Stability AI Founder Steps Down from CEO and Board Roles
Stability AI Founder Steps Down from CEO and Board Roles
It is probably the best (and maybe only) way to save the company
Emad Mostaque, a co-founder of Stability AI, the company that helped propel Stable Diffusion to a dominant market share for text-to-image models, stepped down from his role as CEO and relinquished his board position.
The company said in a statement that Shan Shan Wong and Christian Laforte, the chief operating officer and chief technology officer for the company, respectively, will serve as interim co-CEOs. Stability AI is also actively searching for a replacement CEO.
The announcement also said that Mostaque plans to “pursue decentralized AI.” This might be a challenge for a man who has courted controversy throughout his time at Stability AI and beforehand if he hopes to raise venture capital funding again. Then again, he did make a stable coin reference in his X posts this week, so he might plan to tap into crypto markets.
Decentralized AI
Mostaque is spinning the departure as his choice, given he has a controlling stake in the company. In a series of posts on X, Mostaque argued that centralized AI was a problem and seemed to suggest that his majority ownership of the open-source supporting Stability was a form of centralization that he was voluntarily undoing.
Escaping Controversy
Mostaque’s tenure leading the company was plagued by controversy. Synthedia noted these problems and the apparent inability of Mostaque to raise more funding in a November 2023 article:
Stability AI raised a $101 million funding round in October 2022 at a reported valuation of $1 billion. By April 2022, Fortune reported the company was looking to raise a new funding round at a $4 billion valuation. However, those leaks went quiet…Bloomberg reported (N.B. paywall) in late June about a May 1st funding event of just under $25 million…Stability AI also quietly raised another round recently of just under $50 million, led by Intel.
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An extensive Forbes article from June called out a series of situations where Stability AI provided misleading information to prospective investors and made public statements that were later retracted. The article also stated that “Inside the company, wages and payroll taxes have been repeatedly delayed or unpaid, according to eight former employees, and last year the UK tax agency threatened to seize company assets.”
There is also a legal dispute relating to a former company co-founder who says Mostaque defrauded him by acquiring his 15% stake in the company for just $100, three months before the $101 million funding round that set the $1 billion valuation. It is one more example of the turmoil facing Stability AI.
The company was also plagued with high-profile employee departures and frequent executive turnover. Synthedia identified 13 employees, including executives and researchers, that left the company in the middle of 2023, a time when generative AI interest was peaking. More recently, Sifted reported:
Research scientist Robin Rombach, who joined the London-based startup in 2022, is departing from his leadership role on Stability's scientific and research team.
Rombach was one of the two academics from the Ludwig Maximilian University of Munich who developed the image generation model Stable Diffusion.
One Way Out
While many former employees bristled at Mostaque’s management style, and there was growing scorn about how the company was built upon an open-source project, it is the inability to raise funding combined with engineering talent departures that made his departure inevitable. Bloomberg reported in November that Stability was burning $8 million per month and looking to sell the company. Investors from Coatue Management called for him to step down around the same time.
Questions about the truthfulness of founding CEOs are not uncommon. These situations are often overlooked if the company is growing fast and has momentum. When things are not going so well, they become a millstone.
Majority ownership in a company that is burning cash at a rate well above revenue will soon be worth zero. Mostaque’s departure creates the opportunity for the company to recapitalize and survive, and it is likely the best strategy for his personal ownership stake to retain some value.
Stability AI is the company most closely associated with the open-source Stable Diffusion model. It has also announced Stable Video Diffusion, Stable Zero123, and Stable Video 3D. Between its launch in August 2022 and November 2023, Mostaque claimed 330 million model downloads were made through Hugging Face, mostly of Stable Diffusion model releases. There is a big community and a capable software base upon which to build. The question now is whether an investor will come in to ensure the company survives.
However, given that the software Stability AI worked on was open-source and key engineering departures have plagued the company, it is unclear what it is left to use as a foundation. An alternative approach would be to build upon the open-source technology without the hassle of taking on a wounded brand with existing liabilities. With Mostaque gone, either is now possible.
Nice write up.
Sad to see that a company which was on the forefront of open-source AI is now in the position to redefine itself. Emad was not without controversy, but the mission statement was clear and besides the difficulties there were many state-of-the-art releases.
Thanks Emad, thanks Stability AI!
Their story is over..its sad…I've been calling this since last week.