OpenAI's stunning $150 billion valuation hinges on upending corporate structure, sources say

OpenAI's new financing round is expected to come in the form of convertible notes, according to sources with direct knowledge of the matter, who said its $150 billion valuation will be contingent on whether the ChatGPT-maker can upend its corporate structure and remove a profit cap for investors.

The details of the conditions of the $6.5 billion funding, which have not been previously reported, show how far OpenAI, the most valuable AI startup in the world, has come from a research-based non-profit, and the structural changes it's willing to make to attract ever more investment to fund its expensive pursuit of artificial general intelligence (AGI), or AI that surpasses human intelligence.

The outsized funding round has seen strong investor demand and could be finalized in the next two weeks, given the rapid growth of OpenAI's revenue, sources added.

Existing investors such as Thrive Capital, Khosla Ventures, as well as Microsoft are expected to participate. New investors including Nvidia and Apple also plan to invest. Sequoia Capital is also in talks to come back as a returning investor.

If the restructuring is unsuccessful, OpenAI would need to renegotiate its valuation with investors at which their shares will be converted, likely at a lower number, sources told Reuters, who requested anonymity to discuss private matters.

OpenAI declined to comment.

The removal of the profit cap would require approval from OpenAI’s non-profit board, consisting of Chief Executive Sam Altman, entrepreneur Bret Taylor and seven other members.

The company has also held discussions with lawyers about
turning its non-profit structure to a for-profit benefit
corporation, similar to what its rivals such as Anthropic and
xAI are using, sources added, confirming media reports.

It is unclear if such fundamental corporate structural
changes could happen. The removal of the profit cap, which put a
limit on investors' potential returns in OpenAI's for-profit
subsidiary, would hand early investors an even bigger win.

It could also raise questions about OpenAI's governance
and departure from its non-profit mission. OpenAI has said the
cap was put in place to "incentivize them to research, develop,
and deploy AGI in a way that balances commerciality with safety
and sustainability, rather than focusing on pure
profit-maximization."

The San Francisco-based AI lab, founded in 2015 as a
nonprofit research project, with the goal of building AI for the
benefit of humanity, is currently controlled by a non-profit
parent organization.

It has accelerated its commercialization efforts by
selling subscription-based services like ChatGPT to consumers
and enterprises, which now boasts over 200 million users.

Existing investors are beholden to a capped limit to
their return on investment, with any additional returns to be
routed to the non-profit.

Returns were capped at 100x the investment for investors
in OpenAI’s first round of financing. “We expect this multiple
to be lower for future rounds,” the company said in a 2019 blog
post detailing the structure.

OpenAI used this model to raise more than $10 billion in
recent years, with the majority coming from Microsoft. It was
last valued at $80 billion in February in a tender offer deal
where the company sold existing shares led by Thrive Capital.