Venture capital firms that have backed OpenAI are still fighting to reinstate Sam Altman as the CEO, hoping to preserve investments in the startup that may become worthless with Altman’s move to Microsoft. And as the day wears on and no more board members seem to be budging on reversing course, investors are looking at all their options.
Some of the VC firms continue to explore legal action against OpenAI’s board of directors, following Microsoft’s surprise move to hire Altman and former President Greg Brockman on Sunday night, two sources with direct knowledge of the situation told Fortune on Monday.
Legal action is one of several options for recourse investors would consider, one of the people said, noting that they believe several firms would contribute to protect their investment. It’s unclear at this time exactly what the allegations in the lawsuit would entail.
The leadership turmoil at OpenAI, which began on Friday when OpenAI’s board abruptly fired Altman for not being “consistently candid,” has thrown the fate of investments from venture firms including Khosla Ventures, Tiger Global, Thrive Capital, Sequoia Capital, and a16z into question. Most of these firms invested in the company via a $300 million tender offer in April that valued OpenAI at $29 billion. Investors have few options for recourse, as the tender offer from earlier this year gave investors a cut in the waterfall profit-share model, but limited leverage at the company and no actual control. (An OpenAI spokeswoman didn’t respond to a request for comment.)
Forbes had reported a lawsuit was one of several options investors were tossing around as recourse this weekend before Microsoft’s move. Just before midnight on Sunday, Microsoft CEO Satya Nadella tweeted that he was hiring Altman and Brockman to lead an in-house advanced AI lab—a shrewd move given that Microsoft has invested $13 billion in OpenAI but one that would leave OpenAI’s other investors holding the bag.
Since Sunday evening, when OpenAI told employees the board had hired a second interim CEO to run the company, nearly all of OpenAI’s more than 700 employees have signed a letter threatening to leave the company if the board does not resign and bring back Altman as CEO.
Another tender offer had been underway for OpenAI employee shares that would have valued the company at $86 billion. That deal will likely fall apart without Altman at OpenAI, as Fortune reported on Monday.