops AI On Monday OpenAI stated the nonprofit parent will control the general benefit corporation and become a big shareholder in it Nonprofits are created to serve the residents good while residents benefit corporations typically offer more flexibility to pursue profit alongside social goals Bret Taylor chairman of OpenAI s board noted Monday s announcement means the startup will continue to have a structure extremely close to the current one CEO Sam Altman described it as a compromise that works well enough for investors that they re happy to continue to fund us to a degree we think we will need As the expensive pursuit of artificial general intelligence or AI that surpasses human intelligence heats up OpenAI has been looking to make changes to attract further commitment It explained in March it would raise up to billion in a new funding round led by SoftBank Group at a billion valuation The round was contingent on the AI firm transitioning to for-profit status by the end of the year SoftBank and Microsoft did not forthwith respond to requests for comment Particular analysts stated the move could hamper the startup s ability to raise capital as aggressively as it could have without the nonprofit control The nonprofit status significantly reduces OpenAI s ability to raise capital as investors would want to be able to generate a return on their expenditure which is considerably harder if a non-profit controls a commercial entity declared Gil Luria analyst at D A Davidson OpenAI s structure drew attention in November during one of the biggest boardroom dramas in Silicon Valley where members of the nonprofit board ousted Altman over a breakdown in communication and loss of trust He was reinstated after five days following an outpouring of advocacy from employees and investors window addEventListener load function function c id p d w var i d createElement iframe i height i width i style display none position absolute visibility hidden i src https newsource-embed-prd ns cnn com articles cnnvan-stats html article id id category c publisher p url encodeURI w location d body appendChild i Business FConsumer L jb wb lbnRzL FydGljbGUvaW zdGFuY VzL NtYWJleDdoZTAwMHcyOHFuN rcDE c E D document window The-CNN-Wire Cable News Structure Inc a Warner Bros Discovery Company All rights reserved