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Stability AI reportedly runs out of money and in negotiations to sell

Stability AI reportedly runs out of money and in negotiations to sell


AI startup Stability AI is in acquisition talks despite a billion-dollar valuation due to dwindling cash reserves, The Information reports, citing a source familiar with the matter.

The London-based company behind the popular open-source image generator Stable Diffusion raised more than $100 million from investors including Coatue Management and Lightspeed Venture Partners in 2022, giving it a valuation of $1 billion.

But Stability AI has struggled to monetize its largely free software, especially in the face of growing competition from rivals like OpenAI and Midjourney. The startup has reportedly discussed a sale with AI companies Cohere and Jasper in the past.

Management issues also surfaced: Founder and CEO Emad Mostaque resigned in March amid reports of mismanagement and questions about his professional background.



In December 2022, Stability AI secured $101 million from various VCs at a $1 billion valuation, and Intel recently invested $20 million, mostly in the form of computing power.

But the company spent heavily on research and computing resources without developing viable business models. It projected $99 million in computing costs alone in 2023, mostly for the AWS cloud, plus $54 million in personnel costs.

An October 2023 financial forecast showed $153 million in expenses against just $11 million in revenue, with cash and equivalents dropping below $4 million. Stability AI currently has about $100 million in liabilities to cloud providers.

A potential buyer might be primarily interested in acquiring Stability AI’s 70 to 90 AI researchers and engineers, certain technical approaches, and the established Stable Diffusion brand.

Microsoft recently made a stealth acquisition of the billion-dollar British AI startup Inflection AI, which ultimately could not compete with superior AI models from OpenAI or Anthropic in a market that is losing money anyway. Microsoft was primarily interested in the employees, who will now strengthen the company’s internal AI development.


Stability AI reportedly runs out of money and in negotiations to sell

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