[HN Gopher] Leaked deck raises questions over Stability AI's Ser...
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Leaked deck raises questions over Stability AI's Series A pitch to
investors
Author : mjaques
Score : 91 points
Date : 2023-04-23 20:40 UTC (2 hours ago)
(HTM) web link (sifted.eu)
(TXT) w3m dump (sifted.eu)
| nostromo wrote:
| Lying and fraud aren't ok, and founders should be held to account
| for that.
|
| But this doesn't seem like that. It seems like investors just
| didn't do the bare minimum you'd expect with an investment of
| $100m.
| gojomo wrote:
| There's no report from any investors who suggest they were
| confused about IP/original-work in any way. There _is_ an
| assertion to the contrary in the article: "Stability told
| Sifted that the investors that backed the company were fully
| aware of Stable Diffusion's IP ownership."
|
| So while it's _possible_ investors just don 't want to admit
| they didn't look too deep, it's also possible everyone relevant
| knew exactly what was being offered: a fast-moving team of
| opportunists, adapting core tech originating elsewhere. That
| alone is plenty valuable in a hot area. 'Fast-followers',
| rollups, & integrators can do great in a tech boom.
|
| So, this story might mainly be resentful competitors/employees
| taking potshots. (Or maybe even: potential next-round investors
| trying to win for themselves a lower-valuation via media spin.)
| EGreg wrote:
| Someone help me understand this... the code is open source, so
| does this mean it's actually proprietary and we can't use it?
|
| And if it is indeed open source with a completely permissive
| license, then what material difference does it make who
| originally developed it?
| neximo64 wrote:
| What is the story here? Stability funded a model that came off
| the LMU paper?
|
| They certainly did that better than the way OpenAI did, or
| Midjourney did.
| ShamelessC wrote:
| That they funded the model is not in question. It is that they
| claimed they owned the IP to said model in pitches/messaging to
| investors when they in fact, did not.
| neximo64 wrote:
| Yes, even if they did do that which they didn't, that is also
| what OpenAI, etc do with their models like GPT and Dall-E
| when infact they come off papers like Transformers is all you
| need and the same LMU paper.
|
| Stability has done it better since they purposely acknowledge
| the researchers instead of the way the public domain research
| is just used to make their own model with no acknowledgements
| (no co created mention anywhere). OpenAI would say 'co
| created by Google' if they did.
| capableweb wrote:
| > they claimed they owned the IP to said model in
| pitches/messaging
|
| Where is the evidence of this? The article certainly doesn't
| contain anything that proves they claimed the owned the IP.
| m3kw9 wrote:
| Doesn't look like fraud but likely lower the valuation unless
| they can overcome the ip issue
| Havoc wrote:
| >what official affiliation there was between Stability and
| EleutherAI, they said: "None."
|
| That's wild. Handing out a bunch of cash for nothing except vague
| association. No control? No equity? No IP?
|
| Reminds me of marketing. Cola puts logos on t-shirts of players
| and proclaims to have sponsored them, but I have yet to see cola
| claim to have "co-scored" a goal.
| anonylizard wrote:
| All AI companies used to release their top tier research into
| the open. Google doesn't have control/equity/IP over the
| transformer paper.
|
| GPT-J and co are GPT-2 equivalents, that are not actually
| useful in any way. So its more just building up the open source
| ecosystem.
|
| Stability did get the branding rights to SD1.4, they spent a
| few million to get incredible name recognition out of nowhere,
| in the hottest and most competitive tech space ever. Those
| sponsored alphago tournaments costed way more and had less
| reputational impact than the millions using SD every day.
| Havoc wrote:
| > Google doesn't have control/equity/IP over the transformer
| paper.
|
| A model is not a paper and the transformer paper isn't what
| keeps the lights on in Mountain view. (Nor alphago for that
| matter.)
|
| Agree on the incredible name recognition, but that's a mighty
| fragile thing if not built on sound foundation. Even a slight
| breeze like this article can make it wobble
|
| It'll probably work given how everyone is falling over each
| other trying to give AI-anything money, but still gives me
| strong dot com era vibes. Appearance first, substance perhaps
| later.
| amrrs wrote:
| I don't remember Stability claiming in any public forum that they
| solely developed Stable Diffusion. In fact the first stable
| diffusion model on Hugging Face is under CompVis Org.
