The startup behind AI image generator Stable Diffusion is in talks for a valuation of up to $1 billion


With the Stable Diffusion image generator, you can conjure up in seconds a portrait of Beyoncé as painted by Vincent van Gogh, a cyberpunk cityscape in the style of 18th century Japanese artist Hokusai, and a complex alien world straight out of the box. science fiction. Released to the public just two weeks ago, it has become one of many popular AI-powered text-to-image generators, including DALL-E 2, that have taken the internet by storm.

Now the company behind Stable Diffusion is in talks to raise $100 million from investors, according to three people with knowledge of the matter. Investment firm Coatue has expressed initial interest in a deal that would value London-based startup Stability AI at $500 million, according to two of the people. Lightspeed Venture Partners then entered talks — which are still ongoing — to invest at a valuation of up to $1 billion, two sources said.

Stability AI, Coatue and Lightspeed declined requests for comment.

The London-based startup previously raised at least $10 million in SAFE notes (a form of convertible security popular among early-stage startups) at a valuation of up to $100 million, according to one of the sources. A fourth additional source with direct knowledge confirmed Stability AI’s previous spin. Much of the company’s funds came directly from founder and CEO Emad Mostaque, a former hedge fund manager. News of the earlier funding had not previously been reported.

Due to its open source nature, Stability AI’s underlying technology is free to use. So far, the company has not established a clear business model, according to three of the sources. However, Mostaque said in an interview last month with machine learning engineer and YouTube personality Yannic Kilcher that he had already partnered with “leading governments and institutions” to sell the technology. “We negotiated massive deals in order to be profitable at the door compared to most big money-losing companies,” he says. The first version of Stable Diffusion itself only cost $600,000 to train, it wrote on Twitter – a fraction of the company’s total funding.

Mostaque, 39, is from Bangladesh and grew up in England. He earned a master’s degree in mathematics and computer science from Oxford University in 2005 and spent 13 years working in UK hedge funds. In 2019, he launched Symmitree, a startup that aimed to reduce the cost of technology for people experiencing poverty; it closed after a year, according to his LinkedIn profile.

He then founded Stability AI in late 2020 with a mission to build open source AI projects. According to its website, text-to-image generation is just one part of a larger set of AI-powered offerings the company is helping to build. Other open source research groups he supports develop tools for language, audio, and biology.

“We negotiated massive deals in order to be profitable at the door compared to most big money-losing companies.”

Emad Mostaque, founder and CEO of Stability AI

Stable Diffusion – created in collaboration with RunwayML, a video editing startup also backed by Coatue, and researchers from the Ludwig Maximilian University of Munich – has generated by far the most buzz among the company’s projects. This comes as AI image generators entered the mainstream this year, with the release of OpenAI’s DALL-E 2 in April and independent research lab Midjourney’s eponymous product in July. Google also revealed a text-to-image conversion system, Imagen, in May, although it’s not publicly available. Mostaque and his peers said the existing technology is just the tip of the iceberg of what AI art is capable of creating: future use cases could include photorealism, video and animation. considerably improved.

These image generators are already the subject of controversy: many of them were formed by processing billions of images on the Internet without the consent of the copyright holder, sparking a debate on the ethics and legality. Last week a heated debate broke online after a Colorado fine art competition awarded a top prize to an AI-generated artwork.

Additionally, unlike DALL-E and Midjourney, which have restrictions in place to prevent the generation of bloody or pornographic images, the open source nature of Stable Diffusion allows users to circumvent such blocking. On 4chan, numerous threads appeared with deepfakes of AI-generated celebrity nudes, while Reddit banned at least four communities that were dedicated to posting “unsafe for work” AI images. made using Stable Diffusion.

It’s a double-edged sword for Stability AI, which has garnered goodwill from the community precisely through its open-source approach that gives its users full access to its code. The company’s website says the company is “building open AI tools,” a mission that reflects OpenAI’s original intent to democratize access to artificial intelligence. OpenAI was started as a non-profit research organization by prominent technologists including Sam Altman and Elon Musk, but after accepting a billion dollar investment from Microsoft in 2019, it became a business. for profit. The move caused him to focus on commercializing his technology rather than making it more widely available, drawing criticism from the AI ​​community — and musk itself.

Stability AI has been a for-profit company since its inception, which Mostaque says is intended to allow open source research to reach more people. In an interview with TechCrunch last month, he said the company is completely independent. “No one has the right to vote except our 75 employees – no billionaires, big money, governments or anyone controlling the company or the communities we support,” he said.

At a valuation of $1 billion, Mostaque would sell up to 10% of the company to the new financiers. Venture capitalists who take large stakes in startups typically apply for board positions so they can influence the decisions the company makes using their money. Lightspeed, which manages $10 billion in assets, and Coatue, which is in charge of $73 billion, both have a track record of board seats, though it’s unclear whether that will be the case with Stability AI.


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