AIGC star unicorn explodes! Most of the 700 million financing was burned, the wages of employees were in arrears, and the founder was riddled with holes

Author: Feng Se Xiao Xiao

Source: QubitQbitAI

The founder of the team behind Stable Diffusion was exposed to a huge scandal!

In the past two days, a long piece of news released by Forbes has gone viral on the Internet:

More than 30 ex-employees + investors came forward and counted the 9 major crimes of Stability AI boss Emad Mostaque (Emad Mostaque)——

Falsified academic qualifications and did not obtain a master's degree from Oxford University at all;

Take the 1 billion code achievements of Stable Diffusion "as your own";

Arrears of a large number of employee wages, and even non-payment of payroll taxes;

……

According to reports, the founder of this so-called "star company" that just raised $100 million (equivalent to about 700 million yuan) and was promoted to a unicorn with a valuation of $1 billion not only exaggerated the income of Stability AI, but also its follow-up financing. It didn't go well, and it just said "success" to the outside world.

Eric Hallahan, a former employee who worked at Stability AI, tweeted about his experience:

As I feel, Emad is good at putting his name on other people's work, or doing things that you can't confirm if it's true.

Some netizens even gave a somewhat sensational conclusion after reading it:

Similar to Sam Bankman Fried (arrested for currency fraud), Bernie Madoff, Elizabeth Holmes (blood cancer queen), Emad Mostak is also such a liar.

Clearly, this marks the end of Stability AI.

What the hell does this happen?

The founder of Stability AI turned out to be a big fool?

The nine specific crimes exposed by Forbes are as follows in order of severity:

01. Steal Stable Diffusion results

This dispute has to be traced back to October last year. At that time, Stability AI had just received 101 million US dollars, becoming a unicorn with a valuation of 1 billion in one fell swoop.

Just after the financing was completed, an AI start-up company called Runway suddenly "cut off" and released a new version of Stable Diffusion, saying that he was the original author of Stable Diffusion.

It turns out that the core code of Stable Diffusion, which made Stability AI famous, was jointly completed by the University of Munich, Heidelberg University, and Runway. Stability AI only provided computing resources as the "financial master".

However, authors such as Runway believe that Stability AI directly takes this achievement as its own. For example, when Stable Diffusion was officially released in August last year, Stability AI's press release directly wrote Imad as "the most popular open source software ever". chief evangelist.

Not long after, Stability AI's fundraising platform also directly called "Stability AI is the company behind Stable Diffusion" and "it is our model", without mentioning Runway and other authors at all.

Professors from the University of Munich and Heidelberg University actually wanted to publicize their contributions, but the press office of the university was on vacation at the time. He said Imad had misled the public in key messages:

Obviously, if you own a company with a huge newsroom, you can reshape history to your liking.

In addition, Emad also described Midjourney as part of its "ecosystem" in an investor presentation last year, claiming that Stability AI "co-created" the product and "organized" its user community.

But the Midjourney founder told Forbes that Imad provided a "very small" financial donation and had no relationship with Midjourney beyond that.

02. Arrears of wages to employees, non-payment of taxes, and blatantly opening a "mom and pop shop"

How many people have marveled that Stability AI is such a fast-growing company with only 11 initial employees?

In fact, Stability AI expanded rapidly later, and the number of employees reached 140, including the vice president of R&D who was a director of Nvidia, the head of Google Brain, and three doctoral students from Ommer Lab.

But Imad was exposed to be "harsh" on employees.

Eight former employees told Forbes that the company had repeatedly delayed or failed to pay their salaries for more than a month, as well as the failure to pay payroll tax, which led to the British tax agency threatening to confiscate company assets last year.

During this period, Emad's wife, as the company's public relations director (later a member of the board of directors), even moved tens of thousands of pounds from the company's account.

Their reasoning was that my husband and I had been helping Stability AI operate with a loan in the beginning (now it was time to pay it off).

Ps. "Arrears" have been settled before the end of 2022.

In addition, Emad's wife was also exposed to often scolding employees in the office, and even made them cry.

The most appalling thing was that in January this year, she said that she would resign from the board of directors and return to her family and personal career. However, in May, in an organizational chart of Stability AI, she was listed as the "head of the foundation", at the highest level of the company, comparable to her husband Emad.

03. Fake academic qualifications

Speaking back to Emad, he is 40 years old this year and is a Bangladeshi who grew up in the UK. In 2005, he graduated from Oxford University with a degree in mathematics and computer science.

However, he claimed to have a master's degree from Oxford University.

04. Falsification of work experience

Imad entered the financial industry after graduation, and then joined the hedge fund company Capricorn.

He claimed he was being honored for "reviving" the once-struggling company, but Capricorn said:

He was indeed the firm's co-chief investment officer, but the $330 million fund soon ended its two-year run due to poor performance.

The boss who introduced him to Capricorn at the beginning said:

Emad is very good at making up stories.

After the failure of the fund business, Emad started his own business. After experiencing a series of failed ideas, he finally founded Stability AI in 2019. Epidemic decisions.

Later until he noticed the Stable Diffusion team.

05. Exaggerating company income

Emad publicly claimed in October last year that Stability AI's annual revenue had exceeded $10 million, but people familiar with the matter said that the company's sales have not improved.

06. Difficulties in financing and suspicion from investors

Although Stability AI's revenue is not impressive, Emad initially raised about $100 million in financing through various means.

But now, he has been questioned by many investors.

Many investors told Forbes that Emad has been trying to refinance hundreds of millions of dollars at a valuation of about $4 billion, but it has been unsuccessful in today's favorable wind for start-up AI companies.

07. Exaggerated cooperation with Amazon, owed millions of dollars in bills

Emad's hype doesn't stop there.