|
| They had an issue with Runway with a model takedown or something
| but I think that was sorted out later on.
|
| I don't know why the article seems desparately trying to show
| Stability in bad light while they have in fact funded a lot of AI
| model development and helped release it with permissive licence
| ad404b8a372f2b9 wrote:
| Some of their behaviour over the past year makes me feel the
| company has a culture which doesn't hold honesty as a core
| value.
|
| The Runway takedown or something your refer to was Stability
| sending a takedown request to HuggingFace claiming an IP leak
| over the publication of version 1.5 by their academic partners
| Runway. That was sorted out, if you want to call it that, after
| massive public outcry and Emad claiming it was just confusion
| on HuggingFace's part. HuggingFace then confirmed Stability's
| legal team contacted them to retract the request afterward.
|
| Then there was the incident where they contacted Discord to
| take over the main StableDifussion channel without informing
| the owner. There was also the incident where they convinced the
| owner of the main stable diffusion subreddit to give them mod
| rights and removed all other mods as well as any info and
| mentions related to one of the most widely used StableDiffusion
| tool (Automatic1111).
| algo_trader wrote:
| Emad also put up ~$20M of his own (real!) money for the initial
| compute. And released everything as OSS.
|
| Its just sad to see such a negative article.
|
| There are, however, fair questions about valuation and (lack
| of) moat.
| ShamelessC wrote:
| > I don't remember Stability claiming in any public forum that
| they solely developed Stable Diffusion
|
| This article makes no such claim. It is about whether or not
| investors knew.
| Jaymz87 wrote:
| Investors probably shouldn't be chucking $100m+ at startups
| without doing the bare minimum of DD if that's the point of
| contention here...
| kevinventullo wrote:
| Oh, those poor investors! It would be absolutely unreasonable
| to expect them to evaluate the business fundamentals of their
| investments; it's not as if that's literally their entire
| job.
| ShamelessC wrote:
| I'm not defending the investors? they absolutely should do
| more due diligence. That doesn't make the situation any
| less likely.
| KaoruAoiShiho wrote:
| Dumb hit-piece, Stability's contribution was vital to the
| creation of those models. Article doesn't even make the claim
| that the investors were confused on if Stability owned the
| models, it just insinuates they were for absolutely no reason.
| eachro wrote:
| There is absolutely a reason ...
| KaoruAoiShiho wrote:
| What reason? Did they have an investor tell them they were
| misled? It's not in the article. Did Stability hide anything
| about who made the models? Again not in the article. It's
| content-less insinuations.
| [deleted]
| capableweb wrote:
| The model was initially released in August 22, 2022, and
| everything from the GitHub organization that hosted the code, to
| the actual licenses being around and all the communication made
| it very clear that there was a bunch of groups involved with the
| model; Runway, CompVis, and Stability AI
|
| Then Stability AI raised money from investors in October 2022.
|
| Are you really telling me these investors didn't even do any sort
| of due diligence (not even "barely any" but literally any at
| all), didn't realized that Stable Diffusion was the work of many,
| and checked the license of the model and code?
|
| That's a bit far fetched, to be honest.
|
| Supposedly, this "leaked pitch deck" is supposed to show us that
| they lied to investors, but where is the pitch deck itself?
| Seemingly, only one of the slides is in the article, how could
| anyone reach any sort of conclusion based on just one slide?
|
| Edit: The article seems to be some sort of clickbait trash that
| is so rampant around the web... One selected part:
|
| > The Stable Diffusion code was released by researchers at LMU
| Munich in April 2022.
|
| Links to https://arxiv.org/abs/2112.10752 which is the Version 2
| of the paper, indeed released in April 2022. However, that paper
| is about, and links to https://github.com/CompVis/latent-
| diffusion which is not Stable Diffusion, it's Latent Diffusion.
| Stable Diffusion was released in August 2022, and is at
| https://github.com/CompVis/stable-diffusion
| ShamelessC wrote:
| How is that far fetched? There are plenty of recent examples
| where investors didn't do enough due diligence in projects
| seeking huge valuations.
|
| And why are you putting leaked pitch deck in quotes?
| rvz wrote:
| > There are plenty of recent examples where investors didn't
| do enough due diligence in projects seeking huge valuations.
|
| Exactly. This reminds me of Fast.co [0] who recently shutdown
| after attempting to raise more VC capital when it was
| revealed that they only made 600K and with a very high burn
| rate.
