Elon--
Please see attached, look forward to feedback.
Also, my current thought is that I won't take any equity. I'm not doing this for the money anyway, and I like the
idea of being completely unconflicted and just focused on the best outcome for the world. If it appeared at some
point we weren't going to build AGI but were going to build something valuable, then maybe I'd want equity
then.
Sam
@OpenAI
OpenAl's mission is to ensure that artificial general intelligence - by which
we mean highly autonomous systems that outperform humans at most
Mission economically valuable work - (AGI), when developed, is safe and benefits all
of humanity. We will attempt to directly build safe and beneficial AGI, but will
also consider our mission fulfilled if our work aids others to achieve this
outcome.
OpenAI LP will be a for-profit Delaware Limited Partnership managed by its
General Partner, a single-member Delaware LLC controlled by OpenAI, Inc.
Corporate (the Nonprofit)'s Board of Directors. At all times, no more than a minority of
Structure the Nonprofit's Board of Directors will be holders of any economic interest in
OpenAI LP or in the employee holdings entity (described below).
Initial Capitalization
OpenAI LP will initially be capitalized by a contribution of assets from the
Nonprofit. The Nonprofit will get an interest equivalent to that of a Limited
Partner in the initial raise that is consistent with the value of its capital
contribution.
Funding/
Revenue Limited Partner Interests
We will sell preferred capped Limited Partner Interests redeemable (on a first
in, first out basis) for a multiple of the purchase price (adjusted for inflation as
described below). Redemption will commence either (a) if and when we
successfully create AGI capable of generating the requisite returns and the
General Partner, in its sole and absolute discretion, determines that
@openAI
Summary Term Sheet
redemptions will begin, or (b) at a mutually agreeable pre-AGI alternative.
Specifically, the fundraising rounds will be as follows:
1. Initial raise: $500M, 1OOx target redemption
2. Employee pool: $100B capped target redemption
• Actual redemption amount will be based on the number of
employee LP Interests issued, which will be determined (subject
only to the aggregate cap) by the General Partner in its sole and
absolute discretion.
• The General Partner may increase the target redemption of the
employee pool in its sole and absolute discretion.
3. Second raise: $10+B, 15x expected target redemption.
4. There may be additional fundraising rounds and/or an additional
employee pool, though the interests of employee and/or investor
Limited Partners cannot be diluted absent approval of a majority-in-
interest of the affected class of Limited Partner (employee/ investor).
Distributions will be made as follows:
• First, distributions will be made to initial raise investors in proportion to
their respective capital contributions until each investor has received
an amount equal to its aggregate capital contributions, with such
distributions counting against the investors' target redemption amount;
• Next, 25% of all distributions will be made to initial raise investors and
employees in proportion to their respective target redemption
amounts, and 75% will go to second raise investors in proportion to
their respective capital contributions until each investor has received
an amount equal to its aggregate capital contributions. Subsequently,
all future payments will be in proportion to each investor/employee's
respective target redemption amount. Distributions will continue until
all investors and employees have received their respective target
redemption amounts; and
• Any amounts in excess of the target redemption amounts shall be
distributed to or for the benefit of the Nonprofit in its capacity as a
Limited Partner.
For the first 10 years after the initial raise, the inflation rate will be determined
by reference to the U.S. Consumer Price Index or such alternative U.S.
governmental index as determined by the General Partner with the consent of
a majority-in-interest of the Limited Partners (determined by reference to
target redemption amounts). Subsequently, starting in year 11 , the target
redemption amounts will increase annually at the greater of the inflation rate
or a simple interest rate equal to the London Interbank Offered Rate plus 2%.
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Summary Term Sheet
Any earlier redemption date must be approved by a majority-in-interest of the
investor Limited Partners, as determined by reference to their target
redemption amounts.
Prior to redemption, all items of profits and loss will be allocated among the
Partners in proportion to their target redemption amounts.
Revenue
At some fu ture date, OpenAI LP may generate revenue, primarily in the form
of interest, dividends, capital gains, and royalties. To the extent it seeks to
commercialize technology in a way that will generate significant revenue
subject to the Unrelated Business Income Tax, OpenAI LP will create taxable
"corporate blocker" subsidiaries to commercialize such technology.
