How Britain’s unicorn rival to Openai descended into turmoil
Exit of Stability’s founder caps tumultuous 12 months for image creator, writes Matthew Field
THE statement went out at 3.32am. Drafted and redrafted into the early hours of Saturday morning, Stability AI, arguably Britain’s most vibrant artificial intelligence start-up, finally confirmed the resignation of its embattled chief executive on March 23.
Emad Mostaque, Stability’s 40-yearold founder, quit after a tumultuous 12 months in which the company lurched between PR crises, copyright rows and lawsuits at alarming speed.
Amid the controversy, Stability launched an AI image generation tool that has proved immensely popular and is used by tens of millions of people. It has raised more than $150m (£118m) in venture funding and was valued at $1bn in 2022, marking it out as a rare British technology unicorn and a UK challenger to Openai.
Mostaque, meanwhile, has become a minor celebrity in the AI world, making ambitious claims about his company’s technology while cultivating a devil-may-care persona on Twitter where he is followed by more than 216,000 people.
Since its landmark funding round, however, the business has struggled with staff churn and been locked in costly legal battles. In October, one of the company’s biggest investors called on Mostaque to resign.
His eventual departure months later came after a series of off-the-cuff remarks made at a conference in Los Angeles, where the chief executive told a number of attendees he was planning to quit, sources say.
The statements forced a late-night dash by Stability executives to announce the appointment of two new interim chief executives.
In a series of tweets following his departure, Mostaque was typically offbeat. He posted: “My notifications are RIP… My shares have full board control aha… So it’s a decision by me as it were.”
Speaking to The Telegraph last week, Mostaque said he may have been a “good chief executive on the research and development side, but not necessarily the right fit for scaling” the business. By his own admission, the way Stability operated was “very not normal”, he said last year, with sprawling projects across its remote workforce. Born in Jordan to a Bengali Muslim family, Mostaque moved to the UK and attended Oxford University, where he read mathematics and computer science. His route to launching an AI start-up was far from usual. The entrepreneur says he grappled with ADHD and Asperger’s from a young age. His career before Stability included variously working at a hedge fund, as a consultant and a Middle East analyst.
A project aiming to use big data to tackle Covid that was launched in late 2020 eventually morphed into Stability. By early 2022, the start-up was close to bankruptcy but Mostaque had started to experiment with using AI to create synthetic images.
Based on open source AI technology – tech that is freely, publicly available – the business’s AI image generation tool, Stable Diffusion, quickly proved popular. By October 2022, Stability was valued at $1bn. Its honeymoon period was short-lived. Stability and other AI companies, such as CHATGPT developer Openai, quickly found themselves locked in legal rows with publishers and artists over whether developing their tools by training them on vast troves of images harvested from the internet counted as “fair use”.
Getty Images sued Stability in the US and the UK in early 2023, accusing it of misusing up to 12m images. Stability denied the allegations in a recent High Court filing. The debate over copyright also caused friction within Stability, prompting one senior staff member Ed Newton-rex to resign in November, saying: “Exploiting creators can’t be the long-term solution in generative AI.”
Throughout last year Stability contended with a steady stream of exits. One exasperated ex-employee bemoans the “incompetence” of the start-up’s management. Before Mostaque’s resignation, several key Stability researchers quit the business.
Mostaque admitted to growing pains. He said the company “went Big Tech too quickly”, rapidly expanding to Silicon Valley where “everything slowed down”. He said it subsequently
“moved our entire centre of gravity” back to London.
As well as the copyright dispute, Mostaque has been sued by two early collaborators who accuse him of fraud. In a legal filing this month, lawyers for Mostaque and Stability said: “Each of the plaintiff ’s claims is meritless”.
Perhaps most dramatic has been the collapse in relations between Stability and its biggest investors. In October 2022, Stability hosted a glitzy launch party in San Francisco to celebrate a funding round led by New York fund Coatue. But relations quickly soured. Exactly a year later Coatue launched a stunning attack on Mostaque, privately demanding he quit and sell the start-up. Stability insisted Mostaque’s leadership had been “instrumental” to its success.
Despite the falling out, Mostaque’s exit was unexpected. His shares give him majority voting control over the business he founded, meaning he could not be forced out.
Stability is now being led by interim co-chief executives Shan Shan Wong, a former investment banker who joined in November, and Christian Laforte, its former technology chief.
Jim O’shaughnessy, Stability’s chairman, said the appointments give “us confidence in our future and in our ability to emerge from this period as a stronger company”.
Longer term, Mostaque told The Telegraph that Stability’s board was likely to bring in a new media-oriented chief executive to accelerate revenue”. Newly jobless, he is planning new ventures, saying: “Hopefully the UK will have more GENAI successes.”
Somewhat ironically, the new leaders must now stabilise Stability. Thankfully, they have something to build on. Stability’s products have had hundreds of millions of downloads and sources say it is making $5.4m a month in revenues, although it is loss-making.
Meanwhile, rivals are circling. US competitors have expressed an interest.
A Stability spokesman added: “While several parties have expressed an interest in the purchase of Stability, we are not trying to sell the company.”
Mostaque could not resist a final flourish after his departure. In a Tweet, he posted a cryptic image of himself talking to Satya Nadella, the chief executive of Microsoft, prompting speculation he could join the tech giant, a key backer of rival Openai.
“I’m just messing with you all,” Mostaque followed up.