Analyzing the donors behind OpenAI's over $133 million, how much did Musk donate?

Source: Techcrunch

Author: Mark Harris

Compilation: Babbitt

It's no secret that Elon Musk has been deeply disappointed with OpenAI since he stepped down from its board in February 2018, culminating in an open letter calling for the organization to put a moratorium on developing more powerful systems.

“It does seem weird that something can be non-profit, open source, and then somehow become for-profit, closed source,” Musk said in an interview with CNBC after Tesla’s shareholder meeting on Wednesday. It’s like, let’s say you funded an organization to save the Amazon rainforest, but they turned into a timber company, cutting down the forest and selling it for money.”

The strength of Musk's criticism rests on the fact that he helped found the AI research organization. But exactly how much support he has given, even Musk himself seems unsure.

"I'm still baffled by how a nonprofit I donated about $100 million to somehow turned into a $30 billion for-profit. If it's legal why isn't everyone doing it What?" he tweeted in mid-March.

A week later, he complained again on Twitter: "I donated my first $100M when OpenAI was a non-profit with no ownership or control."

The $100 million figure has been widely reported as fact. But in the same CNBC interview yesterday, Musk abruptly changed his tune. When asked how much he has donated to OpenAI, he replied: "I'm not sure about the exact number, but it's about $50 million."

So, what has changed in the past eight weeks?

After his original tweet in March, TechCrunch began investigating the funding behind the original OpenAI nonprofit, including Musk's donation. Our analysis of filings with the IRS and state regulators suggests that it was unlikely Musk would have provided the nonprofit with the $100 million he initially claimed.

In fact, while the source of much of OpenAI's funding is unclear, only about $15 million in donations in the document can be clearly traced back to Musk.

When we showed Musk's lawyers the analysis and asked for details of his financial backing, TechCrunch did not hear back from the latter.

The tax filings also revealed previously unreported details about OpenAI, including the level of investment from LinkedIn co-founder Reid Hoffman, free Teslas for OpenAI's early engineers, and a possible push for the company to accept Microsoft's (Microsoft) Soaring Computing Fees for $1B Investment.

did not reach the billion dollar investment

The financial aspects of OpenAI have been murky since AI researchers Greg Brockman and Ilya Sutskever announced the organization in December 2015. The goal of OpenAI, they wrote, is to "advance digital intelligence in ways that are most likely to benefit all of humanity, unconstrained by the need to generate a financial return." The nonprofit will be co-chaired by Musk and Sam Altman.

The blog claims that Altman, Musk and Brockman will join Reid Hoffman, Peter Thiel, Amazon, Infosys, Y Combinator partner Jessica Livingston and YC Research to donate to the new 501(c)3 organization.

"These funders collectively committed $1 billion," they wrote. The following year, Wired magazine officially reported OpenAI as a "billion-dollar effort," a figure that was then widely shared.

But "commitment" is not the same as "actual donation". At least one named donor, YC Research, never donated a dollar, according to federal tax filings. The total amount donated to OpenAI's nonprofits from its inception to 2021 is just $133.2 million. The vast majority of that funding came before the 2019 launch of OpenAI's for-profit arm, the nonprofit itself is now largely defunct. It received just $3,066 in donations in 2021.

Musk's share

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

In 2016, the Musk Foundation donated $10 million to another Altman-linked nonprofit, YC.org. In turn, YC.org donated $10 million to OpenAI. A spokesperson for OpenAI explained in 2019 that the circuitous route was taken because of delays in establishing OpenAI's tax-exempt status with the IRS.

The $10 million donation remains Musk's only publicly disclosed cash contribution to OpenAI. However, YC.org's audited financial statements filed with California's charity regulator for 2020 show that $15 million of the organization's 2016 revenue came from a single donor.

Given YC's revenue totaled $16.6 million for the year, Musk is likely to be that contributor. YC then gave OpenAI another $16 million in 2017, at least $5 million of which may have belonged to Musk.

The only other Musk-related donations were a $248,295 Tesla car to OpenAI in 2017, followed by a $14,105 gift of car upgrades in 2018. An audited financial statement noted that the vehicles were provided to employees as compensation.

However, there are also ways to donate to nonprofits anonymously. The wealthy can disguise their gifts by sending money through so-called donor-advised funds (DAFs). The Musk Foundation donated $12.4 million to a DAF called the Fidelity Investments Charitable Gift Fund in 2017 and $6.3 million in 2018.

The foundation subsequently donated $7.8 million to OpenAI between 2018 and 2020. It's impossible to tell whether the money belonged to Musk -- the fund has many donors and tens of billions of dollars in assets -- but it's also impossible to rule it out.

