Stability AI, the struggling generative AI startup known for Stable Diffusion, has secured new funding but hasn’t disclosed the amount.
In a press release on Tuesday morning, the company announced that Greycroft, Coatue Management, Sound Ventures, Lightspeed Venture Partners, O’Shaughnessy Ventures, and angel investors including Prem Akkaraju, Napster founder Sean Parker, Eric Schmidt, and Robert Nelsen have provided fresh capital. Sean Parker has also joined Stability AI as executive board chairman, alongside Greycroft managing partner Dana Settle, Coatue Management COO Colin Bryant, and Prem Akkaraju, who has been appointed as Stability’s CEO.
“Stability AI has made a global impact by creating leading generative image foundation models and fostering the largest ecosystem of generative AI media creators and developers,” Parker stated. “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. This investment will enable the creation of even more powerful models and allow the community to continue pushing the boundaries of human creativity.”
Earlier this week, The Information reported that Stability AI was nearing a deal with investors amid financial difficulties, including unpaid cloud bills. Both The Information and Reuters suggested that the fundraising could lead to a lower valuation for the startup; Stability AI declined to comment.
Stability AI gained recognition in 2022 with the launch of Stable Diffusion, an image-generating AI model created in collaboration with Ludwig Maximilian University and AI startup Runway. The company enhanced the open-source model, developed services around it, and eventually commercialized it, making Stable Diffusion one of the most widely-used open image-generating models today.
In the following years, Stability AI expanded its ambitions, exploring various fields such as music and video generation, and even biomedical research. However, the company’s co-founder and former CEO, Emad Mostaque, allegedly mismanaged the company, leading to financial difficulties. This resulted in staff resignations, a failed partnership with Canva, and growing concerns among investors about the company’s future.
Reports indicate that by last October, Stability AI had only $4 million in the bank, a significant drop from the over $100 million it had raised in previous years from investors like Intel. The company was projected to generate just $11 million in sales in 2023, while facing annual expenses of $99 million for cloud infrastructure from AWS, Google Cloud, and CoreWeave, and $53 million in wages and operating costs.
By December, Stability AI transitioned to a subscription model for commercial use of its technology, with prices starting at $20 per month. The company also explored reselling its compute resources as a managed service and, under Lightspeed’s guidance, considered selling itself.
According to The Wall Street Journal, Stability’s new investors, including Eric Schmidt, negotiated with suppliers to forgive approximately $100 million in debt and released the startup from $300 million in future obligations, primarily related to cloud service providers.
The future of Stability AI remains uncertain. Key personnel, including several researchers behind Stable Diffusion and Ed Newton-Rex, who led the development of Stability’s text-to-audio model, have departed. Additionally, Stability faces multiple copyright infringement lawsuits from Getty Images and other artists, who claim their works were used without permission to train the original Stable Diffusion.
Prem Akkaraju’s background in visual effects, having previously served as CEO of Weta Digital, may indicate Stability’s future customer acquisition strategy. Sean Parker stated that Stability will focus on expanding its managed image, video, and audio pipelines and workflows, developing custom enterprise models and content production tools, and providing APIs for consumer apps in art, graphic design, social media, and gaming.
Regardless of Stability’s future direction, Parker assures that the company will remain “committed to open source principles.”
“Our investment in Stability AI supports the continued development of open-source, open-access, and open-weight models for the benefit of the entire community,” he added. “The market opportunity in generative media — spanning images, video, 3D, voice, and music — is just beginning.”