Days after Stability AI founder Emad Mostaque’s ouster from the company, a Fortune report on the unraveling of the AI startup reveals a striking portrait of Silicon Valley’s AI gold rush fervor — and just how quickly one of the industry’s buzziest early investment relationships has already fallen apart.
Stability emerged as a major player in the AI space in August 2022 when Stable Diffusion, the company’s advanced text-to-image AI, went viral in online developer circles. The impressive image-generating model was quickly billed as the open-source competitor to closed-source rivals like OpenAI’s DALL-E and Midjourney, and frothy investors were gunning to fund the viral model. By mid-September, massive cash infusions from the investment firms Coatue and Lightspeed transformed the company from a buzzy startup to a billion-dollar industry unicorn.
But while Stability’s — not to mention Mostaque’s — outward star and influence was rising, the company’s internal world was reportedly chaotic from the jump.
In one striking anecdote provided by Fortune, back in December 2022 Mostaque was said to have suddenly disappeared off the grid. This left employees scrambling to communicate with the investors who had weeks ago handed the company roughly $100 million. Not even Mostque’s wife Zehra Qureshi, who was deeply involved in the company, knew where he was, reportedly texting one employee that her husband had simply walked off in his pajamas.
Pajama incident aside, according to the report, the company’s chaos seemed mostly driven by a destructive lack of organization.
One former employee who worked at Stability’s London office told Fortune that “there was literally no structure in place in the business at all,” explaining that day-to-day employee tasks were constantly changing in ways that felt far less than productive.
“One day [employees would] be working on a marketing strategy,” the staffer told Fortune. “Before that, they weren’t quite sure. And another day, they’d be working on something completely different.”
At one point, another source told Fortune, a “roadmap” for the company was created at the behest of increasingly frustrated investors at Coatue. Once that document was shipped off, though, the source claims that no one at the company seemed to ever pull it up again.
The company’s lack of organization reportedly hindered its ability to effectively scale, further souring Stability’s investment ties. Then, in June 2023, Mostaque’s relationship with his funders took another blow when a Forbes report alleged that the founder had a history of exaggerating his qualifications.
Mostaque denied the embellishment claims, but a Stability investor told Fortune that Mostaque and his funders “started to speak less” after the Forbes report was published. By November 2023, barely a year after coughing up an incredible amount of funding, a Bloomberg report revealed that Coatue had called for Mostaque to step down in an October letter to Stability executives.
“This — where you’ve got folks resigning from the board right after a $100 million round,” an unnamed Stability investor told Fortune. “That level of souring is pretty uncommon — at least that early anyway.”
Of course, the CEO wouldn’t resign until last weekend. In an email to Fortune, he reportedly cited the stress of being CEO as the main reason for his departure, but we can’t imagine there was a particularly healthy working relationship happening in the meantime.
“Nobody tells you how hard it is to be a CEO and there are better CEOs than me to scale a business,” Mostaque told Fortune, though added that he’s “very proud of the team there.”
“I look forward to moving onto the next problem to handle,” the statement continued, “and hopefully move the needle.”
Stability’s future remains deeply murky. Now, per Fortune, investors and remaining executives are working to salvage what remains — and perhaps wondering what, besides AI hype, made Stability so valuable in the first place.
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