Elon Musk used to say he put $100M in OpenAI, but now it’s $50M: Here are the receipts

It’s no secret that Elon Musk has been deeply frustrated with OpenAI since stepping down from its board in February 2018, culminating in an open letter calling for the organization to pause work on more powerful systems.

“It does seem weird that something can be a nonprofit, open source, and somehow transform itself into a for profit, closed source,” Musk said in a CNBC interview Wednesday, following a Tesla shareholder’s meeting. “This would be like, let’s say you funded an organization to save the Amazon rainforest, and instead they became a lumber company, and chopped down the forest and sold it for money.”

The power of his criticism hinges on the fact that Musk helped to launch the AI research organization. But exactly how much support he gave, even Musk seems unsure about.

“I’m still confused as to how a non-profit to which I donated ~$100M somehow became a $30B market cap for-profit. If this is legal, why doesn’t everyone do it?” he tweeted in mid-March. A week later he complained on Twitter again: “I donated the first $100M to OpenAI when it was a non-profit, but have no ownership or control.”

The $100 million figure has been widely reported as fact. But in the same CNBC interview yesterday, Musk abruptly shrank his claim. When asked how much he had donated to OpenAI, he replied: “I’m not sure the exact number but it’s some number on the order of $50 million.”

So what changed in the last eight weeks?

Following his original tweets in March, TechCrunch began an investigation into the funding behind the original OpenAI non-profit, including Musk’s contributions. Our analysis of documents filed with the IRS and a state regulator show that Musk could not have given the non-profit the $100 million he originally claimed.

In fact, while the source of much of OpenAI’s funding remains unclear, filings contain only around $15 million of donations that can be traced definitively back to Musk.

TechCrunch did not receive a response from Musk’s lawyer when presented with our analysis and asked for details of his financial support.

The tax filings also reveal previously unreported details about one of the most valuable and well-known technology ventures operating today, including the level of investment by Reid Hoffman, free Teslas for early OpenAI engineers, and the sky-rocketing computing bill that may have prompted it to take a $1 billion investment from Microsoft.

Nowhere near a billion-dollar effort

The financial side of OpenAI has been murky ever since the organization was announced by AI researchers Greg Brockman and Ilya Sutskever in December 2015. They wrote that OpenAI’s goal was to “advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.” The non-profit would be co-chaired by Musk and Sam Altman, co-founder of Y Combinator.

The blog claimed that Altman, Musk and Brockman would donate to the new 501(c)3, along with Reid Hoffman, Peter Thiel, Amazon, Infosys, Y Combinator partner Jessica Livingston and YC Research, another non-profit spun out of the startup accelerator. “In total, these funders have committed $1 billion,” they wrote. The next year, Wired duly reported OpenAI as a “billion dollar effort,” and that figure was subsequently widely shared.

But “committed” is not the same as “actually donated.” According to federal tax filings, at least one of the named donors, YC Research, never gave a single dollar, and the total amount donated to OpenAI’s non-profit from its inception through 2021 was only $133.2 million. The vast majority of those funds arrived before the launch of OpenAI’s for-profit arm in 2019, and the non-profit itself is now largely defunct. It received just $3,066 of donations in 2021.

Musk’s share

So how much of OpenAI’s $133 million did Musk donate? A good place to start is with his own 501(c)3 organization, the Musk Foundation.

In 2016, the Musk Foundation made a $10 million donation to yet another non-profit associated with Altman, called YC.org. YC.org, in turn, made a $10 million donation to OpenAI. The reason for this roundabout route, explained an OpenAI spokesperson in 2019, was a delay in establishing OpenAI’s tax-exempt status with the IRS.

That $10 million donation remains the only publicly disclosed cash contribution from Musk to OpenAI. However, an audited financial statement filed by YC.org with California charity regulators in 2020 reveals that $15 million of the organization’s 2016 revenue came from a single contributor. Given that YC’s revenue for the whole year totaled $16.6 million, Musk is very likely to have been that contributor. YC subsequently gave OpenAI another $16 million in 2017, of which at least $5 million was likely Musk’s.

The only other donation that can be tied to Musk is a previously unreported gift to OpenAI in 2017 of $248,295 worth of Tesla vehicles, and a subsequent donation in 2018 for $14,105 in vehicle upgrades. An audited financial statement notes that the vehicles were provided to employees as compensation.

However, there are also ways to give money to a non-profit anonymously. Rich individuals can cloak their gifts by funneling money through so-called donor advised funds (DAFs). The Musk Foundation donated $12.4 million in 2017, and $6.3 million in 2018, to a DAF called Fidelity Investments Charitable Gift Fund. That fund then donated $7.8 million to OpenAI between 2018 and 2020. There is no way to tell whether any of that money was Musk’s – the Fund has many donors and tens of billions of dollars in assets – but it is impossible to rule out.

