OpenAI’s nonprofit branch disclosed a modest revenue of $45,000 for the past year, a stark contrast to the company’s staggering valuation of $86 billion, primarily attributed to the success of ChatGPT. The nonprofit’s financial details surfaced through its 990 filing with the Internal Revenue Service (IRS), mandated for organizations maintaining tax-exempt status. However, the reported revenue is notably incongruent with earlier figures, as in 2017, OpenAI reported revenue exceeding $33.2 million.
Despite operating under a nonprofit structure since its inception in 2015, OpenAI embraced a capped-profit entity in 2019, enabling it to secure substantial external funding and adopt characteristics akin to a tech startup. This evolution paved the way for the development of ChatGPT, a chatbot that garnered immense popularity and fueled the surge in generative AI advancements.
Unraveling OpenAI’s Nonprofit Dilemma
In August, reports suggested that OpenAI’s revenue for the year reached $28 million, with projections nearing $1 billion for 2023, emphasizing the escalating demand for ChatGPT and improvements to OpenAI’s models. However, the recent IRS filing adds a layer of complexity to OpenAI’s financial transparency, fueling uncertainty about OpenAI’s nonprofit status.
The organizational turmoil escalated when CEO Sam Altman was abruptly ousted by the OpenAI’s nonprofit’s board, citing a loss of confidence in his leadership. However, Altman was swiftly reinstated amid employee threats of mass resignations and intervention from major investors. Concurrently, key board members, including Helen Toner, Tasha McCauley, and co-founder Ilya Sutskever, were removed.
This upheaval prompts speculation about the sustainability of OpenAI’s nonprofit framework. Thad Calabrese, a professor specializing in public and nonprofit financial management, suggests that OpenAI could consider relinquishing its nonprofit status, echoing the case of the Blue Cross Blue Shield Association’s transition in 1994.
Despite the confusion surrounding OpenAI’s nonprofit status, the company is currently undergoing an active tender offer, valuing it at $86 billion, driven by substantial investments from major players, notably Microsoft. This valuation sharply contrasts with the nonprofit’s reported expenses of $1.3 million for the previous year, including grants for Duke University research.
As questions loom over OpenAI’s future structure, the need for greater transparency is emphasized by industry comparisons. The Mozilla Foundation, parent to the Mozilla Corporation, maintains transparency through annual 990 documents, audited financial statements, and comprehensive reports. Mark Surman, president of the Mozilla Foundation, emphasizes the importance of public trust and transparency for entities claiming to serve humanity through AI.
While OpenAI commits to strengthening its governance in the wake of Altman’s return, specific changes remain undisclosed. Board chair Bret Taylor asserts the ongoing commitment to bolster corporate governance and ensure that artificial general intelligence benefits humanity at large.
