Stability AI, the company behind the popular image-generation tool Stable Diffusion, has secured $80 million in fresh funding as part of a major restructuring effort.
This financial lifeline comes from a consortium of investors led by Sean Parker, former president of Facebook and co-founder of Napster.
The investment group also includes former Google CEO Eric Schmidt, venture capital firms Greycroft, Coatue Management, Sound Ventures, Lightspeed Venture Partners, and individual investors such as Prem Akkaraju and Robert Nelsen.
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Prem Akkaraju, former CEO of Weta Digital, has been appointed as the new CEO of Stability AI. Sean Parker will serve as the executive chairman of the board. Akkaraju and Parker have a history of collaboration, having co-founded SR Labs together.
Stability AI’s co-founders Emad Mostaque resigned in March and was succeeded by interim co-CEOs Shan Shan Wong and Christian Laforte, who will now continue as COO and CTO, respectively.
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Parker has joined Stability AI as executive board chairman, sitting alongside Greycroft managing partner Dana Settle, Coatue Management COO Colin Bryant, and Akkaraju on the company’s board of directors.
“Stability AI has made a 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 was preempted by The Information earlier this week, which revealed that Stability AI was close to reaching a deal with VCs as it faced a cash crunch and unpaid cloud bills.
Stability rose to prominence in 2022 after the release of Stable Diffusion, an image-generating AI model developed at Ludwig Maximilian University in collaboration with AI startup Runway.
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Stability delivered updates to the open-source model and built services around it, eventually commercializing it and growing Stable Diffusion into one of the most widely used open image-generating models today.
Stability’s ambitions grew in the subsequent years, and the startup ventured into several domains, including code, text, doodle, music, sound, 3D model, video generation, and even biomedical research.
But the company’s co-founder and ex-CEO, Emad Mostaque, reportedly mismanaged Stability into financial ruin, leading staff to resign, a partnership with Canva to fall through, and investors to grow concerned about Stability’s prospects.
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Stability had just $4 million in the bank last October, per reports—a far cry from the over $100 million in capital it raised in the proceeding years from investors, including Intel— 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. According to reporting, the company also considered reselling its compute resources as a managed service—and, at the urging of Lightspeed, selling itself.
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Mostaque left in March following pressure from investors. Stability’s new investors, including Schmidt, have committed $80 million to take over Stability effectively, struck a deal with the startup’s suppliers to forgive some $100 million in debt, and negotiated for Stability to be released from $300 million in future obligations largely meant to go to cloud infrastructure providers, according to The Wall Street Journal.
It’s unclear where Stability goes from here. Key talent, including several researchers behind the development of Stable Diffusion, as well as Ed Newton-Rex, who was heading up Stability’s generative AI audio efforts, have left.
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.
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Akkaraju’s background in visual FX may telegraph Stability’s customer acquisition strategy going forward.
Parker says 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 said. “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.”
Stability AI’s journey has been marked by rapid growth, significant technological advancements, and equally notable operational challenges. The company’s pivot to a subscription model and strategic leadership changes signal a determined effort to stabilize and grow its business.
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