OpenAI is reportedly in the middle of reworking its multibillion-dollar agreement with Microsoft.
The negotiated deal would allow the artificial intelligence (AI) company to someday launch an initial public offering (IPO), while protecting Microsoft’s access to AI models, the Financial Times (FT) reported Sunday (May 11).
As that report noted, Microsoft is a crucial holdout to OpenAI’s plans to restructure itself and move away from its nonprofit roots.
OpenAI recently abandoned a plan that would have taken away control of the company from its nonprofit board, while still sticking to plans for its business arm to become a public benefit corporation (PBC). This, the FT said, would allow it to turn a profit while still focusing on the original goal of AI to benefit humanity.
One of the key issues in these discussions is how much equity in a restructured OpenAI Microsoft will get in exchange for the $13 billion-plus it has invested in the startup, the report said. Multiple sources with knowledge of the negotiations told the FT the companies are also revising the terms of a larger contract, formed when Microsoft first invested $1 billion into OpenAI in 2019.
In its current iteration, that contract runs to 2030 and covers what access Microsoft has to OpenAI’s intellectual property and revenue sharing from product sales.
Sources said Microsoft would be willing to give up some of its equity stake in OpenAI’s new for-profit business in exchange for access to technology developed after 2030. The sources also say the negotiations are being complicated by a cooling relationship between the two companies.
PYMNTS spoke last week with legal experts on OpenAI’s planned PBC shift. Marcus Wolter, partner and global director of corporate practice at the law firm Caldwell, said the PBC structure is an improvement.
“For OpenAI, it is still a better situation,” Wolter said. “They will be able to raise capital more easily and, as a public benefit company, they are merely required to balance the impact of the actions taken with the interests of all stakeholders and not just shareholders.”
In a separate report, PYMNTS examined OpenAI’s ambitions beyond AI models following its hiring of Instacart CEO Fidji Simo as its new CEO of applications.
“This is a power move,” said Jeanel Alvarado, CEO of research firm Retailboss. “The CEO of Instacart has a track record of building killer consumer apps. OpenAI is walking straight into Google’s backyard and challenging Google’s search, ads and AI-powered tools.”