He told investors that Stability AI was assembling one of the 10 largest supercomputers in the world, and then Amazon sold him computing resource services at an 80% discount because Stability AI "has a strategic partnership with Amazon."

In practice, however, this standard discount is available to any customer who has a long-term lease with Amazon.

In addition, Amazon threatened to revoke the company’s access to some of its GPUs after months of unpaid bills (up to millions of dollars), according to three former Stability AI employees.

08, close to the WHO

Emad has claimed on several fundraising platforms that the OECD, the World Health Organization and the World Bank are partners in Stability AI, but all three have denied it.

09, there is still a copyright lawsuit

Lastly, Emad was hit with a class action lawsuit by Getty Images and artists alleging that Stability AI trained models in violation of copyright law.

As soon as the news came out, netizens were all shocked and disappointed: It turns out that the founder of one of the most powerful AIGC companies today is such a shady person.

Some say Imad will do whatever it takes to make himself a billionaire.

AI technology itself is also lying in the gun:

Sure enough, like "its master", the results obtained were plagiarized from others (human artists).

For a while, public opinion was in an uproar.

What is the truth?

I responded quickly: a large number of false accusations

Faced with this series of almost "merciless" accusations, Imad responded quickly within 24 hours.

On his blog, he posted a long letter he wrote to the Stability AI team in response to the Forbes report, which was an explanation for the team and clarification of various rumors from the outside world.

1. Fake academic qualifications

Emad confirmed in his long letter that he does not have a master's degree, not even a bachelor's degree. But he said that was simply because he didn't attend the graduation ceremony:

I have paid £60 and will receive my degree certificate by post next month.

2. Regarding plagiarism of Stable Diffusion results

The long letter stated that Stability AI has repeatedly publicly stated that it is a collaborator of the first version of Stable Diffusion, and other collaborators are from the University of Munich (LMU) and another AI startup company Runway.

Emad also said that 3 of the 5 authors in this paper currently work in Stability AI, and two of them are co-first authors:

However, this statement seems to ignore Heidelberg University? The original paper is as follows:

3. Regarding wage arrears to employees

Emad acknowledged that there had been deferrals in wages, but they had been made up and "additional wages were paid to affected employees".

At the same time, there have been no wage payment issues in "normal operations" since the end of 2021.

4. Relationship with Midjourney

Emad said that Midjourney has been an "independent organization" supported by Stability AI, which has helped it expand, including introducing aesthetic scoring and preference learning, and provided it with strategy and model support.

As for how much money was donated, Emad did not clarify or respond.

5. About exaggerating Amazon's strategic cooperation

Regarding the cooperation of exaggerating Amazon's computing resources, Emad did not mention the price, but said that AWS has built a rare dedicated computing cluster specifically for Stability AI, containing 4,000 A100s, which is "unique".

Some of the payment problems (mainly the payment time problem) have been resolved in the month when the cluster is built (August 2022).

In addition, Emad also responded to some information about himself and the company.

Regarding himself, he mainly clarifies previous work. For example, he used to work at a hedge fund, but then the fund collapsed, not because of him. After all, during his tenure, the company not only won awards, but also recovered its performance; in addition, he also cooperated with the United Nations and participated in autism-related research.

Regarding Stability AI, he emphasized that "the company is running well" at present, not only trying to strengthen and improve the human resources process, but also has settled the arrears with Zehra by the end of 2022. As for the investment situation, the company has not yet opened the Data Room to investors who have signed the MNDA.

Finally, Emad also deliberately emphasized that "everything the company does will be strictly scrutinized":

In an interview with VentureBeat after posting this article, he expressed his sadness:

Our team and Forbes cleared up some facts, but they clearly chose to ignore the truth of many of these issues.

For this response, some people did not buy it. Because Emad did not clarify some key points in the article:

For example, former employee Eric Hallahan pointed out one of the ambiguities:

Regular employees may be paid on time, but this does not include the wages of non-regular employees and outsourced employees!

However, some netizens believe that this news report is full of malice, and the good deeds done by Imad should not be ignored:

However, in addition to the scandal of the founder being exposed, Stability AI itself is also facing serious problems-earlier, it was exposed to problems such as crazy money burning and chaotic management.

"There is no clear path to profit yet"

Although it received US$100 million in financing in October last year, Stability AI has not been going smoothly.

Not long ago, reporter Reed Albergotti broke the news on Semafor about some of the problems Stability AI is currently facing.

On the one hand, Stability AI currently lacks a "financially strong" partner like Microsoft and OpenAI, and it is unknown how to deal with the expensive cost of its AI model training.

Some time ago, Stability AI announced that it would launch an open source ChatGPT product, but the effect was not good after the launch.

On the other hand, the two business models envisioned by Emad are currently unclear.

One is a model of consulting and providing AI tools, and the other is a model of cooperating with related funds.

The latter model has been abandoned, and the former model is not working smoothly because employees are scattered around the office, which actually slows down the product development process and increases costs. According to Semafor, some employees have lost faith in Emad's leadership style, seeing management as chaotic.

Obviously, Stability AI's business model is still uncertain.

At present, it needs to prove two points to investors. One is that its technology is sufficient to develop top-notch AI models; the other is whether it has the ability to "make money"——

Stability AI has burned most of the $100 million it raised last year.

And just earlier, according to "Business Insider", Emad also warned Stability AI employees about the fierce competition in this industry:

You will all die in 2023.

But it’s not just a profit issue. The uncertainty of AI painting makes this field also face longer-term issues such as copyright.

Some netizens said that the Stability AI matter is just the fuse:

It now appears that this company is the most appropriate option to sue.

But Midjourney and DeviantArt better watch out, because they could be next.

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