Openai and Microsoft are rewriting the terms of their multi-billion dollar partnership through high-risk negotiations, aiming to allow ChatGpt Maker to launch a future IPO while protecting software giants’ access to cutting-edge AI models.

Microsoft, the largest supporter of Openai, is key to the $260 billion startup’s plan to conduct a company restructuring plan that keeps the group away from its roots as a nonprofit organization whose mission is to develop AI to “benefit humans.”

A key question in the review is how much equity will be acquired by the restructuring group Microsoft in exchange for more than $13 billion in equity investments in Openai so far.

The two also revised the terms of the broader contract, which was first drafted when Microsoft first invested $1 billion in OpenAI in 2019, according to several people familiar with the matter.

The contract currently runs until 2030 and covers Microsoft's access to OpenAI intellectual property rights such as models and products, as well as revenue share in product sales.

Three people who know directly about the negotiations say Microsoft is offering to abandon some equity stakes in Openai's new for-profit business in exchange for access to new technologies developed beyond 2030.

The deal is crucial for Openai’s restructuring efforts and could determine the future of a company that builds large language models in the vanguard of the technology community, a transformative technology that begins to undermine the global industry.

Openai CEO Sam Altman said his goal is to further develop and build artificial general intelligence beyond human capabilities.

Last week, Openai abandoned the controversial plan that will be lifted by its nonprofit committee to remove final control of the group. However, it retains its business unit’s plan to become a public welfare company (PBC), which is focusing on social interests in addition to making money.

The company model, adopted by competitors such as Anthropic and Elon Musk's Venture Xai, will still allow Openai to provide investors with equity in their business. People close to the company said the change is a key need for investors and will ensure that "IPOs are possible" in the future.

Negotiations between open and Microsoft have become complicated, according to investigations between multiple people who know their relationship directly.

The group remains close collaborators. Microsoft embeds OpenAI technology into its software products, while providing it with a lot of computing power to train AI models.

But Openai's ambitions increase competition with its biggest benefactor. The startup targets enterprise customers with AI products, while seeking partners like SoftBank of Japan and Larry Ellison's Larry Ellison to build its own massive computing infrastructure, known as "Stargate."

"Part of the friction is due to style. Openai said to Microsoft, 'Give us money, calculate and avoid directions: It's nice to travel with us." So, naturally, it leads to tensions. "A senior Microsoft employee said. "To be honest, it's a bad companion attitude, and it shows arrogance." ”

"Microsoft still wants (this conversion) success. That's not to say everything is in hell, it's a tough negotiation. But we have confidence we did it."

Openai was founded in 2015 by Altman, Musk and nine others in a nonprofit research laboratory. The group established a for-profit subsidiary in 2019 where external groups can invest in exchange for a portion of future profits, up to a certain ceiling.

At the time, the group told investors, including Microsoft, to treat the funds “in the spirit of donations” and warned them that their mission would take priority over profits.

However, recent investors have not considered their support as a donation.

Last October, Openai raised $6.6 billion in fundraising from SoftBank, Microsoft and venture capitalists, including Thrive Capital and Altimeter Capital. In March, it raised another $40 billion in a tour round led by SoftBank.

As part of these transactions, provisions in the investor contract stipulate how much equity will be acquired when Openai converts to a new structure.

These contracts mean that if OpenAI fails to convert to PBC, investors can choose to recover some or all of the cash they promised. Openai executives believe that even if there is a delay in the restructuring, their supporters will remain committed.

One close to Openai said the requirement to convert to a more conventional for-profit group is "a high level of awareness of the funds needed to raise this money", adding that "raising $40 billion under the capped profit structure is not possible."

Even if a deal can be reached with Microsoft, Openai's face will be further hindered. It pledged on Monday to ensure that its business unit will eventually remain under the control of the nonprofit committee, by granting PBC a large stake in the board and the power to nominate its directors.

But this failed to satisfy critics of the claimant Openai critics, thus damaging their mission by putting profits at the target.

Musk left Openai after falling with Altman, and he vowed to continue his legal action in an attempt to stop any company reorganization.

"Charity is still transferring its assets and technology to private, including private interests, including Sam Altman, while transferring all the charity's actual work on AI/AGI to a huge for-profit company," Musk's attorney Marc Toberoff wrote in a statement.

Page Hedley, a former Openai employee, said the proposed change undermines Openai's mission and creates "the potential to gain extraordinary wealth and power from artificial general intelligence, from the public to OpenAI investors."

Openai also has to convince the authorities in California and Delaware (a state based in headquarters and formed) that it proposes that it will uphold the group’s mission to benefit the public.

Delaware Attorney General Kathy Jennings said Monday that she will review Openai’s new plan “to comply with Delaware law by ensuring compliance with OpenAI’s charitable purposes and retaining appropriate control over for-profit entities.”

Industry insiders say Openai's new plan failed to make PBC a major blow. This will allow Openai to raise more cash, realize future buoys and gain financial resources to reach large tech competitors like Google.

Dorothy Lund, a law professor at Columbia Law School, said this has given Openai's future mercy to investors who want to ensure they benefit from its huge growth.

“You are in danger when you’re a mission-driven company that needs investor funds,” she said. “You have to go this line: You want investors to keep giving you billions of dollars in checks, so you need to make them happy.”