Nonprofit Radio: OpenAI and Nonprofit-Money Collaborations

I recently spoke with Tony Martignetti, host of Nonprofit Radio, about the OpenAI nonprofit-for-profit joint venture drama making headlines and some lessons to be learned about nonprofit collaborations heavily influenced by money. You can join the 13,000 weekly listeners and catch the Nonprofit Radio podcast here.

As general background, you may find the following websites and news stories helpful regarding the formation of the nonprofit, the nonprofit’s establishment of a for-profit LLC to attract equity capital to help advance its charitable goals related to the development of artificial intelligence (AI), the conflict between the LLC’s CEO (Sam Altman) and the nonprofit’s board, the termination of Altman, the havoc caused by the termination, and the rehiring of the CEO:

OpenAI – Our Structure

OpenAI announces leadership transition (OpenAI)

Sam Altman returns as CEO, OpenAI has a new initial board (OpenAI)

The OpenAI Mess Is About One Big Thing (Derek Thompson, The Atlantic)

How to Stop Another OpenAI Meltdown (Paresh Dave, Wired) [Disclosure: I provided some very general background to Paresh.]

The resources above and the majority of the stories about the recent OpenAI brouhaha do not discuss the nonprofit laws that may have shaped some of the structures and decisions. It’s difficult to state with any certainty how compliance issues led to some of the events, particularly without having access to the LLC Operating Agreement (which is a private document). But I suspect that the LLC fits the description of what is colloquially referred to as a nonprofit joint venture, an entity in which a 501(c)(3) charitable organization has an equity stake that it is mission-related and not just part of a prudent investment portfolio. Tony and I talk about this a little on the podcast. Here are some additional resources on nonprofit joint ventures, including some posts on an OpenAI-inspired hypothetical I wrote several weeks ago:

Nonprofit Joint Ventures: Basics

Form 990 Series – Joint Venture Policy and Memorandum (Public Counsel)

An OpenAI-Inspired Nonprofit Law Story – Part One, Part Two

As we learn more about the OpenAI/Altman events, we’ll share more resources on this post. Stay tuned.