Stability AI, the embattled generative AI startup behind Stable Diffusion, has raised new funding, though the amount has not been disclosed.
Greycroft, Coatue Management, Sound Ventures, Lightspeed Venture Partners, O'Shaughnessy Ventures, angel investor Prem Akkaraju, former Google CEO Eric Schmidt, Robert Nelsen and Napster founder and former Facebook executive Sean Parker have infused new capital into Stability, the company revealed Tuesday morning. Parker will become chairman of Stability AI's board of directors and join Greycroft managing partner Dana Settle, Coatue Management COO Colin Bryant and Akkaraju, who has been appointed CEO of Stability.
“Stability AI has impacted the world by creating cutting-edge generative imagery foundation models and cultivating the largest ecosystem of generative AI media creators and developers,” Parker said in a statement. “Innovation happens at the intersection of art and technology. Our world-class research and applied AI teams collaborate with a vibrant community of AI artists, model builders, and developers who have creatively extended the capabilities of our core models.”
The announcement was pre-empted earlier this week by The Information, which broke the story that Stability AI, which has been struggling with cash crunch and unpaid cloud bills, was close to closing a deal with venture capitalists. Both The Information and Reuters reported that the funding could lower the startup's valuation, but Stability AI declined to comment.
Stability came to prominence in 2022 following the release of Stable Diffusion, an image generation AI model developed by Ludwig Maximilian University in collaboration with AI startup Runway. Stability provided updates to the open source model, built a service around it, and eventually commercialized it, growing Stable Diffusion into one of the most widely used open image generation models today.
Over the next few years, Stability's ambitions grew, with the startup expanding into code, text, graffiti, music, sound, 3D models, video generation, and even biomedical research. But the company's co-founder and former CEO, Emad Mostaque, reportedly mismanaged Stability, leading to financial collapse, staff resignations, a failed partnership with Canva, and investor concerns about Stability's future.
Stability reportedly had just $4 million in the bank last October, a far cry from the more than $100 million it had raised in previous years from investors including Intel, and was expected to generate just $11 million in revenue in 2023. Meanwhile, the company had to pay $99 million a year in rent for cloud infrastructure from AWS, Google Cloud and CoreWeave to train and run its models, and $53 million in operating and staff costs.
By December, Stability had pivoted to a subscription model for commercial use of its technology, with prices starting at $20 per month. The company was also reportedly considering reselling its computing resources as managed services and, at Lightspeed's urging, considering selling itself.
Mostake stepped down in March following pressure from investors.
According to The Wall Street Journal, Stability's new investors, including Schmidt, spent $80 million to effectively buy the company, struck a deal with the startup's suppliers to forgive $100 million in debt and negotiated a deal to free Stability from $300 million in future debt owed mostly to cloud infrastructure providers.
The future of Stability is unclear. Key personnel have left the company, including several researchers who worked on Stable Diffusion, as well as Ed Newton-Rex, who led Stability's generative AI audio efforts. Stability also faces multiple copyright infringement lawsuits from stock image vendor Getty Images and other artists who claim their work was used without their permission to train the original Stable Diffusion.
Akkaraju's visual FX background may hint at Stability's customer acquisition strategy going forward. Akkaraju was previously CEO of Weta Digital, the FX company that worked on digital effects for films such as “Avatar” and “The Lord of the Rings” trilogy. Parker said Stability will focus on expanding its managed image, video and audio pipelines and workflows, building custom enterprise models and content creation tools, and offering APIs to power consumer apps for art, graphic design, social media and gaming.
Whatever Stability's future holds, Parker vows the company will “remain true to open source principles.”
“Our investment in Stability AI will enable the continued development of our open source, open access, open weighted models to benefit the entire community,” he said. “The market opportunity for generative media across images, video, 3D, audio and music is only just beginning. This investment will enable the creation of even more powerful models, allowing the community to continue to push the boundaries of human creativity.”