Stability AI disrupted the generative AI scene with Stable Diffusion, which was a breakthrough in open-source text-to-image models. Prior to this, such models were proprietary. The startup’s innovation put it in direct competition with Silicon Valley’s heavyweights, including OpenAI.

Riding on the success of Stable Diffusion, the company also raised $101 million in the following months. However, since then, the company has been plagued by a series of predicaments.

Very recently, Sifted, an European publication backed by Financial Times, claimed that Stability AI neither developed the original Stable Diffusion code, nor they own the intellectual property (IP) to the model.

Stable Diffusion, was in fact, a German research project at the University of Heidelberg (now Munich). The codes for the text-to-image model were released by Ludwig Maximilian University of Munich in 2021. 

The report alleges that the startup might have withheld key information to its investors, including the fact that they did not own the IP rights to Stable Diffusion, their flagship AI model.

Nonetheless, the report does state that although Stability AI did not possess any ownership rights to the Stable Diffusion AI model, it played a significant role in enhancing its capabilities.

Interestingly, this was not the only instance where serious allegations have been made against Stability AI. The company has already received criticism for facilitating the creation of objectionable content like graphic violence and pornographic and non consensual celebrity deep fakes.

Class action lawsuit

In January, a class action lawsuit was filed at the District Court of San Francisco against Stability AI, as well as MidJourney and DeviantArt, by a group of artists, who alleges that their artwork was illegally used by these companies to train their models and create new images. 

“The plaintiffs and the Class seek to end this blatant and enormous infringement of their rights before their professions are eliminated by a computer programme powered entirely by their hard work,” the lawsuit says. 

Similarly, Stability AI is also being sued by Getty Images over alleged copyright violation. 

“It is Getty Images’ position that Stability AI unlawfully copied and processed millions of images protected by copyright and the associated metadata owned or represented by Getty Images absent a licence to benefit Stability AI’s commercial interests and to the detriment of the content creators,” the stock photo company said in a statement. 

Previously, Getty Images has prohibited the submission of content generated using Stable Diffusion due to concerns regarding potential intellectual property conflicts.

Burning cash

In early April, Semafor published a report where it claims that Stability AI is burning through cash and is struggling to generate revenue. 

In a tweet, Stability AI’s chief Emad Mostaque did reveal that the training cost of Stable Diffusion is close to $600,000, as it took over 150,000 GPU hours on AWS servers. Similarly, the business Business Insider also reported, the startup’s operations and cloud expenditure exceeds $50 million. 

Semafor claims Stability AI has already burned through a major chunk of the $101 million it raised last year and investors are sceptical about participating in a fresh fundraising round.

The report further claims that employees have lost faith in Mostaque’s leadership style. His preference to provide AI researchers with complete independence, granting them access to expensive server time without any supervision is sometimes seen as counterproductive by some of Stability AI’s employees.

Still on the front foot?

Despite its struggles, the company appears to be on the front foot. Recently, Stability AI released a family of large language models they called StableLM. 

This model, currently in its alpha version, is available in 3 billion and 7 billion parameter versions, with the company promising the future release of 15 and 65 billion parameter versions.

Earlier this year, the startup also acquired Init ML, the developer of the acclaimed AI-powered imaging tool Clipdrop for an undisclosed amount. As per the deal, Stability AI will integrate its generative AI into the Clipdrop platform to make it accessible to creators, which already boasts 15 million users. 

Now, it appears that the company is gearing up for a fresh round of funding, which is expected to be more than the USD 101 million they raised last year. 

Furthermore, Mostaque has also hinted that he could possibly take his company public in the next few years. Nonetheless, he also did acknowledge that in order to do so, a company needs amazing revenue, amazing margins, and distribution. 

While Mostaque is dreaming big, with Stability AI facing significant challenges with its revenue and margins, as well as lawsuits and allegations, the path ahead does appear to be gloomy for Stability AI.