Openai announced Thursday that it reached a non-binding agreement with major investor Microsoft for a revised partnership that would allow the startup to transform its non-profit group into a public benefit corporation (PBC).
The move, if cleared by state regulators, could allow Openai to raise additional capital from investors and ultimately become a public company.
In a blog post, Openai Chairman Brett Taylor said that under the non-binding agreement with Microsoft, Openai’s nonprofit organization would continue to exist and retain control over the startup’s operations. Openai’s nonprofit organization would acquire a stake in the company valued at $100 billion by PBC, Taylor said. Additional terms of the deal were not disclosed.
“Microsoft and Openai have signed a non-binding Memorandum of Understanding (MOU) on the next phase of our partnership,” the companies said in a joint statement. The MoU is not legally binding, but is intended to document each party’s expectations and intent.
“We are actively working to finalize the terms of the agreement into a final contract,” the joint statement added.
The development appears to point to months of talks between Openai and Microsoft about Chatgpt-Maker’s transition plans. Unlike most startups, Openai is controlled by a non-profit board. The unusual structure allowed Openai’s board members to use CEO Sam Altman until 2023. Altman was reinstated days later, and many of the board members resigned. However, the same governance structure remains in place.
Under their current deal, Microsoft is expected to gain the desired access to Openai’s technology and be the startup’s primary cloud provider. However, Chatgpt is a much bigger business than when Microsoft first invested in the startup in 2019, and Openai has reportedly sought to relinquish control of the cloud provider as part of these talks.
Openai has made a series of deals in the past year that would allow it to be less dependent on Microsoft. Openai recently signed a $300 billion deal with cloud provider Oracle over a five-year period starting in 2027, according to the Wall Street Journal. Openai has also partnered with Japanese conglomerate SoftBank on its Stargate data center project.
Taylor says Openai and Microsoft “will continue to work with the California and Delaware attorneys general” on the transition plan, noting that the deal still needs a stamp of approval from regulators before it can take effect.
Representatives for the California and Delaware attorneys general did not immediately respond to TechCrunch’s request for comment.
Tensions between Openai and Microsoft over those talks have reportedly reached a boiling point in recent months. The Wall Street Journal reported that Microsoft wanted control of technology owned by Windsurf, an AI coding startup that Openai had planned to acquire earlier this year, while Openai fought to keep the startup’s IP independent. However, the deal fell through, and Windsurf’s founders were hired by Google, and the rest of its staff were acquired by another startup.
In Elon Musk’s lawsuit against Openai—which essentially accuses Sam Altman, Greg Brockman, and the company of abandoning its nonprofit mission—the startup’s nonprofit transition is also a major flashpoint. Lawyers representing Musk have tried to surface information related to Microsoft and Openai’s talks about the transition.
Musk also made an unsolicited $97 billion takeover bid for Openai earlier this year, which the startup’s board promptly rejected. However, legal experts noted at the time that Musk’s offer likely inflated Openai’s unprofitable stock price.
Notably, the non-profit organization Openai PBC is larger than what Musk offered under this agreement.
In recent months, nonprofits like Encode and the Midas Project have been linked to Openai’s non-profit transition, claiming it jeopardizes the startup’s mission to develop AGI that benefits humanity. Openai has responded by sending subpoenas to some of those groups, claiming the nonprofits are funded by its competitors — namely Musk and Facebook CEO Mark Zuckerberg. Encode and the Midas Project deny the claims.
