Tech investor Sean Parker leads rescue of struggling AI startup

livemint.com:

Investors including ex-Facebook President Sean Parker are committing $80 million to take over Stability AI, an image-generation startup that took off with the artificial-intelligence boom but quickly ran into business problems. The investment group, which includes former Google Chief Executive Officer Eric Schmidt and early backers of London-based Stability, has struck a deal with suppliers to forgive some $100 million owed by Stability, according to people with knowledge of the arrangement. The investors also negotiated for the startup to be released from $300 million in future obligations, largely meant to go to cloud computing providers.

The recapitalization is intended to grant a new lease on life for the company behind Stable Diffusion, an image-generation tool that competes with OpenAI’s DALL-E and startup Midjourney. Stability raised $101 million in late 2022 in a round valuing it at $1 billion, but struggled since then to build a business model around its technology, an open-source tool other companies can use free. Stability talked to investors this past year about raising more capital but didn’t land a deal, according to a person with knowledge of the effort.

Despite its problems, Parker said the company’s core technology remained popular, which gave him faith it could become financially successful. “The business challenges are all things that we know how to solve," he said. Parker, who will become executive chairman of Stability AI’s board of directors, declined to comment on the company’s valuation following the new investment.