OpenAI CEO Sam Altman had held and fully divested a minor, indirect stake in the company, he revealed in a recent interview with Bari Weiss from The Free Press. The previously unknown stake was managed through a Sequoia fund, adding a new layer to the complex narrative surrounding OpenAI’s shift to a for-profit model.
The revelation might be a major point of debate in the AI industry and the focus of an ongoing legal battle with OpenAI co-founder Elon Musk.
Altman, who became CEO in 2019, previously told US lawmakers in 2023 that he held no direct equity in OpenAI. His only acknowledged investment was through a Y Combinator fund, as documented on OpenAI’s website.
He now revealed his previous Sequoia fund investment in the interview with Bari Weiss, stating “I used to have some [equity] via a Sequoia fund but that one turned out to be easier to like sell and not keep the position in.” He emphasized its minimal nature and clarified, “There’s no current plan or promise for me to get anything” regarding future equity.
Sequoia’s initial investment in OpenAI occurred in 2021, when the company was valued at around $14 billion. With Sequoia’s participation in subsequent funding rounds, OpenAI’s valuation has soared to $157 billion. Although venture firms like Sequoia typically don’t disclose their limited partners, even a small stake from 2021 would have grown significantly.
OpenAI’s Contentious Governance Overhaul
OpenAI, founded as a nonprofit in 2015, transitioned to a “capped-profit” model in 2019. This hybrid structure allows for limited investor returns, with excess profits reinvested into the company’s mission.
It aimed to balance philanthropic goals with the need for capital to advance AI research. OpenAI’s nonprofit board has a majority of independent directors, interpreted as individuals without equity in the company. Altman said his initial decision to forgo equity was based on this structure.
The disclosure of Altman’s previously held stake through Sequoia is particularly significant given OpenAI’s ongoing transition to a fully for-profit structure. This move has been marked by internal debates and external challenges.
Related: Meta Urges Legal Block on OpenAI’s Transition to For-Profit Entity
As The New York Times reported on December 18, OpenAI is currently negotiating a multi-billion-dollar payout to its nonprofit board as part of this transition.
This follows a $6.5 billion funding round that now requires OpenAI to overhaul its governance structure within two years to prevent the investment from converting into debt.
Bret Taylor, OpenAI’s board chairman, described the restructuring as “a necessary step to align organizational goals with the financial realities of building advanced AI systems” at this year’s AI+ Summit.
Elon Musk’s History with OpenAI: From Co-Founder to Critic
Elon Musk, a co-founder of OpenAI, has strongly criticized its shift towards a for-profit model. He is currently engaged in legal action against the company, with his legal team recently filing a motion to halt the for-profit transition.
This is part of a larger strategy to challenge OpenAI’s business practices, including agreements that allegedly restrict support for competitors like Musk’s AI venture, xAI.
However, internal emails disclosed by OpenAI on December 13 reveal Musk’s own early skepticism regarding the nonprofit model. In a November 2015 email to Sam Altman, Musk wrote, “The structure doesn’t seem optimal. Probably better to have a standard C corp with a parallel nonprofit”.
These emails, spanning from 2015 to 2018, show Musk advocating for significant restructuring, increased funding, and a leadership role for himself with substantial authority.
OpenAI argues that Musk’s departure stemmed from his inability to secure unilateral control, not a betrayal of the original mission. Altman also clarified that it was Musk who initially championed the idea of OpenAI adopting a for-profit model, even proposing its integration into Tesla.
