zlacker

> 113. OpenAI’s conduct could have seismic implications for Silicon Valley and, if allowed to stand, could represent a paradigm shift for technology start-ups. It is important to reflect on what has transpired here: a non-profit startup has collected tens of millions of dollars in contributions for the express purpose of developing AGI technology for public benefit, and shortly before achieving the very milestone that the company was created to achieve, the company has become a closed, forprofit partner of the world’s largest corporation, thereby personally enriching the Defendants. If this business model were valid, it would radically redefine how venture capitalism is practiced in California and beyond. Rather than start out as a for-profit entity from the outset, “smart” investors would establish non-profits, use pre-tax donations to fund research and development, and then once their technology had been developed and proven, would slide the resulting IP assets into a new forprofit venture to enrich themselves and their profit-maximizing corporate partners. That is not supposed to be how the law works in California or anywhere else in this country, and this should not be the first Court to hold otherwise.

> 114. To further understand why this is important, if OpenAI’s new business model is valid, for every dollar that an investor “invests” by contributing to a non-profit, that investor gets approximately 50 cents back from the state and federal governments in the form of reduced income taxes, so the net cost to them of each $1 of investment is only 50 cents. However, with OpenAI’s new business model, they get the same “for profit” upside as those who invest the conventional way in for-profit corporations and thus do not get an immediate tax write off, financed by the government and, ultimately, the public. From an investment perspective, competing against an entity employing the new OpenAI business model would be like playing a game of basketball where the other team’s baskets are worth twice as many points. If this Court validates OpenAI’s conduct here, any start-up seeking to remain competitive in Silicon Valley would essentially be required to follow this OpenAI playbook, which would become standard operating procedure for start-ups to the detriment of legitimate non-profits, the government’s tax coffers, and ultimately the people of California and beyond. Notably, OpenAI’s for-profit arm was recently valued at nearly $80 billion.

I've always wondered about this. I briefly worked at a non-profit that turned over into a for profit once it found traction, and to my knowledge, the donors didn't get anything back. I learned a lesson too, taking a pay cut to work somewhere mission focused and not beholden to profit maximization. Not going to make that mistake again.