Companies and individuals can donate directly to nonprofits without disclosing their identities. Musk likely did this in 2016 by donating an additional $5 million to YC.org. Maybe he just increased his OpenAI donation to $50 million or $100 million the same way?

Representatives for Musk were alerted to the TechCrunch report a few weeks ago but did not respond to a request for comment. The only way to be sure of Musk's donation, then, is to count the gifts to OpenAI from other donors and see how much is left.

Other Founders' Shares

OpenAI's 2016 IRS filing shows contributions from Sam Altman, now OpenAI's CEO. He lent the young organization $3.75 million to get it started—and then forgave the full amount of the loan, including interest, giving a total of $3,784,637.

Hoffman donated $1 million to YC in 2016 using his own foundation, Aphorism, and the group appears to have transferred that money to OpenAI in 2017. Aphorism then donated another $5 million directly to OpenAI in 2017 and 2018.

Amazon and Microsoft have donated at least $800,000 in cloud computing services, and Infosys confirmed to TechCrunch that it has. None of the companies will be specific about how much they donate. There were other in-kind corporate gifts, including a $129,000 Nvidia high-performance computer, and software and services from a dozen other companies.

OpenAI would not share details of Brockman's or Livingston's donations. Likewise, there is no record of Peter Thiel providing any funding to OpenAI, nor did his venture capital firm respond to requests for information. However, the Donor's Trust, a DAF favored by conservatives and liberals alike, donated $100,000 in 2018, and Thiel is among them.

In 2017, Open Philanthropy announced a $30 million donation to OpenAI, split into three $10 million grants in 2017, 2018, and 2019 through a nonprofit controlled by Facebook co-founder Dustin Moskovitz. Holden Karnofsky, CEO of Open Philanthropy, has won a seat on OpenAI's board.

The group wrote at the time: "We see a number of risks, both from the unintended consequences of the use of artificial intelligence and from deliberate misuse. We believe that, as a philanthropic organization independent of academia, industry and government, we may be in a position to support efforts to reduce these risks."

Computing costs

As OpenAI scaled up, its costs began to rise rapidly. In addition to hiring superstar AI researchers with multimillion-dollar salaries, OpenAI's computing costs have grown exponentially, and in-kind computing donations are just a drop in the bucket. OpenAI spent $2.3 million on cloud computing in 2016, $7.9 million in 2017 and $30.6 million in 2018, according to its tax filings.

In February 2018, OpenAI switched its cloud provider from Amazon to Google and signed an agreement to invest at least $63 million over the next two years. That same month, Musk left OpenAI's board. Those events may not be connected, though Semafor recently reported that Musk believed OpenAI was falling behind Google and left after fellow founders rejected his offer to run the nonprofit.

According to OpenAI insiders contacted by Semafor, Musk stopped donating at the time, prompting the spin-off of a for-profit OpenAI LP that welcomes outside investors. By the summer of 2019, OpenAI had spent Google's computing dollars and was looking for another deal.

In July, Microsoft invested about $1 billion in the new for-profit entity -- about half of that funding in the form of credit for its own Azure cloud computing service.

Musk has publicly condemned OpenAI's transition to a for-profit business.

Its other big donor, Moskovitz, also seemed unhappy with the effort. In a March talk at the Philanthropy Forum, he posted: "I hope we're actually slowing down the acceleration (OpenAI's transition to a for-profit business) by participating, but I'm skeptical about the notion that we're a part of it."

Not every founding donor feels the same. Reid Hoffman's Aphorism Foundation invested $50 million in OpenAI's for-profit venture in 2018, a previously undisclosed amount. Defending the philanthropic investment, Aphorism wrote that the new business aims to "make AI technology available to the public under appropriate open-source licenses for the benefit of the public."

Currently, none of the latest versions of OpenAI's Chat-GPT chatbot is open-sourced.

With Musk's departure, OpenAI welcomed six new board members, each of whom also became donors, according to the group. Neither they nor OpenAI would disclose how much they donated. But by the following year, OpenAI received its final major public gift: $30 million from a DAF called the Silicon Valley Community Foundation. There is no record that Musk or his foundation ever made a donation to the DAF.

at the lowest limit

Adding up all non-Musk contributions to OpenAI, including funding from the Silicon Valley Community Foundation, totals $75.8 million of the $133.2 million. That means Musk can donate up to $57.4 million to OpenAI — a far cry from the $100 million he initially claimed, but close to the figure he mentioned Wednesday.

However, this figure assumes that three founding donors (including Thiel), six new donors, and multiple corporate backers like Infosys donate anything at all.

And in Musk's larger financial plan, the difference of $35 million, $50 million or even $85 million is nothing more than a rounding error.

Musk recently valued Twitter at just $20 billion, and the world's second-richest man has lost more than $100 million a day since buying the company last fall.