So there's really no legal recourse if a 501c3 markets itself as a research institute / OSS developer, collects $130MM, and then uses those donations to seed a venture-backed company with closed IP in which the donors get no equity? One that even competes with some of the donors?
There is recourse, in that a 501c3 is limited in what it can do with it's assets: it must use them to advance its charitable purpose. In this case the OpenAI board will attempt to make the case that this approach, with partial ownership of a public benefit company, is what's best for their mission.
If donors got equity in the PBC or the owned PBC avoided competing with donor owned companies this would not be consistent with the non-profit's mission, and would not be compliant with 501c3 restrictions.
Right, I pointed out the competition to show that the donors are suffering actual damages from the restructuring. I don't think any of the critics here seriously expect the PBC model to fulfill the nonprofit's stated mission in any case.
This is not just an issue for the change that OpenAI is contemplating right now, but also the capped for-profit change that happened years ago. If that's found to be improper, I'm curious if that entitles the donors to any kind of compensation.
> A historic precedent for this is when Blue Cross' at the time nonprofit health insurers converted into for-profit enterprises. California Blue Cross converted into what's now Anthem. They tried to put a small amount of money into a nonprofit purpose. The California Attorney General intervened and they ultimately paid out about $3 billion into ongoing significant health charitable foundations in California. That's a good model for what might happen here.
So my guess is there's no compensation for any of the donors, but OpenAI may in the end be forced to give some money to an open, nonprofit AI research lab (do these exist?). IANAL so that's a low-confidence guess.
Still, that makes me so queasy. I would never donate to a YC-backed nonprofit if this is how it can go, and I say that as a YC alum.
