On November 20, according to sources familiar with the matter, some investors in OpenAI, the creators of ChatGPT, are exploring potential legal actions against the company’s board. This development comes in the aftermath of the abrupt removal of CEO Sam Altman, which has triggered the possibility of a significant employee exodus.
Investors, concerned about the substantial sums they have invested in OpenAI, a flagship entity in their portfolios, are contemplating legal recourse. The fear is that their investments, amounting to hundreds of millions, could face severe losses due to the apparent instability within what was once considered one of the leading AI startups in the rapidly expanding generative AI sector.
The situation escalated when, by Monday, over 700 of OpenAI’s employees had threatened to resign unless the board was replaced. Altman was dismissed on Friday by OpenAI’s board following what was described as a “breakdown of communications,” as outlined in an internal memo obtained by Reuters.
What sets this case apart for venture capital investors is the unique governance structure of OpenAI. Unlike typical startups where investors often hold board seats or significant voting power, OpenAI is controlled by its non-profit parent company, OpenAI Nonprofit. This parent entity was established with the mission to benefit “humanity, not OpenAI investors.”
As a consequence, employees at OpenAI appear to have more leverage compared to venture capitalists who have traditionally played a more decisive role. Microsoft owns a 49% stake in the company, while the remaining 49% is divided among other investors and employees, with the remaining 2% owned by OpenAI’s nonprofit parent.