Stability AI, the start-up behind the Stable Diffusion image generator, announced on June 25 a new round of fundraising which amounts to $80 million according to people familiar with the matter. The funding round was led by multi-stage venture capitalist Lightspeed, Sound Ventures, Coatue Management and Greycroft. Sean Parker, founder of the online music store Napster and former chairman of Facebook, and Eric Schmidt, former CEO of Google, also participated. A new board of directors has been formed with Sean Parker as executive chairman.
A visual effects professional as new CEO
The London-based startup also named Prem Akkaraju as its new CEO, replacing Emad Mostaque, who left the company at the end of March. A strategic hire: Prem Akkaraju is the former CEO of New Zealand-based Weta FX, previously known as Weta Digital, which specializes in visual effects for cinema. Major Hollywood film producers are increasingly in need of visual effects, while artists are complaining about their working conditions. They are therefore ideal candidates for the startup's acquisition, with a promise that could be presented as a way to speed up production while reducing labor costs.
Advertisement
Why a buyout? Because this financing is a rescue operation for the young company, which only had $4 million in the bank last October. Stability AI has been facing a critical financial situation for several months and unpaid invoices to cloud providers. In 2023, it had planned to make just $11 million in sales. At the same time, it had to pay $99 million per year to AWS, Google Cloud and CoreWeave for training its models on their cloud infrastructures and $53 million in operating expenses and salaries.
According to The Informationciting a person involved in the deal, the investors reportedly reached an agreement with the cloud providers to forgo that debt and $300 million in future obligations.
The start-up continues its setbacks
Stability AI had also been accused by Getty Images of having plundered its image bank to train Stable Diffusion, using 12 million images without its authorization. Ten executives then left the start-up. The latter failed last summer to obtain new financing – despite raising $101 million in funds in 2022 – and was looking for a buyer. The company, however, managed to sign an agreement with Intel worth $50 million, involving a significant investment from Stability in Intel hardware, including its Gaudi accelerators.
Stability AI announced in December that it would move away from its initial open source business model and move to a subscription system for its most advanced generative AI models, starting at $20 per month. It remains to be seen whether this measure will be sufficient to redress the situation. Earlier this month, the startup released Stable Diffusion 3 Medium, its text-image AI model with 2 billion parameters, which it considers “the most sophisticated”.
Advertisement
Selected for you