Stability AI Seeks Sale as Investors Lose Confidence in CEO

Stability AI, the startup that co-developed and commercialized Stable Diffusion, is reportedly for sale.

Bloomberg is reporting that the generative AI startup is facing increasing pressure from investors as it continues to lose money. Stability AI has reportedly held talks with multiple companies, though they remain at an early stage at this time.

According to Bloomberg sources, one of the potential buyers is Cohere, a rival startup that boasts Spotify and Oracle among its customers. Another company that approached buying Stability was Jasper.

No deal is imminent and the startup - once a generative AI darling - could turn its back on a sale.

Unlike OpenAI’s explosive board room turmoil, tensions at Stability have been simmering for some time, with key backers thought to be growing disillusioned with Stability CEO Emad Mostaque's leadership.

One of its biggest investors, Coatue Management, sent a letter to management in October calling for Mostaque to step down. The letter said Mostaque’s leadership caused an exodus of top talent and placed the startup in a shaky position.

Mostaque reportedly ran a disorganized company with an inexperienced hand. He also had a history of outlandish claims and lofty promises that he did not always meet, according to Bloomberg, which interviewed nearly two dozen current and former employees, investors, vendors and contractors.

Related:Stable Diffusion Adds Video Generation

Since June, the startup has lost senior staff – including the head of research, the COO and also the head of human resources. To try and steady the ship, the idea of a co-CEO was raised though nothing has been confirmed.

In early November, the startup secured about $50 million in debt financing in the form of a convertible note from chipmaking giant Intel.

Stability is thought to be spending around $8 million a month on computing costs and salaries while bringing in a fraction of the amount in revenue. In August, it made $1.2 million in revenue and is on track to make $3 million in November. In July, Stability told Bloomberg that its revenue forecast of $10 million had fallen as it focuses on R&D.

In its latest statement to Bloomberg, the startup said it is not trying to sell the company but instead is “focused on releasing leading models.”

Just last week, Stability added video generation capabilities to its portfolio through the new Stable Video Diffusion model.