Shocking news came out this week from the OpenAI board, as they issued a directive to remove their CEO and co-founder, Sam Altman. This might sound like a familiar tale in the world of large-scale technology companies, where founders are ousted by the board of directors, but the case of OpenAI and Sam Altman is quite unique.
This article brings together information about the management structure and ownership of OpenAI, a non-profit research company. OpenAI was founded in 2015 as a non-profit entity, raising funds from a group of investors through a $1 billion agreement (although they actually received $130.5 million). The company’s main mission is to develop safe and beneficial AI, specifically Artificial General Intelligence (AGI), which can outperform humans in most economically valuable work.
The initial founders of OpenAI included Elon Musk, CEO of Tesla, Sam Altman, CEO of investment firm Y Combinator, Reid Hoffman, co-founder of LinkedIn, Greg Brockman, an executive at Stripe, Jessica Livingston, a partner at Y Combinator, and Peter Thiel, a renowned investor and co-founder of PayPal.
However, problems arose when the promised donations did not materialize as expected, partly due to Elon Musk’s resignation. The development of AI requires significant financial resources, which led OpenAI to restructure its organization to accommodate new investments. However, external investors were seeking returns on their investments from a company that explicitly stated it was not-for-profit. This conflict prompted the current structure of OpenAI, as depicted below.
OpenAI established a new for-profit subsidiary. This new company will generate profits for its shareholders, primarily Microsoft, while any excess profits will be possessed by OpenAI, the non-profit entity. The major shareholders of the for-profit subsidiary are Micros
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