|
| I don't see how it is so difficult for many commenters here
| to see that investors were mislead by the claims made by
| Stability.ai's IP, and now they're also are burning cash with
| questionable revenues being generated whilst begging to VCs
| again to raise at a higher valuation.
|
| Some of these investors just run into hype and get burned
| repeatedly and never learn from FOMO.
|
| [0] https://techcrunch.com/2022/04/05/fast-shuts-doors-after-
| slo...
| capableweb wrote:
| > that investors were mislead by the claims made by
| Stability.ai's IP
|
| Which claims, precisely? Could you quote these claims that
| were made by Stability/Emad that makes it clear they were
| misleading the investors?
|
| Because the article doesn't make those clear, these claims
| you talk about.
| jacquesm wrote:
| 'A Series 'B' led by Stripe' -> I really wonder what the
| story is there. It can't be that easy to fool the Stripe
| founders.
| capableweb wrote:
| > How is that far fetched? There are plenty of recent
| examples where investors didn't do enough due diligence in
| projects seeking huge valuations.
|
| Is there examples of investors investing in a project without
| even visiting the homepage of the project or trying to
| understand even 0.1% of what the project is about? I don't
| think it's super common, but maybe I'm not hanging around the
| right/wrong circles in SV.
|
| > And why are you putting leaked pitch deck in quotes?
|
| AFAIK, this is the only article that mentions a leaked pitch
| deck from Stability AI and it only includes one image, which
| puts into question if there really is a leaked pitch deck, or
| if it's just one image that got sent to them.
| jacquesm wrote:
| FOMO really is a thing. Mind you, this isn't _all_
| investors, but as a company you only need to find one that
| will sign. And that one might serve as validation to a
| bunch of others who might then want to be in on the round.
| It can get pretty crazy. At the same time, plenty of solid
| businesses that aren 't hyped can't raise a round at any
| reasonable valuation. It really isn't a fair world.
|
| The worst is when your solid business suddenly gets a
| competitor flush with capital which decides to start a
| price war, which, depending on the amount of capital
| they've got they may well win _before_ they themselves go
| out of business.
| szundi wrote:
| Yes it happens all the time. Check out the FTX story and
| many others
| z3c0 wrote:
| I'm not sure how one could equate a lack of DD to
| deliberately misleading investors.
| jacquesm wrote:
| That line can be pretty fine. Not in the case of FTX but
| the perfect poison for any investor is a founder or a
| group of founders that are true believers but that are
| mistaken all the same. They don't actually know that they
| are misleading investors, it isn't deliberate but if it
| was you wouldn't be able to spot the difference.
| capableweb wrote:
| The comparison would be if investors now suddenly say
| "Hey, we didn't know FTX were trading with
| cryptocurrencies, we don't like that!", not that things
| were hidden behind financials and corporate setups.
|
| Even though the troubles of FTX were hidden behind
| financials, someone who would look deeper into it would
| spot issues for sure. But maybe not from a brief look,
| while in this case with Stability AI, no one didn't even
| do a brief look?
| impulser_ wrote:
| It's definitely not far fetched for VC investors to not do any
| due diligence at all. Obviously not all of them, but there are
| quite a bit of them that just gamble with their money. Just
| take a look at how many of them threw money at crypto lol.
| capableweb wrote:
| Yeah, again, how many investors invested in a cryptocurrency
| company and then not until afterwards realized they invested
| into a cryptocurrency company? Because that's what the
| article suggests happened, which is obviously ridiculous.
| algo_trader wrote:
| My pet theory is that Stability was a surprise viral hit during
| aug/sep. Then got a massive capital round. And NOW, growth is
| already slowing and investors are getting buyers-remorse?
|
| Or maybe growth is accelerating, and those who passed on
| series-A are upset?
|
| Or maybe the lizard men are involved?
| anonylizard wrote:
| Stability never had any revenue, nor any easy ways to measure
| their user base. Their 'growth' is basically dependant on
| them being able to release open source models that get so
| popular, unbeatable ecosystems get formed around them.
|
| On this front. SD1.4/1.5 is extremely successful, but there
| has been no followup. SD2.0 was a total disaster that shocked
| the community, SD2.1 is still no better than SD1.5. StableLM
| currently is still a joke in performance. Like, they don't
| seem to even test their models before releasing them.
