• OpenAI says it has struggled to raise funds due to its nonprofit structure.
• The company just revealed its fundraising challenges in a letter to California's attorney general.
• OpenAI plans to restructure as a Public Benefit Corporation to attract investors.

OpenAI is one of the most well-funded startups in history, raising a massive $40 billion round led by SoftBank earlier this year.

But many investors have passed on the startup because it's controlled by a nonprofit and is unable to offer "easy-to-understand" equity, the AI giant revealed in a recent letter to California's attorney general.

"Many potential investors in OpenAI's recent funding rounds declined to invest," the May 15 letter reads.

"OpenAI's recent attempts at securing funding have demonstrated the challenges posed by the organization's existing structure," it adds.

OpenAI didn't respond to a request for comment. The letter was first reported on by the AI publication Obsolete. OpenAI submitted the May 15 letter in response to an April 9 petition from a coalition of nonprofits and other organizations that urged the California attorney general to block OpenAI's for-profit conversion plans. Business Insider obtained the letter from LatinoProsperity, one of the nonprofits leading the coalition.

Startups are typically highly reluctant to acknowledge fundraising challenges, so it's an unusual disclosure.

But OpenAI, which was last valued at $300 billion, isn't a typical startup: it was founded as a nonprofit and remains controlled by its board, creating a big fundraising hurdle.

In the letter, OpenAI says it was only "able to secure" investments by promising to change its structure. Indeed, a big chunk of its massive SoftBank round was conditioned on just that.

OpenAI is now trying to restructure its for-profit arm as a Public Benefit Corporation, similar to competitors like Anthropic. It has given up on plans to free itself from its nonprofit's control.

The May 15 letter also shows that OpenAI is worried about competitors who are "far better funded, conventional for-profit businesses."

Google, Meta, and other tech giants have pledged capital expenditures of over $300 billion in AI investments in 2025 alone. OpenAI mentioned such investments as "threats" to its mission, which risks that artificial general intelligence, or AGI, will be consolidated in the hands of a few powerful entities.

If OpenAI can't raise more money to compete with them, then its ability to ensure safe AGI will be "compromised," the letter states.

Orson Aguilar, the founding president of LatinoProsperity, remains skeptical of OpenAI's plans.

"OpenAI's response comes only after they reversed course on their for-profit plans, but they haven't offered anything new," he told Business Insider.

"The core questions remain: What is the true value of their charitable assets? Who are they accountable to? And how can a nonprofit claim independence when it's clearly entangled with corporate interests?"