The Wall Street Journal recently reported that xAI, the artificial intelligence startup founded by Elon Musk, completed a funding round of $5 billion at a pre-money valuation of $45 billion ($50 billion post-money). Rumored to participate in the round according to the Journal were Sequoia Capital, a16z and Valor Equity Partners.  One could hardly blame these Silicon Valley heavyweights for wanting to make a big bet on artificial intelligence and Elon Musk’s record of success.  But one may wonder whether in their eagerness to do so, they’ve overlooked xAi’s corporate structure as a benefit corporation, which allows it to pursue stated societal goals in addition to purely financial returns.

xAI’s structure as a benefit corporation is noteworthy, but far from unusual for an AI startup.  xAI typifies a growing trend of AI startups adopting governance frameworks that prioritize societal impact alongside profit.  For example, Anthropic organized as a public benefit corporation with a stated purpose of “the responsible development and maintenance of advanced AI for the long-term benefit of humanity”.   Similarly, OpenAI has reportedly adopted plans to restructure itself as a benefit corporation. 

So why are AI startups like xAI embracing the benefit corporation structure, and are investors overlooking the risks?Continue Reading From Algorithms to Altruism: Risks and Rewards of xAI’s Benefit Corporation Strategy

What happens when corporate directors approve their own awards under an equity incentive plan? Under Delaware law, so long as the plan is approved by a majority of the fully informed, uncoerced and disinterested stockholders, the awards will generally be protected by the business judgment rule and judges will not second guess them. Or will

Venture capital funds routinely negotiate for a right of redemption – the right to require the company to buy out their shares after a certain period of time if an exit has not occurred – as a key element of their exit strategy. But according to a recent case in Delaware, the VCs and the