Breaking news: OpenAI engineers earn $900,000 a year! Sam Altman creates special equity to give employees "painting cakes"

**Source:**Xinzhiyuan

Guide: As the hottest and most mysterious AI start-up company today, what is the salary structure of OpenAI? Reporters from foreign recruitment websites revealed the secret exclusively for us.

The salary structure of OpenAI employees has always been a mystery. OpenAI has always been tight-lipped about how employee compensation works and how it is evaluated.

Recently, the salary website Levels.fyi dug out according to various sources: the annual salary of OpenAI software engineers is as high as 925,000 US dollars!

However, it is worth noting that the $925,000 does not seem to be the final price.

As for another mystery - why doesn't OpenAI want to go public?

Sam Altman, founder and CEO, said: We have a strange structure called "capped-profit".

This hybrid form of "profit capping" refers to the fact that a company is allowed to raise outside funding, but the company places a limit or cap on the amount of profit it can earn, designed to ensure that the company's focus is on serving customers and the greater good Contribute, not maximize profits.

(Are there really companies in the world that do not pursue profit maximization?)

In a long article, a reporter from Levels.fyi exclusively revealed to us how OpenAI’s unique equity compensation works.

Software Engineer Annual Salary $925,000

Recently, the salary website Levels.fyi has pieced together some exclusive information about OpenAI’s salary model through internal channels (such as offering salary negotiation services for people applying for OpenAI).

It can be seen that OpenAI's software engineer has an annual salary of $925,000.

Among them, the basic salary is $300,000, and the remaining $625,000 is "equity."

The "equity" will be issued in 4 years. If there is no accident, you can get a total of 2.5 million US dollars.

According to rough statistics, except for software engineers, the base for other positions ranges from 100,000 to 450,000.

OpenAI's unique equity compensation structure

Note that on the surface, the annual salary of OpenAI software engineers is $925,000, but this is not the amount at hand.

Among the 900,000+ annual salary, the salary of 300,000 US dollars is easy to understand.

The other 2/3 of the "equity" is OpenAI's original "Profit Participation Units" (PPU).

To put it simply, this is the equity incentive given to employees by OpenAI. The PPU worth 625,000 US dollars may eventually bring 10 times the cash compensation to employees, which is 6.25 million US dollars.

So, this $925,000 job could turn into $6.55 million one day in the future.

Of course, the 625,000 may end up being worthless.

**What is the PPU? **

What is OpenAI's special "equity" - Profit Participation Units?

Literally, it is the unit that participates in the distribution of profits.

The core value of PPU is to be able to share the profits generated by OpenAI.

This means that one day in the future, if an investor wants to participate in sharing the profits of OpenAI, he will spend money to buy PPU from the employees who hold PPU.

In this sense, PPU is very similar to traditional stocks.

However, OpenAI leaders such as Sam Altman have repeatedly mentioned on various occasions that OpenAI will not be listed in the future.

If it is not listed, who has the final say on how much the "equity" in the hands of employees is worth?

Through what channels can investors purchase these "equity shares" so that employees can withdraw at a profit?

So it sounds like the "equity" issued to employees by OpenAI seems to be a pie that can never be valued or cashed out?

According to the information collected by Levels.fyi, when OpenAI sends Offers to employees who are ready to join, OpenAI will introduce the value of this PPU to employees.

These PPUs are distributed to employees free of charge (25% per annum) on average over 4 years and do not require employee purchases.

Its value is determined according to a company's internal guidelines and valuation tools.

Employees who hold PPU can sell PPU to obtain cash when external investors invest in OpenAI.

However, during the first two years of obtaining PPU, employees are not allowed to sell, and the selling price cannot exceed 10 times the internal valuation.

**How are the values of these PPUs calculated? **

OpenAI has an internal valuation tool to determine the value and growth of PPU, according to employees who are approached by Levels.fyi who are preparing to join OpenAI.

According to OpenAI's plan not to go public, the specific value and value changes of PPU will not be known to the public.

And because the number of PPU shares and the number of PPU shares obtained by employees are not disclosed.

Therefore, employees only know the value of their PPU, but cannot know the specific share of PPU they hold.

But generally speaking, the change in the value of PPU will be directly linked to the valuation of the company by external investors.

In the latest financing, investors valued OpenAI at $27 billion to $29 billion.

However, some employees who are preparing to join OpenAI revealed to Levels.fyi that OpenAI also told them that the value of PPU is based on OpenAI's ultimate profitability.

If profits cannot be realized, the value of PPU is at risk of being zeroed.

**How to redeem PPU into cash? **

According to Levels.fyi, when OpenAI is financing, employees can sell the PPU they hold.

In a recent funding round earlier this year, early OpenAI employees were able to sell their PPUs.

But when the next OpenAI financing will happen, it is up to the company and management to judge.

**Does OpenAI have other benefits? **

It's unclear if OpenAI is offering any new or additional PPUs for those nearing the profit cap or beyond the 4-year vesting period, but it's safe to assume that it must have provided other benefits to employees as well.

