Open Season At OpenAI

Dear reader,?

In just 24 hours, the future of generative AI is being questioned. The ouster of Sam Altman as CEO of OpenAI has not only caught the entire tech world off guard but serious questions are being asked about what happens to generative AI.?

But it’s not just Altman. OpenAI has also seen the departure of Greg Brockman after he was removed as the chairman of the board and then resigned soon after from his position as the president of what is considered the flagship AI company in the world.?

The leadership changes could potentially disrupt a host of startups and tech companies that have relied on OpenAI’s APIs, ChatGPT, and other applications.?

This Sunday, we look to answer what the dismissal of Altman, the cofounder of the $29 Bn AI behemoth, could mean for generative AI and for Indian startups that are using the company’s tools.?

But first, here are the top stories from our newsroom this week:?

• Doom And Taxes For RMG: In just a month, India’s real money gaming industry is feeling the heavy impact of the new GST regime on revenue as well as user spending
• Behind The Jio Stack: The grander vision of Reliance Jio around its various tech and digital businesses has become clearer over the past year. What does it mean for startups in the long run??
• IPO Season In 2024? Will startup IPOs be back on the table in 2024 as several prominent unicorns, including Swiggy and Ola Electric, look to take the public listing route

Inc42 Startup Spotlight

Calling all early stage startups – get discovered by India's top startup leaders, investors and operators.?Apply now?for a chance to get featured on Inc42!

OpenAI’s Stumbling Block

Before we dive in, here’s OpenAI’s official statement on Altman’s ouster: “Altman’s departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI.”

That’s a rather damning statement about the leadership at OpenAI. Now, reports indicate that Altman’s exit may have come following internal debates about the future of the company and the direction in which OpenAI’s technology was being taken.?

According to The Information, OpenAI employees had disagreements about whether the company was developing AI safely enough. Employees are said to have asked Ilya Sutskever, cofounder and board member at OpenAI, what was the reason behind Altman’s dismissal. Some wondered whether it was a “coup” or “hostile takeover” by some of the major investors in the company.

Sutskever, who is largely responsible for limiting societal harms from OpenAI’s technology and products, responded that the board was simply doing its duty to the mission of the nonprofit, “which is to make sure that OpenAI builds AGI that benefits all of humanity”.

Given that Altman’s dismissal comes on the heels of OpenAI’s DevDay, its developer conference, adds more weight to the theory that perhaps the board thought that the company’s gen AI development was going in the wrong direction.?

Replacing Altman is CTO Mira Murati, who has been named the interim CEO. She told employees that OpenAI is steadfast in its mission to develop safe and beneficial AI tools and artificial general intelligence (AGI). AGI refers to computer programmes and software that can mimic human reasoning.

Safe and responsible AI development is high on the agenda for lawmakers across the world as well. India’s Union IT Minister Ashwini Vaishnaw said that the government is discussing ways with tech giants to combat the rising threat of deepfakes.?

Prime Minister Narendra Modi has urged the media to educate people about deepfakes. Earlier this week, YouTube announced that it requires creators to disclose AI-generated content or videos and introduced a mechanism for users to report suspected deepfakes or generative videos.?

Many consider AGI to be the holy grail of AI, but others have warned about the potential catastrophic consequences of developing the AGI without any safety nets, including rampant creation of doctored videos, fabricated content and seemingly authentic misinformation.?

And OpenAI’s DevDay announcements in early November only served to exacerbate some of these fears.

Startups On Generative AI Trail

During OpenAI's DevDay on November 6, the company released GPT-4 Turbo, which increases the context length for prompts by 16x compared to GPT-4. It also introduced new speech synthesis and image processing features, as well as copyright protection for API and ChatGPT Enterprise Edition.

In other words, OpenAI’s various products have rapidly gained maturity in the past year. Over 100 Mn weekly active users are now using OpenAI tools, with 2 Mn developers using the API solutions for custom software. These numbers underscore the impact that OpenAI has had on the tech landscape.?

As seen in Inc42’s latest report on the generative AI opportunity in India, we can see more than two dozen startups are leveraging GenAI tools, and many of them are leveraging OpenAI’s APIs and ChatGPT offerings. These startups will now wonder whether OpenAI’s leadership changes will disrupt their existing products and AI-centric features.?

While that is an unanswered question for now, several industry experts raised concerns about the announcements at DevDay, as we reported.?

There have been apprehensions about how OpenAI is cornering the resources in the AI industry in many ways, which allowed it to take great strides at the expense of smaller AI startups. Many believe that the new tools forced the industry to embrace OpenAI over competitors since the platform had gained rapid maturity. It creates an artificial dependency on OpenAI, which is not good for innovation at large, or OpenAI’s early principles.

What Could Have Pushed Altman Out?

Altman founded OpenAI with Elon Musk and others as a non-profit in 2015 but launched a for-profit arm in 2019. The initial goal was to create an AI that would benefit humanity.

