Openai announced Thursday that it has reached a non-binding contract with Microsoft, the largest investor. This allows startups to convert for-profit organizations into public benefits companies (PBCs).
This transition would allow Openai to raise additional capital from investors if cleared by state regulators, and could ultimately become a public company.
In a blog post, Openai Chairman Bret Taylor said that Openai’s nonprofit will continue to exist and maintain control of the startup’s operations under a non-binding agreement with Microsoft. Taylor said Openai’s nonprofit would acquire more than $100 billion in stake in PBC in the company. No further terms of the transaction have been disclosed.
“Microsoft and Openai have signed a non-binding memorandum of understanding (MOU) for the next phase of our partnership,” the company said in a joint statement. Mous is not legally binding, but it aims to document the expectations and intentions of each party.
“We are actively working to finalize the terms of the contract in a decisive agreement,” the joint statement added.
The development appears to mark the end of months of negotiations between Openai and Microsoft over ChatGpt-Maker’s migration plan. Unlike most startups, Openai is managed by a non-profit committee. The extraordinary structure allowed Openai board members to fire CEO Sam Altman in 2023. Altman was resurrected a few days later, with many of his board members resigning. However, the same governance structure is in place today.
Under the current transaction, Microsoft will gain priority access to Openai technology and become the leading provider of startup cloud services. However, ChatGpt is a much larger business than Microsoft first invested in startups in 2019, and Openai reportedly tried to loosen its management of cloud providers as part of these negotiations.
Last year, Openai attacked a series of transactions that made it less dependent on Microsoft. According to the Wall Street Journal, Openai recently signed a $300 billion deal with cloud provider Oracle over five years starting in 2027. Openai is partnering with Japanese conglomerate SoftBank on the Stargate Data Center project.
Taylor said Openai and Microsoft will “continue to work with the California and Delaware Attorney Generals” on the migration plan.
Representatives for California and Delaware Attorney General did not immediately respond to TechCrunch’s request for comment.
Tensions between Openai and Microsoft over these negotiations have reportedly reached a boiling point in recent months. The Wall Street Journal reported that Microsoft wants to manage the technology owned by Windsurf. Windsurf is an AI coding startup that Openai plans to acquire earlier this year, and was fighting to make Startup’s IP independent. However, the contract fell apart, with Windsurf founder hired by Google and the remaining staff being acquired by another startup, Acknowledge.
Elon Musk’s lawsuit against Openai accused Sam Altman, Greg Brockman and the nonprofit mission at its heart, but the startup’s for-profit transition is also a major flashpoint. The attorney representing Musk in the lawsuit attempted to express information related to negotiations regarding the migration of Microsoft and Openai.
Musk also submitted Openai’s unsolicited $97 billion purchase bid earlier this year. However, legal experts said the mask bid could have raised the price of Openai’s nonprofit stock.
In particular, the nonprofit’s interest in Openai PBC under this Agreement is greater than that provided by Musk.
In recent months, nonprofits such as Encode and the Midas Project have been having problems with the transition of Openai’s for-profit organizations, claiming it threatens the startup’s mission to develop AGIs that benefit humanity. Openai responds by sending Subpoenas to some of these groups, claiming that the nonprofit is funded by its competitors, namely Mark Zuckerberg, CEO of Musk and Meta. Encoding and MIDAS projects reject claims.
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