The Company Behind Stable Diffusion Appears to Be At Risk of Going Under

The company is burning through cash at an alarming rate.

Burning Cash

Stability AI, a startup that's made a huge name for itself by helping develop the incredibly popular open-source image generator called Stable Diffusion, is in serious trouble, Semafor reports, burning through cash at an alarming rate without a clear path to profitability.

The company is now looking to hire new executives who will help sales and generate some much-needed revenue.

Given the sheer amount of competition the company is facing, Stability AI's woes are a worrying sign that clear winners in the AI race are already emerging.

Unstable Diffusion

Stability AI raised $100 million last year and has already spent a significant portion of those funds, according to the report. That means the startup's upcoming fundraising round, which would balloon the company's valuation to a lofty $4 billion, is on shaky grounds, with investors having second thoughts.

Sources familiar with the matter told Semafor that CEO Emad Mostaque's leadership style has been unpredictable, swinging from micromanaging to letting researchers do what they want without oversight.

But there are deeper, structural issues the company is also grappling with. Stability AI wasn't actually the sole inventor of Stable Diffusion, which was originally created by an international team of researchers from the Ludwig-Maximilians-Universität in Munich, Germany, and New York-based company RunwayML.

Mostaque swooped in to help turn the AI model into an open-source image generator. The CEO even bet his own personal wealth to guarantee the company was able to pay for Amazon web hosting, according to Semafor's sources.

Stiff Competition

Then there's the fact that Stability AI is facing a lot of competition, with rival Midjourney making major headwinds in becoming the de-facto image generator on the internet, even beating out OpenAI's DALL-E in terms of numbers, the report notes.

Whether Stability AI will be able to turn things around and raise enough funds to keep things going remains to be seen. The company still doesn't have an AI model that it's created by itself from the ground up, something that will likely make staying competitive in a rapidly changing landscape even more difficult.

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