OpenAI announced on Tuesday that it had completed its restructuring — a move it has previously said is vital to attract future capital and remain competitive in the AI race. It also struck a new definitive agreement with Microsoft, its largest investor, crossing a key hurdle in completing the recapitalization.
The AI startup’s unusual structure, including its control by a non-profit board, was thrust into the spotlight in November 2023 when the board briefly removed Sam Altman as CEO before he returned days later.
“OpenAI has completed its recapitalization, simplifying its corporate structure. The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives,” the company wrote in a blog post.
“The nonprofit, now called the OpenAI Foundation, holds equity in the for-profit currently valued at approximately $130 billion, making it one of the best resourced philanthropic organizations ever. The recapitalization also grants the Foundation additional ownership as OpenAI’s for-profit reaches a valuation milestone.
OpenAI says the for-profit arm, a public benefit corporation called OpenAI Group PBC, has “the same mission as the OpenAI Foundation — which ensures the company’s mission and commercial success advance together.”
OpenAI, one of the world’s most valuable startups, has raced to raise billions in funding to develop the energy-hungry AI frontier models behind its viral products, like ChatGPT and the Sora app. As it struck bigger and bigger funding deals, OpenAI has faced pressure to restructure the startup to resemble a more traditional company, especially in the wake of Altman’s brief ousting.
A new agreement with Microsoft that gives OpenAI more freedom
OpenAI also gave an update on its partnership with its top investor, Microsoft, announcing it had signed a new definitive agreement that will also sees some key provisions of its deal change.
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As part of the new agreement, Microsoft now holds around a $135 billion stake in the for-profit business, OpenAI Group PBC, “representing roughly 27 percent on an as-converted diluted basis, inclusive of all owners—employees, investors, and the OpenAI Foundation.”
“Excluding the impact of OpenAI’s recent funding rounds, Microsoft held a 32.5 percent stake on an as-converted basis in the OpenAI for-profit,” OpenAI said.
In a section titled “What has evolved,” OpenAI detailed refinements and changes to its partnership, including:
Once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel.Microsoft’s IP rights for both models and products are extended through 2032 and now includes models post-AGI, with appropriate safety guardrails.Microsoft’s IP rights now exclude OpenAI’s consumer hardware.OpenAI can now jointly develop some products with third parties. API products developed with third parties will be exclusive to Azure. Non-API products may be served on any cloud provider.Microsoft can now independently pursue AGI alone or in partnership with third parties.The revenue share agreement remains until the expert panel verifies AGI, though payments will be made over a longer period of time.OpenAI has contracted to purchase an incremental $250B of Azure services, and Microsoft will no longer have a right of first refusal to be OpenAI’s compute provider.OpenAI can now provide API access to US government national security customers, regardless of the cloud provider.
This is a developing story…