Companies and individuals can donate to non-profits directly without their identities being made public. Musk likely did this with the additional $5 million gift to YC.org in 2016. Perhaps he simply topped up his OpenAI donations to $50 or $100 million the same way?

Several weeks ago, Musk’s representative was presented with TechCrunch’s reporting but did not reply to requests for comment. The only way to put a limit on Musk’s contributions was to count up the gifts to OpenAI from other donors and see how much was left over.

The other founders’ share

Sam Altman, now OpenAI’s CEO, made a contribution, the organization’s 2016 IRS filing shows. He loaned the young organization $3.75 million to get it started — and then forgave the full amount, with interest, for a total gift of $3,784,637.

Hoffman used his own foundation, Aphorism, to give $1 million to YC in 2016, which the organization seems to have passed on to OpenAI in 2017. Aphorism then followed up with a $5 million donation direct to OpenAI in 2017 and 2018.

Amazon and Microsoft donated at least $800,000 in cloud computing services, and Infosys confirmed to TechCrunch that it had made a donation. None of the companies would put a dollar amount on their contributions. There were other corporate gifts in-kind, including a $129,000 high performance computer from Nvidia, as well as software and services from over a dozen other companies.

OpenAI would not share details of contributions made by Brockman or Livingston. Likewise, there is no record of Peter Thiel providing any funds to OpenAI, nor did his VC firm reply to a request for information. However, there was a modest $100,000 donation in 2018 from Donor’s Trust, a DAF favored by conservatives and libertarians, among whom Thiel has been counted.
In 2017, Open Philanthropy announced a $30 million donation to OpenAI, which was delivered in three $10 million gifts in 2017, 2018 and 2019, through a non-profit controlled by Facebook co-founder Dustin Moskovitz. Open Philanthropy’s CEO, Holden Karnofsky, was given a seat on OpenAI’s board.

“We see some risks, both from unintended consequences of AI use, and from deliberate misuse), and believe that we — as a philanthropic organization, separate from academia, industry, and government — may be well-placed to support work to reduce those risks,” the organization wrote at the time.

The cost of computing

As OpenAI scaled, its costs began rising fast. On top of employing super-star AI researchers with multi-million dollar salaries, OpenAI’s computing bill had increased exponentially and in-kind computing donations were just a drop in the bucket. According to its tax filings, OpenAI spent $2.3 million on cloud computing in 2016, $7.9 million in 2017, and $30.6 million in 2018.

In February 2018, OpenAI switched cloud providers from Amazon to Google, signing an agreement to spend at least $63 million with the tech giant over the next two years. Musk left OpenAI’s board the same month. The events may be unconnected, although Semafor reported recently that Musk thought OpenAI was slipping behind Google, and walked away after the other founders rejected his offer to run the nonprofit.

According to insiders at OpenAI contacted by Semafor, Musk stopped making donations at that point, precipitating the spin-out of a for-profit OpenAI LP that would welcome outside investors. By the summer of 2019, OpenAI had already spent its Google computing money and was looking for another deal.

In July, Microsoft invested around $1 billion in the new for-profit entity — with about half the funds in the form of credits for its own Azure cloud computing service.

Musk has publicly decried OpenAI’s transition to a for-profit business.

Its other big donor, Moskovitz, also seems to have soured on the effort. In a conversation on a philanthropy forum in March, he posted: “My hope is we actually slowed acceleration by participating but I’m quite skeptical of the view that we added to it.”

Not every founding donor felt the same. Reid Hoffman’s Aphorism foundation invested a previously unreported $50 million in OpenAI’s for-profit venture in 2018. Aphorism justified the charitable investment by writing that the new business aimed to provide AI “technology to the public through open source licensing where appropriate to benefit the public.”

None of the recent versions of OpenAI’s Chat-GPT chatbot have been open source.

With Musk’s departure, OpenAI welcomed six new board members, each of whom also became a donor, according to the organization. Neither they nor OpenAI would share how much they gave, but the next year, OpenAI received its last major public gift: $30 million from a DAF called the Silicon Valley Community Foundation. There is no record of Musk or his foundation ever donating to that DAF.

The bottom line

Adding up all the non-Musk contributions to OpenAI (including the Silicon Valley Community Foundation money) gives a total of $75.8 million, out of $133.2 million. That means the most Musk could have donated to OpenAI would likely have been $57.4 million — a far cry from the $100 million he originally claimed, but close to the figure he mentioned Wednesday.

However, this number assumes that three founding donors (including Thiel), six newer donors, and multiple corporate supporters like Infosys, gave nothing at all.

In the bigger scheme of Musk’s finances, a discrepancy of $35 million, $50 million or even $85 million is little more than a rounding error. With Musk recently valuing Twitter at just $20 billion, the world’s second richest person has lost well over $100 million every day since buying the company last fall.

Elon Musk used to say he put $100M in OpenAI, but now it’s $50M: Here are the receipts by Kirsten Korosec originally published on TechCrunch

from TechCrunch https://ift.tt/rN0SDTc