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OpenAI announced Thursday it reached a nonbinding agreement with Microsoft, its largest investor, on a revised partnership that would allow the startup to convert its for-profit arm into a public benefit corporation (PBC).<\/p>\n
The transition, should it be cleared by state regulators, could allow OpenAI to raise additional capital from investors and, eventually, become a public company.<\/p>\n
In a blog post,<\/a> OpenAI board chairman Bret Taylor said under the nonbinding agreement with Microsoft, OpenAI\u2019s nonprofit would continue to exist and retain control over the startup\u2019s operations. OpenAI\u2019s nonprofit would obtain a stake in the company\u2019s PBC, worth upward of $100 billion, Taylor said. Further terms of the deal were not disclosed.<\/p>\n \u201cMicrosoft and OpenAI have signed a nonbinding memorandum of understanding (MOU) for the next phase of our partnership,\u201d the companies said in a joint statement<\/a>. MOUs are not legally binding but aim to document each party\u2019s expectations and intent.<\/p>\n \u201cWe are actively working to\u00a0finalize\u00a0contractual terms in a definitive agreement,\u201d the joint statement added.<\/p>\n The development seems to mark an end to months of negotiations between OpenAI and Microsoft over the ChatGPT maker\u2019s transition plans. Unlike most startups, OpenAI is controlled by a nonprofit board. The unusual structure allowed for OpenAI board members to fire CEO Sam Altman<\/a> in 2023. Altman was reinstated days later, and many of the board members resigned. However, the same governance structure remains in place today.<\/p>\n Under their current deal, Microsoft is supposed to get preferred access to OpenAI\u2019s technology and be the startup\u2019s primary provider of cloud services. However, ChatGPT is a much larger business than when Microsoft first invested in the startup back in 2019, and OpenAI has reportedly sought to loosen the cloud provider\u2019s control as part of these negotiations.<\/p>\n In the last year, OpenAI has struck a series of deals that would allow it to be less dependent on Microsoft. OpenAI recently signed a contract to spend $300 billion with cloud provider Oracle<\/a> over a five-year period starting in 2027, according to the Wall Street Journal. OpenAI has also partnered with the Japanese conglomerate SoftBank on its Stargate data center project<\/a>.<\/p>\n Taylor says OpenAI and Microsoft will \u201ccontinue to work with the California and Delaware attorneys general\u201d on the transition plan, implying the deal still needs a stamp of approval from regulators before it can take effect.<\/p>\n Representatives for California and Delaware attorneys general did not immediately respond to TechCrunch\u2019s request for comment.<\/p>\n Tensions between OpenAI and Microsoft over these negotiations reportedly reached a boiling point in recent months. The Wall Street Journal<\/a> reported Microsoft wanted control of technology owned by Windsurf, the AI coding startup that OpenAI had planned to acquire <\/a>earlier this year, while OpenAI fought to keep the startup\u2019s IP independent. However, the deal fell through, and Windsurf\u2019s founders were hired by Google<\/a>, and the rest of its staff was acquired<\/a> by another startup, Cognition.<\/p>\n In Elon Musk\u2019s lawsuit against OpenAI \u2014 which at its core accuses Sam Altman, Greg Brockman, and the company of abandoning its nonprofit mission \u2014 the startup\u2019s for-profit transition is also a major flash point. Lawyers representing Musk in the lawsuit have tried to surface information<\/a> related to Microsoft and OpenAI\u2019s negotiations over the transition.<\/p>\n Musk also submitted an unsolicited $97 billion takeover bid<\/a> for OpenAI earlier this year, which the startup\u2019s board promptly rejected. However, legal experts noted at the time that Musk\u2019s bid may have raised the price<\/a> of OpenAI\u2019s nonprofit stake.<\/p>\n Notably, the nonprofit\u2019s stake in OpenAI PBC, under this agreement, is larger than what Musk offered.<\/p>\n In recent months, nonprofits such as Encode and The Midas Project have taken issue with OpenAI\u2019s for-profit transition, arguing that it threatens the startup\u2019s mission to develop AGI that benefits humanity. OpenAI has responded by sending subpoenas to some of these groups,<\/a> claiming the nonprofits are funded by its competitors \u2014 namely, Musk and Meta CEO Mark Zuckerberg. Encode and The Midas Project deny the claims.<\/p>\n<\/div>\n