And the reporter also discovered an old position at OpenAI called “Director of Equity Management.”

One of the responsibilities of this position is to "supervise the management of employee equity, including the issuance, attribution and tracking of profit participation units." This is the only relevant information that can be found online so far, and it is no longer displayed.

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Note that the annual salary for this position ranges from $180,000 to $285,000. It seems that when OpenAI released the recruitment information, the annual salary announced by the public did not include PPU.

In addition to standard medical, dental, and mental health benefits, they provide the following services:

• 401(k) plan, 4% match
• Unlimited vacations and 18+ company holidays per year
• Paid parental leave (20 weeks) and family planning support
• Annual learning and development stipend ($1,500 per year)

In the end, the reporter emphasized that although OpenAI's quotation seems high, because of the chaotic nature of the PPU, it is difficult for OpenAI's salary to be compared with that of major technology companies such as Apple.

**What is the "Profit Cap" model? **

Analyzing here, we can understand OpenAI's salary structure as:

The fixed basic salary issued by the company + the variable salary paid by the investor through the purchase of PPU.

But if OpenAI is not listed, why should investors buy OpenAI's "equity"?

This involves OpenAI's architecture and commitment to investors.

OpenAI framework

In 2019, OpenAI changed from a non-profit organization to a "profit cap" model and continued to raise funds due to the continuous burning of money and operating difficulties.

That is, OpenAI=OpenAI Non profit (non-profit part) + OpenAI LP (profit partnership)

Why switch to this mode?

OpenAI's blog describes it like this——

The basic idea behind OpenAI LP is that if we succeed in our mission, investors and employees can earn capped returns, which allows us to raise investment capital and attract employees with startup-like equity.

But any returns beyond that amount — which, if we succeed, are expected to generate orders of magnitude more value than we owe OpenAI LP’s investors or employees — go to the original OpenAI non-profit entity.

In other words, the source of equity that OpenAI uses in exchange for external investment and the employer of most of its employees is OpenAI LP.

In the future, if OpenAI makes money, investors will obtain a return on investment based on the PPU share obtained by their own investment, with a cap of 10 times the PPU value.

This is the most direct reason for driving external investors to invest in OpenAI.

Such an architecture satisfies OpenAI's own need for a large amount of financing in the development process.

At the same time, there is no need to worry about the founder losing control of OpenAI because he has transferred too much equity to investors.

This ensures that OpenAI can continue to develop as a non-profit organization according to its original intention.

Commitment to Investors

According to Fortune's report, in the investment agreement between OpenAI and Microsoft, the investment return on investment is divided into four stages:

OpenAI's profit distribution can be divided into four stages:

1. The profit of the enterprise first allows the first investors led by Musk to recover the investment of 1 billion U.S. dollars, and then withdraw.

2. 75% of subsequent OpenAI profits will be allocated to Microsoft until Microsoft recovers its $13 billion investment.

3. After OpenAI's profit hit $92 billion, Microsoft's stake dropped to 49%. The rest of the profits are shared among other venture investors and OpenAI employees.

4. When the profit reaches 150 billion US dollars, the equity of Microsoft and other venture investors will be transferred to OpenAI's non-profit fund for free.

listed or not listed, is a question

Since the launch of ChatGPT in November last year, OpenAI has been making headlines in media around the world, and was even invited by the White House to discuss artificial intelligence legislation with giants such as Google and Microsoft.

Recall that in 2015, when OpenAI was first established, it was still a "non-profit organization".

In 2019, OpenAI officially turned into a for-profit startup, receiving $1 billion in investment from Microsoft. Musk was also very indignant about this, thinking that it was inconsistent with his business philosophy, and quit the founder team angrily.

Today, with the large-scale model hurricane detonated by ChatGPT, OpenAI has raised another US$10 billion from Microsoft, and its valuation is close to US$30 billion.

At the Abu Dhabi conference in early June, Sam Altman said again: "When we develop superintelligence, we may make some decisions that will be very strange to most investors. I don't want to be sued by the open market, Wall Street, etc. ...so we will not go public for the time being, there is no such plan.”

Recently, an internal meeting that Sam Altman participated in revealed that OpenAI is currently severely limited by GPUs, and it costs tens of millions of dollars to train large models, not to mention that hundreds of millions of users of ChatGPT are consuming massive computing resources every day.

It is far from enough to choose not to go public, just to hold on to Microsoft's thigh.

And if you insist on not going public, you can pay more attention to independence, and you don't have to be too constrained by the capital market and commercial profits. It also reflects OpenAI's original intention to ensure that research results benefit the world.

From 2015 to 2023, whether it is a non-profit organization at the beginning of its establishment or a for-profit start-up company today, OpenAI's goal has always been the same-to develop general artificial intelligence (AGI) "in a way that is most likely to benefit the entire human race" .

It remains to be seen whether OpenAI can benefit its own employees before benefiting the entire human race.

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