Following the launch of ChatGPT, a chatbot app for consumers, OpenAI not only broke through into the mainstream but has also become the dominant company in AI. According to reports, Altman claimed OpenAI was generating $1.3 Bn in ARR.?

Altman didn’t own any equity in OpenAI and neither did he have voting rights, which opened him up to being dismissed without notice. Now many are comparing him to Steve Jobs, who was also fired from Apple in 1985, following a tussle with the board.

But it must be noted that OpenAI wasn’t without its critics and this could very well have played a role too. Earlier this year, OpenAI came under heavy criticism from published authors and researchers.?

An open letter signed by 8,500+ authors urged companies such as ChatGPT, Google-run Bard and Meta’s LLaMa to explain why their copyrighted works were used for developing large language models, without permission or compensation. These authors accused companies of profiteering off of copyrighted works. It’s very possible that companies such as OpenAI are opening themselves up to legal action for using copyrighted work for training sets.?

Interestingly, just days before Altman’s removal as CEO, OpenAI paused new subscriptions and signups for ChatGPT Plus, which allows customers to create their own version of ChatGPT. This was a major selling point for OpenAI, leading to several businesses signing up and using GPT to create custom chatbots.?

Many are also questioning the role of Microsoft, which does not have a board representative at OpenAI, and whether the Satya Nadella-led company is poised for a major acquisition. Speculation is rife about Microsoft pulling the strings in the background to have Altman removed.?

Interestingly, Microsoft, which has invested over $10 Bn in OpenAI, only learned about the board’s decision to remove Altman and Brockman, a few minutes before the announcement was made official. This further points to an internal issue at OpenAI, but again, this is just speculation at the moment, given that the actual reason for Altman’s dismissal has not yet been revealed.?

So, what will Altman do next? The OpenAI cofounder is the largest shareholder in Humane, the company that’s looking to make a ChatGPT-powered mobile device called the Humane AI Pin. Will Altman look to shape this potential gamechanger and disrupt smartphone giants?

OpenAI’s Impact On Indian Startups

There’s a lot of pressure on interim CEO Murati to lead the company beyond this current kerfuffle and answer questions about how the company is looking to tackle the potential pitfalls of rampant AI development.?

Interestingly among Indian startup founders, the debate has turned towards the role of the board and how much control founders have in the boards. Altman, who was in India earlier this year, was bullish about investing in Indian startups working on AI.

Manish Maheshwari, former Twitter India head and cofounder of AI startup Fanory.ai, said that Altman’s dismissal is likely to revive debates about board members, transparency in leadership changes and how much say a board has on changing the leadership.?

Beyond the boardroom considerations, entrepreneurs are wondering about the strategic direction for OpenAI under Murati’s leadership. One founder compared the development to how fintechs adapted to the need for multi-bank partnerships.?

“ChatGPT was a gift for startups but it would be unwise to rely on just one company for AI. Now startups have to decide how to remain flexible and potentially transition from OpenAI to any other alternatives,” according to the cofounder of a generative video startup.?

Others pointed out that Altman was an entrepreneur with a vision and it will be hard to replace this without hampering the progress of the platform. The changes could also spur the development of other LLMs in the global market.?

OpenAI’s loss might just prove to be a shot in the arm for competition such as Bard or LLaMA. Altman was by far the biggest pull at OpenAI in the market. Can OpenAI compete with big tech without the weight of its name?

In Focus: Startup Founder Salaries

The two-year-long funding winter has resulted in layoffs, pay cuts and a lot of heartache for startup employees. But what about startup founders??

Inc42 is back with yet another tracker and this time we are looking to answer the question of who’s the highest-paid startup founder in India. Check out our ‘Founder Salaries FY23 Tracker’ to see the answer and get an idea of what founders get paid these days.?

See Our Founder Salary Tracker

Sunday Roundup: Tech Stocks, Funding & More

• Funding Slows To A Crawl: Following two weeks of steady growth in funding, this past week saw a chill hit startup funding once again, with just $44 Mn raised by Indian startups
• EOW Vs Ashneer: Delhi Police’s Economic Offences Wing has summoned former BharatPe cofounder Ashneer Grover and wife Madhuri Jain Grover in connection with the alleged fraud at the fintech giant
• UPI Culling: The NPCI has asked banks and payment apps to deactivate UPI IDs and numbers that have remained dormant for over a year as a security measure

• Ola Electric Eyes IPO: Putting its IPO plans into full throttle, EV unicorn Ola Electric has converted to a public company and is likely to list next year
• Nykaa On A Roll: Nykaa jumped 11% week-on-week to touch INR 170 during Friday’s intraday trade last week, and also hit an 11-month high?

We’ll be back next Sunday with another roundup of the week’s biggest stories and our weekly brief on the most pressing debates in the startup ecosystem. Stay tuned!?

Till next week,?

Nikhil Subramaniam