I don’t know the first thing about American non-profit law, but a charity turning into a for-profit company seems like it can’t possibly be legal, or at least it definitely shouldn’t be.
I think it was a great idea to transition from a full non-profit (or whatever it was — OpenAI’s structure is so complicated) to spinning out a capped profit for-profit company that is majority owned by the non-profit. That’s an exciting idea! Let investors own up to 49% of the for-profit company and earn up to a 100x return on their investment. Great.
(Edited on 2025-05-06 at 05:25 UTC: I found an article that claimed the OpenAI non-profit only owned 2% of the OpenAI company. I don’t know if this is true. I can’t find clear information on how much of the company the non-profit currently owns or has owned in the past.)
Maybe more non-profits could try something similar. Novo Nordisk, the company that makes semaglutide (sold under the brand names Ozempic, Rybelsus, and Wegovy) is majority controlled by a non-profit, the Novo Nordisk Foundation. It seems like this model sometimes really works!
But to now give majority ownership and control of the for-profit OpenAI company to outside investors? How could that possibly be justified?
Is OpenAI really not able to raise enough capital as is? Crunchbase says OpenAI has raised $62 billon so far. I guess Sam Altman wants to raise hundreds of billions if not trillions of dollars, but, I mean, is OpenAI’s structure really an obstacle there? I believe OpenAI is near or at the top of the list of private companies that have raised the most capital in history. And the recent funding round of $40 billion, led by SoftBank, is more capital than many large companies have raised through initial public offerings (IPOs). So, OpenAI has raised historic amounts of capital and yet it needs to take majority ownership away from the non-profit so it can raise more?
This change could possibly be legally justified if the OpenAI non-profit’s mission had been just to advance AI or something like that. Then I guess the non-profit could spin out startups all it wants, similar to what New Harvest has done with startups that use biotech to produce animal-free animal products. But the OpenAI non-profit’s mission was explicitly to put the development of artificial intelligence and artificial general intelligence (AGI) under the control of a non-profit board that would ensure the technology is developed and deployed safely and that its benefits are shared equitably with the world.
I hope this change isn’t allowed to happen. I don’t think AGI will be invented particularly soon. I don’t think, contra Sam Altman, that OpenAI knows how to build AGI. And yet I still don’t think a charity should be able to violate its own mission like this, for no clear social benefit, and when the for-profit subsidiary seems to be doing just fine.
I don’t know the first thing about American non-profit law, but a charity turning into a for-profit company seems like it can’t possibly be legal, or at least it definitely shouldn’t be.
I think it was a great idea to transition from a full non-profit (or whatever it was — OpenAI’s structure is so complicated) to spinning out a capped profit for-profit company that is majority owned by the non-profit. That’s an exciting idea! Let investors own up to 49% of the for-profit company and earn up to a 100x return on their investment. Great.
(Edited on 2025-05-06 at 05:25 UTC: I found an article that claimed the OpenAI non-profit only owned 2% of the OpenAI company. I don’t know if this is true. I can’t find clear information on how much of the company the non-profit currently owns or has owned in the past.)
Maybe more non-profits could try something similar. Novo Nordisk, the company that makes semaglutide (sold under the brand names Ozempic, Rybelsus, and Wegovy) is majority controlled by a non-profit, the Novo Nordisk Foundation. It seems like this model sometimes really works!
But to now give majority ownership and control of the for-profit OpenAI company to outside investors? How could that possibly be justified?
Is OpenAI really not able to raise enough capital as is? Crunchbase says OpenAI has raised $62 billon so far. I guess Sam Altman wants to raise hundreds of billions if not trillions of dollars, but, I mean, is OpenAI’s structure really an obstacle there? I believe OpenAI is near or at the top of the list of private companies that have raised the most capital in history. And the recent funding round of $40 billion, led by SoftBank, is more capital than many large companies have raised through initial public offerings (IPOs). So, OpenAI has raised historic amounts of capital and yet it needs to take majority ownership away from the non-profit so it can raise more?
This change could possibly be legally justified if the OpenAI non-profit’s mission had been just to advance AI or something like that. Then I guess the non-profit could spin out startups all it wants, similar to what New Harvest has done with startups that use biotech to produce animal-free animal products. But the OpenAI non-profit’s mission was explicitly to put the development of artificial intelligence and artificial general intelligence (AGI) under the control of a non-profit board that would ensure the technology is developed and deployed safely and that its benefits are shared equitably with the world.
I hope this change isn’t allowed to happen. I don’t think AGI will be invented particularly soon. I don’t think, contra Sam Altman, that OpenAI knows how to build AGI. And yet I still don’t think a charity should be able to violate its own mission like this, for no clear social benefit, and when the for-profit subsidiary seems to be doing just fine.