Info on OpenAI’s “profit cap” (friends and I misunderstood this so probably you do too):
In OpenAI’s first investment round, profits were capped at 100x. The cap for later investments was neither 100x nor directly less based on OpenAI’s valuation — it was just negotiated with the investor. (OpenAI LP (OpenAI 2019); archive of original.[1])
In 2021 Altman said the cap was “single digits now” (apparently referring to the cap for new investments, not just the remaining profit multiplier for first-round investors).
Reportedly the cap will increase by 20% per year starting in 2025 (The Information 2023; The Economist 2023); OpenAI has not discussed or acknowledged this change.
Edit: how employee equity works is not clear to me.
Edit: I’d characterize OpenAI as a company that tends to negotiate profit caps with investors, not a “capped-profit company.”
economic returns for investors and employees are capped (with the cap negotiated in advance on a per-limited partner basis). Any excess returns go to OpenAI Nonprofit. Our goal is to ensure that most of the value (monetary or otherwise) we create if successful benefits everyone, so we think this is an important first step. Returns for our first round of investors are capped at 100x their investment (commensurate with the risks in front of us), and we expect this multiple to be lower for future rounds as we make further progress.
Info on OpenAI’s “profit cap” (friends and I misunderstood this so probably you do too):
In OpenAI’s first investment round, profits were capped at 100x. The cap for later investments was neither 100x nor directly less based on OpenAI’s valuation — it was just negotiated with the investor. (OpenAI LP (OpenAI 2019); archive of original.[1])
In 2021 Altman said the cap was “single digits now” (apparently referring to the cap for new investments, not just the remaining profit multiplier for first-round investors).
Reportedly the cap will increase by 20% per year starting in 2025 (The Information 2023; The Economist 2023); OpenAI has not discussed or acknowledged this change.
Edit: how employee equity works is not clear to me.
Edit: I’d characterize OpenAI as a company that tends to negotiate profit caps with investors, not a “capped-profit company.”
^