OpenAI, Nonprofit with 60 Million KRW Revenue Controls Company Valued at 113 Trillion KRW

OpenAI Nonprofit Corporation,
Reported 60 Million Won Revenue to US IRS
Controversy Over OpenAI's Unusual Governance Structure

The nonprofit corporation that effectively controls OpenAI, the developer of 'ChatGPT' with a corporate value reaching 113 trillion won, reportedly has annual revenue of about 60 million won. Market confusion surrounding the unusual governance structure, where a nonprofit's subsidiary is the big tech company OpenAI, which triggered the ousting of OpenAI CEO Sam Altman, is expected to deepen.

[Image source=Yonhap News]

On the 12th (local time), U.S. economic media CNBC reported that OpenAI's nonprofit corporation declared revenue of $44,485 (about 58.67 million won) to the U.S. Internal Revenue Service (IRS) last year.

This does not include the revenue of OpenAI's for-profit corporation. The for-profit OpenAI reported revenue of $33.2 million (43.8 billion won) to the state government in 2017. This is 800 times the revenue reported by the nonprofit corporation last year. Given the global AI boom triggered by the release of the generative AI ChatGPT at the end of last year, this year's revenue is expected to be even higher. Recently, The Information reported that OpenAI's revenue was $28 million (about 36.9 billion won) last year and is expected to reach $1 billion (about 1.319 trillion won) this year. OpenAI's market value is also estimated to be $86 billion (113 trillion won).

Foreign media expect that the disclosure of the nonprofit corporation's revenue will increase market questions about OpenAI's governance structure. There is a forecast that confusion will spread over the unusual governance structure where a nonprofit corporation with less than 60 million won in revenue owns a for-profit corporation valued at 113 trillion won.

OpenAI has a different governance structure from typical companies, similar to competing companies like Anthropic or Inflection AI, which also present themselves as public interest enterprises. In particular, among these, it is structured as a unique type of company called a 'Capped-profit company.'

This stems from OpenAI's founding philosophy. OpenAI was established in 2015 as a nonprofit corporation for the development of safe artificial general intelligence (AGI) for humanity, with participation from investors including Elon Musk. However, although investors pledged to pour $1 billion into OpenAI, they spent less than $200 million, and OpenAI established a for-profit corporation in 2019 to raise development funds. This for-profit corporation is the entity that created ChatGPT and others. This for-profit corporation has the right to reinvest all profits back into the company until AGI is developed, while limiting investor returns to 100 times their principal.

The market views that it will be difficult to regard OpenAI as a nonprofit corporation any longer. Due to the recent ousting and return of Altman, and Microsoft (MS), the second-largest shareholder of OpenAI's for-profit corporation, joining the board, it is seen as difficult to uphold OpenAI's founding philosophy.

Ted Calabrese, a professor of public and nonprofit financial management at New York University, said, "OpenAI's current state is confusing and unlike any nonprofit corporation we have seen before," adding, "OpenAI may give up its nonprofit status."

This content was produced with the assistance of AI translation services.