Why did OpenAI go from non-profit to a capped-profit company? Sam Altman explains

OpenAI CEO Sam Altman has explained the reason why the San-Francisco based startup pivoted from a non-profit company to a capped-profit company in 2020. Founded in 2015 by notable names in Silicon Valley including Sam Altman, Elon Musk and LinkedIn cofounder Reid Hoffman, OpenAI was a non-profit company until 2020. The current structure allows investors to earn upto 100 times on their investment but nothing over that.

During a recent conversation with computer scientist and podcaster Lex Friedman, OpenAI CEO Sam Altman delved into the reasoning behind the company's strategic shift in 2020.

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“So we started as a non-profit, we learned earlier on that we were going to need far more capital than we learned early on that we were going to need far more capital than we were able to raise as a non-profit” Altam explained

He added, “Our non-profit is still fully in charge… there is a subsidiary capped profit so that our investors and employees can earn a certain fixed return”

The OpenAI founder further explained that his company wanted to have 'some of the benefits of Capitalism but not too much'. During a blog post in 2020, OpenAI had said that the startup is a hybrid of a for-profit and nonprofit which they were calling a ‘capped-profit’ company.

Recently, Twitter CEO Elon Musk had also questioned OpenAI asking how a non-profit became a ‘$30 billion market cap for-profit’ company. He also said that the startup was a maximum-profit company effectively controlled by Microsoft.

Musk had resigned from OpenAI's board in 2018, which the artificial intelligence company said was to eliminate “potential future conflicts”.

Ever since ChatGPT launched in November last year, people have been struck with wonder and panic at the same time owing to the chatbot's abilities. It's also put a spotlight on the company behind the viral chatbot and its relationship with Microsoft.