OpenAI introduced Thursday it reached a non-binding settlement with Microsoft, its largest investor, on a revised partnership that will enable the startup to transform its for-profit arm right into a public profit company (PBC).

The transition, ought to it’s cleared by state regulators, may enable OpenAI to lift extra capital from traders and, finally, develop into a public firm.

In a weblog publish, OpenAI Board Chairman Bret Taylor stated underneath the non-binding settlement with Microsoft, OpenAI’s nonprofit would live on and retain management over the startup’s operations. OpenAI’s nonprofit would acquire a stake within the firm’s PBC value upwards of $100 billion, Taylor stated. Additional phrases of the deal weren’t disclosed.

“Microsoft and OpenAI have signed a non-binding memorandum of understanding (MOU) for the following part of our partnership,” the businesses stated in a joint assertion. MOUs should not legally binding, however intention to doc every celebration’s expectations and intent.

“We’re actively working to finalize contractual phrases in a definitive settlement,” the joint assertion added.

The event appears to mark an finish to months of negotiations between OpenAI and Microsoft over the ChatGPT-maker’s transition plans. Not like most startups, OpenAI is managed by a nonprofit board. The bizarre construction allowed for OpenAI board members to hearth CEO Sam Altman in 2023. Altman was reinstated days later, and most of the board members resigned. Nonetheless, the identical governance construction stays in place right now.

Underneath their present deal, Microsoft is meant to get most popular entry to OpenAI’s expertise and be the startup’s major supplier of cloud companies. Nonetheless, ChatGPT is a a lot bigger enterprise than when Microsoft first invested within the startup again in 2019, and OpenAI has reportedly sought to loosen the cloud supplier’s management as a part of these negotiations.

Within the final yr, OpenAI has struck a collection of offers that will enable it to be much less depending on Microsoft. OpenAI just lately signed a contract to spend $300 billion with cloud supplier Oracle over a five-year interval beginning in 2027, in response to the Wall Avenue Journal. OpenAI has additionally partnered with the Japanese conglomerate SoftBank on its Stargate information heart venture.

Taylor says OpenAI and Microsoft will “proceed to work with the California and Delaware Attorneys Basic” on the transition plan, implying the deal nonetheless wants a stamp of approval from regulators earlier than it may well take impact.

Representatives for California and Delaware attorneys basic didn’t instantly reply to TechCrunch’s request for remark.

Tensions between OpenAI and Microsoft over these negotiations reportedly reached a boiling level in current months. The Wall Avenue Journal reported Microsoft wished management of expertise owned by Windsurf, the AI coding startup that OpenAI had deliberate to amass earlier this yr, whereas OpenAI fought to maintain the startup’s IP unbiased. Nonetheless, the deal fell by, and Windsurf’s founders have been employed by Google, and the remainder of its employees was acquired by one other startup, Cognition.

In Elon Musk’s lawsuit towards OpenAI — which at its core accuses Sam Altman, Greg Brockman, and the corporate of abandoning its nonprofit mission — the startup’s for-profit transition can also be a significant flash level. Legal professionals representing Musk within the lawsuit have tried to floor info associated to Microsoft and OpenAI’s negotiations over the transition.

Musk additionally submitted an unsolicited $97 billion takeover bid for OpenAI earlier this yr, which the startup’s board promptly rejected. Nonetheless, authorized specialists famous on the time that Musk’s bid could have raised the value of OpenAI’s nonprofit stake.

Notably, the nonprofit’s stake in OpenAI PBC, underneath this settlement, is bigger than what Musk provided.

In current months, nonprofits resembling Encode and The Midas Challenge have taken difficulty with OpenAI’s for-profit transition, arguing that it threatens the startup’s mission to develop AGI that advantages humanity. OpenAI has responded by sending subpoenas to a few of these teams, claiming the nonprofits are funded by its rivals — particularly, Musk and Meta CEO Mark Zuckerberg. Encode and The Midas Challenge deny the claims.