OpenAI History, Founding, and Timeline

OpenAI: The Nonprofit That Became a Leading Enterprise Software Entity

In November 2022, OpenAI released ChatGPT as a free research preview. It was not intended as a full product launch, yet within five days, it had one million users. Within two months, it reached 100 million, making OpenAI one of the most significant technology companies in the world.

What OpenAI Actually Does

OpenAI trains and deploys large language models—AI systems that process and generate text, images, code, and increasingly audio and video. Its flagship product is ChatGPT, a conversational interface that uses these models to answer questions, write code, draft documents, and analyze information. OpenAI also offers access to its underlying models (GPT-4, o1, o3) via an API, allowing other companies to build their own products on top of them.

How OpenAI Makes Money

OpenAI's primary revenue source is subscriptions. ChatGPT Plus costs $20 per month, offering faster model access and higher usage limits. ChatGPT Team costs $30 per user per month with shared workspace features. Enterprise contracts are priced individually, typically based on scale and usage. The second major revenue source is the API, where developers and companies pay per token processed. A "token" is roughly 0.75 words; a single GPT-4 API call might use hundreds or thousands of tokens. At scale, this generates significant revenue from the thousands of companies that have integrated OpenAI's models into their own products.

The Microsoft Dependency

OpenAI's relationship with Microsoft is fundamental to its operations. Microsoft has invested over $13 billion since 2019 in exchange for approximately 49% of profits until its investment is recouped, exclusive right to deploy OpenAI's technology via Azure, and the ability to use OpenAI's models in its own products (Copilot, GitHub Copilot, Bing).

This arrangement gives OpenAI enormous compute capacity—training models the size of GPT-4 requires supercomputing infrastructure that would be difficult to build independently. But it also means OpenAI's unit economics are structurally tied to Microsoft's infrastructure pricing, and that a significant share of revenue passes through to Microsoft until the investment is recouped.

The Governance Crisis of 2023

In November 2023, OpenAI's board—which included safety researchers and academics—abruptly fired CEO Sam Altman. The stated reason was a loss of confidence in his candor. Within 48 hours, 95% of OpenAI's 770 employees threatened to resign and follow Altman to Microsoft. Within five days, the board reversed its decision and reinstated Altman.

The episode revealed that OpenAI's original governance structure—in which a nonprofit board had authority over the commercial entity—was challenged by the company's actual power dynamics. The aftermath: a restructuring into a for-profit benefit corporation, raising $6.6 billion at a $157 billion valuation. The safety mission that justified the original governance structure remained, while the mechanisms designed to enforce it were updated to reflect the company's scale.