Recent reports suggest that investors are urging OpenAI to undergo a reorganization. According to Reuters, the proposed changes could significantly impact the startup’s ability to raise further capital, potentially valuing the company at $150 billion. This follows previous reports about investors’ intentions to influence the company’s structure for more favorable returns.
Details of the New Financing Round
The upcoming financing round will involve issuing convertible bonds, which would allow debt holders to convert their debt into equity. However, potential creditors are pushing OpenAI to alter its organizational structure by removing restrictions on profit distribution. OpenAI, founded in 2015, initially capped investors’ future profits at 100 times their investment, with excess profits directed to the nonprofit that oversees the company. Over time, this cap has been reduced, further limiting investor profits.
OpenAI has reportedly raised more than $10 billion in its history, with Microsoft contributing the majority of funds. However, Microsoft’s profit share is also capped at under 50%. Investors, including Microsoft, Thrive Capital, and Khosla Ventures, are expected to participate in the upcoming round, which is anticipated to raise $6.5 billion. New participants, such as Nvidia, Apple, and Sequoia Capital, may also join.
Potential Impact of the Reorganization
Should negotiations fail to result in structural changes, the conversion price of the bonds issued during this round could drop. Additionally, OpenAI’s board of directors may need to reconsider the profit cap imposed on investors. The company is currently consulting legal experts to assess the possibility of modifying its structure, adds NIXSolutions.
While OpenAI has adhered to its original nonprofit mission by limiting investor profits, adopting the proposed changes would require abandoning this approach. OpenAI’s most recent funding round in February valued the company at $80 billion, but with the conditions set by investors, the new valuation could surpass that, provided the startup agrees to their demands. We’ll keep you updated on further developments.