Stability AI Lands a Lifeline from Sean Parker, Greycroft
Stability AI, the troubled generative AI startup behind Stable Diffusion, has secured new funding, but the exact amount remains undisclosed.
A group of investors, including Greycroft, Coatue Management, Sound Ventures, Lightspeed Venture Partners, O'Shaughnessy Ventures, and angel investors Prem Akkaraju, ex-Google CEO Eric Schmidt, Robert Nelsen, and Napster founder and ex-Facebook executive Sean Parker, have injected fresh capital into the company. Parker has joined Stability AI as executive board chairman, alongside Greycroft managing partner Dana Settle, Coatue Management COO Colin Bryant, and Akkaraju, who has been appointed CEO.
"Stability AI has made a significant global impact by creating the leading generative image foundation models and fostering the largest ecosystem of generative AI media creators and developers," Parker said in a statement. "Innovation happens at the intersection of art and technology: the company's world-class research and applied AI teams collaborate with a vibrant community of AI artists, model builders, and developers who have ingeniously extended the capabilities of the company's core models."
The announcement comes after reports that Stability AI was facing a cash crunch and unpaid cloud bills. The company's co-founder and former CEO, Emad Mostaque, reportedly mismanaged the company into financial ruin, leading to staff resignations, a failed partnership with Canva, and investor concerns about Stability's prospects.
According to reports, Stability had just $4 million in the bank last October and was projected to make just $11 million in sales in 2023. Meanwhile, the company was on the hook for $99 million a year for cloud infrastructure rentals from AWS, Google Cloud, and CoreWeave to train and run its models, and $53 million in operating expenses and wages.
By December, Stability had pivoted to a subscription model for commercial use of its technology, with prices starting at $20 per month. The company also considered reselling its compute resources as a managed service.
According to reports, Stability's new investors, including Schmidt, struck a deal with suppliers to forgive some $100 million owed by Stability and negotiated for the startup to be released from $300 million in future obligations, largely meant to go to cloud service providers.
It's unclear where Stability goes from here. Key talent, including several researchers behind the development of Stable Diffusion and Ed Newton-Rex, who was heading up Stability's generative AI audio efforts, have left. And Stability faces multiple copyright infringement suits brought by stock image vendor Getty Images and other artists, who allege that their works were used without permission to train the original Stable Diffusion.
Akkaraju's background in visual FX may telegraph Stability's customer acquisition strategy going forward; Akkaraju was previously CEO of Weta Digital, the FX company behind the digital effects in films like "Avatar" and "The Lord of the Rings" trilogy. Parker says that Stability will focus on growing its managed image, video, and audio pipelines and workflows, building custom enterprise models and content production tools, and delivering APIs to power consumer apps for art, graphic design, social media, and gaming.
Wherever Stability's future takes it, Parker pledges that the company will remain "committed to open-source principles."
"Our investment in Stability AI enables the continued development of open-source, open-access, and open-weight models for the benefit of the entire community," he continued. "The market opportunity in generative media — spanning images, video, 3D, voice, and music — is just getting started … This investment will enable the creation of even more powerful models and allow the community to continue pushing the boundaries of human creativity."
Image Credits: David Paul Morris / Bloomberg
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