On December 27, OpenAI's board of directors announced it is assessing the company's structure to better fulfill its mission of ensuring that artificial general intelligence (AGI) benefits humanityThis announcement comes amidst speculation in the market that OpenAI is considering restructuring its core operations to be more profit-oriented, moving away from oversight by its nonprofit boardAlthough OpenAI has not explicitly stated that its subsidiary, which houses its core operations, will no longer be governed by the nonprofit board, the distinct separation between the subsidiary and the original nonprofit parent company has become more pronounced.

OpenAI plans to convert its profit-seeking subsidiary into a Public Benefit Corporation (PBC) based in Delaware, which will manage and control its operations and business endeavorsThe existing rights of the nonprofit organization in the for-profit subsidiary will be reflected in the form of shares within the PBC

This decision to adopt the PBC structure aligns with current trends among major U.Scompanies operating in similar fields, providing a framework that balances both profitability and ethical responsibility.

Meanwhile, the nonprofit arm of OpenAI will be tasked with conducting charitable activities across healthcare, education, and scientific research sectorsThis bifurcated approach allows OpenAI to maintain its original mission while pursuing profitable ventures more independently.

OpenAI's corporate structure is indeed a unique oneFounded in 2015 as a nonprofit entity, the organization sought to raise more funds by creating a framework in 2019 that maintained the nonprofit's status while allowing for the establishment of a for-profit subsidiary controlled by the nonprofitThe board of directors effectively serves as the oversight body for both entitiesNotably, the for-profit subsidiary was configured with a profit cap, limiting the potential financial returns for investors and employees

This cap was introduced to strike a balance between commercial interests and broader safety and ethical concerns, ensuring that the company is not solely focused on profit maximization.

In today’s fiercely competitive and rapidly evolving business landscape, organizations are constantly evaluating their structures and operational modelsOpenAI, in its reflective and analytical search for improvement, has identified critical flaws within its existing framework

One of the central issues pointed out by OpenAI pertains to the boards' capacity to fully consider the interests of investors who contribute significant funding to the companyInvestors play a crucial role in driving the growth and development of a business; their substantial monetary contributions come with the expectation that the company will account for their interests in operational decisions

However, under the current structure, an invisible barrier appears to hinder the board's ability to prioritize the interests of these investors, which disrupts the harmonious relationship necessary for continued collaboration

Furthermore, OpenAI believes that this structural limitation is likely to complicate future fundraising effortsIn the capital market, potential investors typically conduct a comprehensive evaluation of a company’s overall structure, operational dynamics, and assurances regarding the safeguarding of their interests before committing fundsIf the current framework does not provide these investors with the reassurance that their concerns will be adequately addressed, they may become reluctant to financially support the company, potentially abandoning it altogether

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This reluctance to invest could severely impede OpenAI's ability to secure funding necessary for business expansion, project development, and technological advancements, negatively impacting its long-term viability and competitive stance within the market

The challenges pinpointed by OpenAI serve as a wake-up call for similar organizations, urging them to introspect and consider how to optimize and adjust their current architecturesStriking a balance between diverse stakeholder interests is crucial for maintaining open and sustainable fundraising avenues, setting the stage for healthy long-term growth

Reflecting on the reasons for restructuring, OpenAI recalled that in 2019, it anticipated needing to raise $10 billion to develop AGI effectivelyShortly after this structural change, the for-profit subsidiary secured over $100 million in its initial funding round, along with a significant $1 billion investment from Microsoft

Now, the company faces a need for even greater capital than initially projected.

Despite being one of the most talked-about companies in the field of large models, OpenAI has yet to become profitableIt continues to depend heavily on external funding to sustain its operationsReports suggest that OpenAI is expected to incur a staggering loss of about $5 billion this year, unlikely to achieve profitability before 2029. Actively pursuing financing, OpenAI secured $6.6 billion in a recent funding round in October, raising its estimated valuation to $157 billion.

In their considerations surrounding the structural shift, OpenAI explained that the board is focused on selecting the most strategic long-term development structurePart of this entails finding viable pathways to ensure the nonprofit arm’s sustainability, while also guaranteeing that each department of the company performs effectively