|
| Compare their releases, to the polished and immediately
| dominant releases from OpenAI, and you have to question their
| researching chops. Did they only succeed with SD1.4 because
| of collaboration with other companies?
| capableweb wrote:
| > Stability never had any revenue, nor any easy ways to
| measure their user base
|
| They do, for the products they have/will have. Right now, I
| think it's only DreamStudio, but like any SaaS product,
| they can and surely do measure the amount of users, and
| trivial for them to see the revenue.
|
| What you're talking about, the models they help release,
| are not products themselves, more like research output they
| give away for free. Probably in order to drive users to
| their paid products.
| anonylizard wrote:
| Dreamstudio is a joke, not intended to be a serious
| product, but merely for someone to try out SD in under a
| minute.
|
| 99.9% of SD usage happens outside of Dreamstudio. The
| power of SD comes from using fine-tuned models, and
| dreamstudio doesn't allow that (For copyright reasons
| presumably). There are websites like happyaccidents that
| do allow using fine-tunes, because they are willing to
| shoulder the massive legal risk as smaller startups.
|
| SD's primary business model was always intended to sign
| up corporate clients in a semi-LLM-consulting/support
| role for their open sourced models. Like Redhat in a way.
| And to succeed in that space, you need massive name
| recognition.
| [deleted]
| yawnxyz wrote:
| They should have interviewed the investors to understand where
| they saw the opportunity.
|
| I think an ecosystem of users coming back to perform (and pay
| for) all kinds of generative AI tasks is totally worth the
| investment.
|
| I can't figure out how Stability hasn't been able to make revenue
| though. Are they just not charging enough? Are they subsidizing
| everyone's compute?
| ericflo wrote:
| I think in the world of ML, contributing that much compute should
| count as co-creation. There is a lot of code published by
| academia that just needs compute and data, but they don't receive
| it. Stability deserves credit for Doing the Thing. IP rights are
| another thing but that's a whole subtree of legal questions that
| society is barreling towards.
| ShamelessC wrote:
| > IP rights are another thing
|
| Actually the _only_ thing in contention per the article.
| anonylizard wrote:
| People have to remember, back in 2022-08, AI was still not a
| big thing. DALLE-2 was only released 2 months ago, and was just
| a quickly forgotten novelty.
|
| Emad had to have funded the training of SD even before DALLE-2,
| investing the cash in exchange for branding rights to a free
| model.
|
| Its obviously an extremely good bet in retrospect (RunwayML is
| probably bleeding with regret), giving stability herculean name
| recognition despite not having done any high profile research
| themselves. But when the bet was made, it was quite an insane
| bet requiring a lot of vision.
| exizt88 wrote:
| Another poorly reported hit-piece from Sifted. This is a non-
| event. Anyone who's been close to fundraising knows that
| investors expect founders to build a narrative and do their own
| due diligence.
| sillysaurusx wrote:
| Whoa. So I got a DM on Twitter about a week ago thanking me for
| pushing back on Emad's claims about cluster pricing. I didn't
| really take it seriously (or understand it) till now:
|
| https://i.imgur.com/5XAndrR.jpg
|
| https://i.imgur.com/OAZeZEl.jpg
|
| So for whatever that's worth, here's a claim that predates this
| article by a week that emad was lying about stability origins to
| investors. I've trimmed the name off the DM for obvious reasons,
| but it's from someone who seems credible (though I don't know
| them).
|
| I don't like posting random unsubstantiated accusations without
| context. But this article just provided both.
|
| As for what he lied about (or stretched the truth), I don't know.
| I don't even know if it matters. But this is why I never lie to
| investors, and why I've always really felt negatively towards
| colleagues who stretch the truth. It's all kinds of misleading,
| and it's a kind of misleading that tends to matter.
|
| It would also make me upset as an investor if I found out that
| someone had fooled me. So even if it'd be to my advantage to lie
| for money, I can't imagine doing it. I'd rather live in relative
| obscurity.
| [deleted]
| faeriechangling wrote:
| Seems like an ungrounded hit piece and it mostly raises questions
| about who is backing sifted.eu
| [deleted]
| [deleted]
| napier wrote:
| What a clumsy half assed hack attempt at a hatchet job.
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(page generated 2023-04-23 23:00 UTC)