Should we generate revenue (through OpenAI LP or its subsidiaries) that is
not reserved for Research & Development activities and/or other related
expenses, at the sole discretion of the General Partner, such surplus revenue
will be distributed to our Limited Partners. These periodic distributions will be
allocated based on the Limited Partner's targeted redemption amounts and
will not count against the targeted redemption amounts.
Tax Distributions
OpenAI LP will make customary tax distributions to all Partners in respect of
the net taxable income of OpenAI LP, if any. The amount and timing of any
tax distribution will be determined in the discretion of the General Partner.
OpenAI LP exists to advance our mission using the principles expounded in
OpenAl's Charter. We will employ the Partnership's assets to help us achieve
these goals, such as through funding research and development activities,
investing in companies and assets that may further the mission, and other
related activities. The General Partner shall have the sole right to determine
the amount of the Partnership's assets that shall be spent on and reserved for
the expenditures in advancement of the mission.
Fiduciary Our duty to these principles and the advancement of our mission takes
Duties precedence over any obligation to generate a profit. We may never make a
profit, and we are under no obligation to do so. We are free to re-invest any
or all of our cash flow into research and development activities and/or related
expenses without any obligation to the Limited Partners. The General Partner
will have discretion to establish and maintain reserves for such expenditures,
consistent with the mission, so long as such discretion is exercised
reasonably.
The fiduciary duties of the Nonprofit Board of Directors flow exclusively to
the Nonprofit, not to the Limited Partners.
In addition to their salary, employees will be granted profit interests in an
Employee employee holding vehicle (detailed below) in exchange for their services.
Comp. Certain employees of the Nonprofit will also be granted profits interests in the
target redemption amount, if any, held by Nonprofit. It is intended that the
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Summary Term Sheet
profits interests will not give rise to tax liability at the time of grant.
Grants will vest over 6 years, with 0% in the first year, followed by 20%
vesting each year for the next five years.
Employee interests will not be transferrable until the employee has been at
OpenAI for one year. Employees are limited to selling a maximum of 25% of
their vested interests per year.
Each employee recipient will make a timely Section 83(b) election with
respect to their profits interests.
We will create a separate holding company (OpenAI Holdings, L.P.) to issue
profit interests to employees of OpenAI LP. OpenAI LP will issue mirror
profits interests to OpenAI Holdings, and, as a result, OpenAI Holdings will be
a partner in OpenAI LP (along with the investors). The profits interests held
by employees in OpenAI Holdings thus will represent an indirect economic
interest in OpenAI LP.
Employee
Holding By receiving profits interests in OpenAI Holdings rather than OpenAI LP, it is
Company intended that employees will be spared certain negative tax consequences of
holding a partnership interest directly in a partnership in which they are also
employees (such as quarterly estimated tax filings, self-employment taxes
and no longer being eligible to participate in certain employee benefit plans).
Employees will receive W-2s from OpenAI LP and otherwise will be treated as
employees at that level for tax purposes. Employees will receive K-1s from
OpenAI Holdings in connection with their profits interests and otherwise will
be treated as partners at that level for tax purposes.
Notwithstanding any of the preceding, the transferability of LP Interests will be
subject to limitations including:
1. transfers will be limited to a period occurring once per year;
2. transfers can only be between and among Limited Partners absent
Limitations
prior approval by the General Partner;
Re: Transfer
of Interests 3. transfers will be limited so as to avoid material burdens upon the
partnership or the General Partner under securities and other
applicable laws; and
4. transfers will be limited to avoid partnership tax liability under US
federal "publicly traded partnership" and other similar laws.
Each Limited Partner will be furnished with annual financial statements within
90 days following the end of each financial year.
Information
All scheduled payments to Limited Partners will be considered confidential,
Rights
and Limited Partners are not entitled to information regarding the interests of
other Partners, provided that the Limited Partners will be entitled to such
information as they need to self-organize for purposes of exercising their
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Summary Term Sheet
voting and other rights under the governing Limited Partnership Agreement.
Confidentiality will be subject to customary exclusions for required
governmental reporting; for example, the Nonprofit will be required to disclose
certain information regarding OpenAI LP on its IRS Form 990, which will be
available to the public.
OpenAI LP is empowered to enter into strategic investment agreements with
Strategic
companies that become Limited Partners subject only to the caveat that those
Investment
agreements must not clearly subvert the redemption waterfall described
Agreements
above nor clearly detract from the advancement of our mission.