Inside Stability AI’s bad breakup with key investors
Everyone knew that Stability AI was going through the wringer. There was the steady stream of executive departures, the damning Forbes story from summer, and then, just over this weekend, Stability founder Emad Mostaque’s sudden resignation as CEO.
But what we didn’t know was what has been playing out behind-the-scenes between Mostaque and Stability’s marquee investors, Coatue and Lightspeed. What my colleague Jessica Mathews and I found was a love story gone wrong. At first, Coatue and Lightspeed saw Stability as a vital AI investment, and Mostaque as a star. Then, things went haywire. We write:
“The story of how that relationship fell apart—to the point that, in just one year, Coatue was demanding that Mostaque be fired—is a spectacular business debacle that may cost tens of millions of dollars, dozens of jobs, and the reputations of many of the principal actors involved. But the whirlwind romance that brought together top-tier investors and a startup in the tech industry’s most promising sector is also a reminder of the hype, FOMO, and dangerous delusions currently fueling Silicon Valley’s love affair with artificial intelligence.”
Together, Jessica and I spoke to 20 Stability investors and former employees from both Stability and Coatue, along with Coatue-backed founders. We also reviewed hundreds of pages of documents, including lawsuits, balance sheets, business plans, pitch decks, and correspondence. We even reached Mostaque via email, who told Fortune:
“Nobody tells you how hard it is to be a CEO and there are better CEOs than me to scale a business. I am not sure anyone else would have been able to build and grow the research team to build the best and most widely used models out there and I’m very proud of the team there. I look forward to moving onto the next problem to handle and hopefully move the needle.”
In my view, it’ll take years (and maybe an HBO show) before we finally put all the Stability puzzle pieces together. But for today, Jessica and I can take you inside a turnkey facet of the story: How an investor-founder romance soured, helping set up the situation Stability is in today—grasping for its future.
It was evident Stability was in turmoil, and now we know more as to why—but, to me, there are still so many unanswered questions. After days of canceled plans, dozens of reporting hours, juggling fact-checks, and waking up around 3 a.m. in a cold sweat, I don’t know necessarily what happens from here.
Stability may not know either. Read the whole story here.
Ask Andy…Fortune’s Ask Andy column, penned by Bonobos cofounder and Burn Rate author, has debuted! Our very first question-asker is a software developer who wants to know: How do you figure out if a company is legit? The crux of Andy’s advice: “Find a company where you believe in the mission. One where you fall in love with the product or service.” Read the whole column here.
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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This story was originally featured on Fortune.com
