Charles Esther
OpenAI, once hailed as one of the best-funded startups in history, is currently struggling to raise new funds.
This difficulty stems from its unique nonprofit structure, which limits its ability to attract investors in the traditional sense.
The company detailed these fundraising issues in a letter to California’s attorney general dated May 15.
OpenAI announced plans to restructure itself as a Public Benefit Corporation.
This move aims to make it easier to draw investors and solve the current funding problems.
Earlier this year, OpenAI raised a staggering $40 billion in a round led by SoftBank.
Despite this, many potential investors declined to participate due to OpenAI’s nonprofit control and inability to offer standard equity stakes.
The letter specifically states, “Many potential investors in OpenAI’s recent funding rounds declined to invest.”
OpenAI admitted that its nonprofit status is a major hurdle in securing sufficient funding.
This transparency is unusual because startups typically avoid disclosing such difficulties.
Originally founded as a nonprofit and still governed by its board, OpenAI’s structure restricts its fundraising options.
According to the letter, investments were only secured by promising to alter this structure.
Much of the SoftBank funding depends on this planned restructuring.
OpenAI intends to transform its for-profit arm into a Public Benefit Corporation.
This model is similar to competitors like Anthropic.
However, OpenAI has dropped earlier plans to completely separate itself from nonprofit governance.
The letter also highlights concerns over competitors like Google and Meta.
These tech giants have committed over $300 billion in AI investments for 2025 alone.
OpenAI views these huge investments as threats to its mission to develop safe artificial general intelligence (AGI).
The letter warns that failing to raise enough funds could compromise OpenAI’s ability to ensure safe AGI development.
Orson Aguilar, founding president of LatinoProsperity, expressed doubts about OpenAI’s restructuring plans.
He questioned the true value of the nonprofit’s assets and their accountability.
Aguilar also raised concerns about the nonprofit’s independence due to its close ties with corporate interests.
This letter was a response to a petition asking California’s attorney general to block OpenAI’s conversion to a for-profit structure.
The disclosure reveals the delicate balance OpenAI faces between maintaining its nonprofit mission and attracting investment.
This challenge is critical as it tries to compete with well-funded technology giants.
OpenAI did not provide further comments regarding the letter.
This situation underscores the complex issues at the intersection of innovation, funding, and corporate structure in the AI industry.
