OpenAI boasts a staggering $86 billion valuation thanks in part to the immense popularity of ChatGPT. However, when it comes to revenue, the latest official figure stands at a modest $44,485 for the previous year, as revealed in the nonprofit parent organization’s IRS 990 filing—a mandatory document for tax-exempt organizations. OpenAI disclosed this filing to CNBC, and it was subsequently published by the website PlainSite.
Federal regulations don’t mandate audited financial statements for nonprofits, and in OpenAI’s home state of California, the organization managed to avoid submitting audited financials for 2022 by reporting revenue below the $2 million threshold. To put this in perspective, OpenAI’s last filing with the state in 2017 reported revenue of $33.2 million—more than 700 times higher than the 2022 figure.
Despite OpenAI’s commitment to transparency, its financials remain largely opaque. Initially established as a nonprofit in 2015, OpenAI introduced a capped-profit entity in 2019, allowing it to secure substantial outside funding and take on characteristics akin to a tech startup, such as granting equity to employees. The for-profit arm of the organization was responsible for developing ChatGPT, the chatbot that caused a sensation late last year and catalyzed the generative AI surge.
According to The Information’s report from August, OpenAI generated $28 million in revenue for the previous year and is poised to approach $1 billion in 2023, reflecting ChatGPT’s popularity and improvements to OpenAI’s models.
The recent IRS filing further complicates matters following the abrupt firing of CEO Sam Altman by the nonprofit’s board, citing a loss of confidence in his leadership. This move raised questions about the nonprofit’s ability to continue functioning smoothly.
In a rapid turn of events, Altman was reinstated as CEO after employee threats of mass resignation and intervention by major investors. Altman acknowledged “real misunderstandings” with board members. Simultaneously, Helen Toner, Tasha McCauley, and co-founder Ilya Sutskever were removed from the board.
This chaos has prompted speculation about whether OpenAI should continue as a nonprofit. Thad Calabrese, a professor of public and nonprofit financial management at New York University, finds OpenAI’s current status confusing and unique in the nonprofit realm. He suggests that OpenAI might consider relinquishing its nonprofit status if it desires to operate as a startup.
OpenAI has not commented on whether it is contemplating a shift away from its nonprofit status, stating only that it has consistently complied with California’s filing requirements.
While the nonprofit model is not entirely unfamiliar in the tech industry—Mozilla Foundation oversees the Mozilla Corporation, which produces products like the Firefox browser—OpenAI differs in its fundraising approach. Mozilla has not raised money from venture and corporate investors and reinvests most of its revenue into product development while allocating some for the nonprofit’s initiatives.
Mark Surman, president of the Mozilla Foundation, emphasizes the importance of OpenAI clarifying its direction and advocating for transparency if it aims to be seen as a public institution focused on ensuring AI benefits humanity.
In the midst of this, an active tender offer allows OpenAI employees to sell their shares and values the startup at $86 billion, a significant contrast to the IRS 990 filing, which reported expenses of $1.3 million for the nonprofit in the previous year, including around $400,000 in grants, primarily supporting Duke University research. The filing also listed seven notable achievements for 2022, with ChatGPT and the DALL-E 2 tool for image generation from text being the most prominent. OpenAI, in the filing, reaffirms its commitment to a mission that prioritizes safety and broad benefit in AI research and deployment, unburdened by profit incentives.
In the wake of Altman’s return, OpenAI has pledged to enhance its governance structure, although specific changes have yet to be disclosed. Current board chair and former Salesforce co-CEO Bret Taylor has stated that the board will continue to strengthen OpenAI’s corporate governance and oversee its mission of ensuring that artificial general intelligence benefits all of humanity.