Key takeaways:
- A group of investors is infusing $80 million into Stability AI, the struggling co-developer of Stable Diffusion that had trouble monetizing its popular image generation model.
- Investors include Sean Parker, the former president of Facebook, and Eric Schmidt, a former CEO of Google.
- New CEO Prem Akkaraju is developing a monetization plan over the next three months, which includes charging large companies that use its technology to build products.
Stability AI, co-developer of the popular image generation model Stable Diffusion, is getting an $80 million infusion from a group of investors that includes the former president of Facebook and a former CEO of Google, according to The Wall Street Journal.
Sean Parker from Facebook and Eric Schmidt from Google are among the struggling startup’s investors in this latest funding round. In addition, the group convinced suppliers to forgive the $100 million Stability owes them and struck a deal for the startup to escape $300 million in future obligations mostly due to cloud providers, the paper reported.
Stability co-developed and commercialized Stable Diffusion but ran into problems monetizing its model. Co-founder and CEO Emad Mostaque resigned in March after pressure from investors, but he remains a stakeholder.
Mostaque told the paper that he focused on the technology and left financial matters to other executives. “I hired highly credentialed individuals and delegated business and other functions to these established leaders,” he said. “As a hypergrowth company in a hypergrowth sector, some did well, others did not and could not deliver and left or were let go.”
Parker, who will take over as executive chairman of Stability, said he has “faith” in the company’s core technology. Its flagship product, Stable Diffusion, continues to be popular with more than 150 million downloads. The most recent release, Stable Diffusion 3, topped the download charts in less than a month, with over 2 million downloads.
Parker said the investor group will address the startup’s “business challenges,” which they “know how to solve.”
Other investors in this round include Greycroft, O’Shaughnessy Ventures, Coatue Management, Light speed Venture Partners, Ashton Kutcher’s Sound Ventures, and biotech investor Robert Nelsen.
Hollywood to the rescue?
Stability’s new CEO is Prem Akkaraju, the former CEO of WetaFX, an Academy Award-winning visual effects and animation studio whose projects included “Lord of the Rings” and “Avengers: Infinity Wars.”
Akkaraju, who is also investing in Stability, said his priority will be to develop a business plan in the next three months. The startup will continue to offer its open-source models free to researchers and many developers but charge large companies that use its technology to build products. Another way to make money is to sell tools that help developers integrate its technologies, the paper said.
Akkaraju said Stability can also start to target Hollywood producers and studios as potential customers since it has a video-generation model called Stable Video Diffusion. Stability also has 3D generation and audio generation models.
Parker said in a statement that “the market opportunity in generative AI – spanning images, video, 3D, voice and music – is just getting started.” Going forward, Stability will focus on four key areas:
- Managed image, video, audio pipelines and workflows for developers
- Custom enterprise models
- Content creation and production tools serving independent content creators to major studios
- Powering B2C applications for generative art, creativity, graphic design, social software, and gaming
Currently, Stability offers a non-commercial license for free to individual developers and researchers but charges $20 a month for a limited commercial license for smaller businesses. Enterprise pricing – for companies and API providers – will depend on the client’s needs.
Like Stability, many other generative AI startups are struggling to monetize their technology as well, leading to talk in Silicon Valley about a potential shakeout, according to the Journal.
A former unicorn, Stability had raised $101 million in late 2022 that valued it at $1 billion. But it failed to raise more capital in the past year, resulting in the latest rescue plan.
