Microsoft, OpenAI and Deal Structure
Microsoft put the cart before the horse with its initial investment in OpenAI by not insisting that OpenAI modify its organizational structure from a non-profit to a C corp as a contingency for closing MSFT’s initial investment round. If MSFT had done so, the Redmond WA giant would know exactly how much OpenAI equity it owned.
Before investing $14 billion in OpenAI (a combination of cash and Azure resources), Microsoft had every reason to insist that the investment was contingent upon OpenAI modifying its organizational structure from a non-profit to a C corp. To do so would not have been a significant “Ask”, especially at the implied valuation. Had Satya Nadella and MSFT done so, the WSJ would not be writing articles such as this and MSFT’s equity stake would not be a great mystery.