By Krystal Hu and Jaspreet Singh

(Reuters) – OpenAI must transition to a for-profit company by the end of the year to secure the full $40 billion funding led by SoftBank it is in the final stages of raising, a person familiar with the matter said on Friday.

SoftBank can pare back the size of the funding round to $20 billion if Microsoft-backed OpenAI fails to restructure into a for-profit company by the end of the year.

The Wall Street Journal was the first to report the news earlier in the day.

This would mark an accelerated deadline for OpenAI to pull off its complicated transition. It was under a two-year deadline from its last round of financing with investors.

The startup has said its transition to a for-profit entity is required to secure the capital it needs to develop the best AI models.

OpenAI did not immediately respond to a Reuters request for comment.

(Reporting by Jaspreet Singh in Bengaluru; Editing by Pooja Desai)