OpenAI has $20 billion to win or lose in its race to become a for-profit

• OpenAI has raised $40 billion at a lofty $300 billion valuation.
• Securing $20 billion of that comes with a catch.
• The Japanese conglomerate needs to see OpenAI complete its for-profit restructuring first.

OpenAI just raised up to $40 billion at a $300 billion valuation — but around $20 billion of its funding comes with very long strings attached.

According to information released on Monday by SoftBank, the Japanese conglomerate headed by AI-obsessive Masayoshi Son, its investment is set to come in two separate closings. The amount in one of those depends on OpenAI completing its transition to a for-profit.

Here's how SoftBank sets out the — somewhat convoluted — terms.

The first closing would see OpenAI receive $10 billion this month, with funding directed toward its existing for-profit subsidiary, OpenAI Global — no strings attached. SoftBank said this $10 billion would be financed through borrowings from Mizhuho Bank and other financial institutions.

In the second closing, set for December, OpenAI is expected to receive up to $30 billion. But things get a little more complex when breaking down where that $30 billion will come from and on what terms.

Specifically, SoftBank is committing $22.5 billion along with $7.5 billion coming from a syndicate in the second closing, expected by the end of 2025, according to a source with knowledge of the deal. In the event the restructuring does not happen, SoftBank has the option to reduce the second part of its funding for the second closing to $10 billion, per the source. Business Insider understands that the syndicate is also contingent on OpenAI completing its for-profit restructuring.

So that means SoftBank is pledging a total of around $20 billion no matter what — and an extra $10 billion if OpenAI achieves its for-profit switch. Meanwhile, up to $10 billion may be syndicated out to co-investors in either scenario and across either close, according to SoftBank's announcement. While SoftBank says it has started talks with "major institutional investors," that funding isn't guaranteed.

OpenAI's structure until the end of 2024 involved having a for-profit controlled by a non-profit entity and a capped profit share for investors and employees, per details from the company.

Entering 2025, however, OpenAI said its structure would change as it seeks to "advance the mission of ensuring AGI benefits all of humanity." The new structure — a Delaware Public Benefit Corporation — loosely defines a firm seeking profit while aiming to deliver a positive social impact.

The shift to a new structure is not completed yet, and the process is facing a legal challenge from Elon Musk. For OpenAI, then, there's plenty still to do before the end of the year if it wants a significant third of the $30 billion tranche at stake in the second closing.

SoftBank, for its part, seems ready to still give OpenAI a whole lot of money, whether or not its for-profit conversion is completed by the end of the year.

The company, which is also partnering with OpenAI on the up to $500 billion Stargate project, said it recognized OpenAI as "the partner closest to achieving artificial general intelligence."

SoftBank first invested in OpenAI last October as part of a $6.6 billion funding round — one that valued the company at $157 billion.

That said, the company is holding off on going all in. At least until OpenAI has made the full shift toward a for-profit structure.

SoftBank's deal terms for its OpenAI investment were first reported by The Wall Street Journal.