OpenAI is eyeing another big round, but that's not what's drawing attention. AI startups building promising underlying models can still open their doors and checkbooks. Black Forest Labs, a startup that builds generative AI image models and emerged from stealth two months ago with a $31 million round, is closing on a new round of funding, according to multiple sources. A $100 million round at a $1 billion valuation is what we're hearing. The deal may not be final and is subject to change.
Black Forest is more than just an AI startup. The company was co-founded by the engineers who developed Stability AI's technology, and it also has some big name customers: Elon Musk's X.ai uses Black Forest's Flux.1 text-to-image translation model to generate images in its Grok chatbot. The service made waves soon after launch, in part because of the bold results people have produced with it.
“No filter” still seems to be trending a month later. The image on the right was created earlier this week.
The company has attracted investor attention due to its founders and founding team, which includes researchers Andreas Bratmann, Patrick Esser, Dominik Lorentz, and CEO Robin Rombach, who developed Stability AI, a groundbreaking platform for image generation.
“Robin Rombach is known as the absolute expert on image virality modeling, and when you have someone this smart and proven in an entirely new field, it's a clear investment to make if you see the opportunity,” one of the company's investors told TechCrunch.
It's not yet entirely clear who is investing in the Freiburg, Germany-based startup's latest round. One source said Lightspeed, one of Europe's biggest investors in AI and backer of Helsing, Mistral, Stability AI, among others, may be involved. Lightspeed has not yet responded to a request for comment, nor has Black Forest itself. (We'll update the post if we hear back.)
The company's previous $31 million funding round brought in a line-up of A-list investors, including Andreessen Horowitz, General Catalyst, Stuttgart venture capital firm Mätch.vc, Nvidia's Timo Ayla, Oculus co-founder Brendan Ilib, Apple AI research scientist Vladlen Koltun, entertainment mogul Michael Ovitz, and Y Combinator's Garry Tan, according to PitchBook data.
The $1 billion valuation is a significant increase from the $150 million valuation it was at after its previous round of funding. (When asked about further funding, Andreessen Horowitz declined to comment for this article.)
Rapid fundraising in the field of generative AI is commonplace in today's market. Startups developing these tools need capital to buy computing, hire talent, possibly enter into IP licensing agreements, and for marketing and business development to compete with larger, better-funded companies. In the case of Black Forest Labs, there are more tech announcements expected in the near future. The company has already announced that it is working on a cutting-edge text-to-video conversion tool, but no launch date has been announced yet.
But the market is tricky, making it tough for smaller AI companies that have raised big sums and are now under pressure to deliver. Paris-based H, a generative AI startup founded by DeepMind alumni, raised $220 million in May this year. The company has already lost three of its five co-founders, citing operational differences. Aleph Alpha, which has raised more than $500 million, appears to have shifted its focus from building foundational models to enterprise services.
“They get the headlines, they get the limelight, but they don't deliver,” another investor who spoke to TechCrunch described the predicament facing companies like Aleph Alpha and H.
Black Forest Labs will naturally try to avoid these issues, especially since, at least for now, it doesn't have a strategic investor willing to back it with big money to grow more aggressively. “I think they'll try to go down a different path, which is to be as secretive as possible,” said this same investor.