Unveiling Stability AI Co-Founder's $500M Mistake and the Latest Doodle to Image Model

0:00What can 160 years of experience teach you about the future? When it comes to protecting what matters, Pacific Life provides life insurance, retirement income, and employee benefits for people and businesses building a more confident tomorrow. Strategies rooted in strength and backed by experience. Ask a financial professional how Pacific Life can help you today. Pacific Life Insurance Company, Omaha, Nebraska, and in New York. Pacific Life and Annuity, Phoenix, Arizona. Stability AI is in the news for a couple different reasons today. One of them is an awesome new feature they just launched, and the other is a$500 million mistake one of their co-founders made.

0:39So today on the podcast, we're going to break down what's happening with Stability AI, what their new feature is, and what one of their co-founders did that, you know, is a little bit painful in retrospect, so we're going to talk about it. So the first thing that I want to talk about is this new feature. So Stability AI recently released what is called Stable Doodle. So this is a sketch-to-image tool. This is really, really cool, especially for people that may not be incredible artists or artists that want to take some of their art to the next level and speed it up really quick. Essentially, what you're able to do is make any sort of doodle or any sort of quick sketch, and it will turn this into a full-fledged image.

1:17And it has a bunch of different styles. In their example, they didn't actually allow everyone to test out the feature before it launched. So I'm just you know going based off of a few that they have kind of shown ahead of time and otherwise you can get on there and test it out but I'll in their examples. They have one where they literally did like a doodle of an owl It is as basic as it gets the basic body of an owl with a couple eyes a little beak a couple dots on its stomach and like some Lines for its feet and it turned it into a bunch of different styles It made orgaum-y versions of the owl.

1:51It did all sorts of things really really impressive another one They did like the most basic four-year-old drawing of a castle and it turned it into a full-fledged castle really really impressive so i think this is um essentially one of their latest steps that they're trying to take right now um because they just acquired a couple companies so they actually acquired uh clip drop which is a platform um they got back in march through its purchase through the purchase of init ml which is an ai startup founded by some people that used to work at google and this is what they said to tech crunch in an email they said stable doodle is geared towards both professionals and novices regardless of their familiarity with ai tools with stable doodle anyone with basic drawing skills and online access can generate high quality original images in seconds so i think this is a really really cool new tool that they're integrating into stable diffusion and there's a lot that you can do with this.

2:51So under the hood, how this essentially works is that Stable Doodle is powered by Stable Diffusion, specifically Stable Diffusion XL. And that is paired with what they call, quote unquote, a conditional control solution, which is developed by one of Tencent's R &D divisions, the Applied Research Center, the ARC. And that is called a T2I adapter. so the control solution both allows stable diffusion excel to Accept sketches as inputs and guides the model to enable fine-tuning of the output work Artwork, so I think that's really important here This is what stable Stability AI said and kind of explained in their blog post about this.

3:36They said T2i adapter enables stable doodle to understand the outlines of sketches and generate images based on prompts combined with the outlines defined by the model. So essentially what you're gonna do is sketch a chair and then say, draw a chair like this, blah, blah, blah, put it in this kind of room, put this kind of background, put this kind of lighting, do it in this kind of style and it will take your doodle and do all of that, which is actually really nice that it allows you to combine it with a text input because you can say, here's my sketch, but my vision for this castle is for it to be in a mystical land with a river next to it and a waterfall and blah, blah, blah and it can do all of that stuff.

4:13So I think it's a really powerful tool. I think this is gonna be really big I think the idea here is that they really want to kind of branch out from just these text image Generating models they want to make this a tool that is useful for business professionals They specifically said quote ideas drawn as sketches can be immediately implemented into work to create designs for clients materials for presentation decks and websites or even to create logos moving forward stable doodle will enable users to import a sketch further we will include use cases for specific verticals including real estate applications for example i think this is overall like the direction a lot of these tools are going to go in right now we see things like mid journey and a lot of other tools and it's kind of like this fun um i don't know there's like all these little fun tools that you can use to generate images and stuff and i think we're going to start getting them into a lot more applicable use cases for business professionals so I think this is going to go to architecture I think this is going to go to real estate I think this is going to go to interior design right like imagine if you're an interior designer just did a sketch of what the basic room looked like and said make it modern make it blah blah blah do all these different things and it could you know design the entire room or instead of a sketch if they're able to take a picture of what your room currently looks like and say, you know, turn this into a modern room with all these different elements to it.

5:35And it's able to generate that as well. I think this is going to be where the, where overall the industry goes. And I think it's going to make it, these tools are going to become a lot more valuable. So with tools like Stable Doodle, I think they're really focusing on getting new sources of revenue following a lull in their commercial endeavors. Stable Doodle is free but it is subject to limit so i am assuming monetization will be turned on shortly in april semaphore reported that stability a was burning through cash leading to an excessive hunt to ramp up sales and i believe purchasing tools like this um are are essentially ways that they're planning on increasing sales um last month stability ai did raise 25 million dollars to a convertible note which is bringing its total raised over 125 million but it hasn't closed new funding in a higher valuation like they were hoping.

6:26And so the startup was last valued at a billion dollars. Reportedly, they were looking to quadruple that in the next few months to four billion, but we'll see if they're able to make that. Now, this is a perfect segue into the other reason that Stability AI is in the news. And that is the fact that one of their co-founders is accusing the CEO and the company of essentially scamming him or stealing his shares. So essentially on Thursday, he has sued the company and he says that they defrauded him into selling his 15 % stake in Stability AI for just$100. And that was just three months before they went and raised a$1 billion market valuation.

7:09They raised$100 million. So in this complaint filed in San Francisco, Cyrus Hodes, who is the co-founder who, you know, appears to have lost his shares. He said that the CEO and co-founder, Iman Mostak, convinced him Stability AI was quote-unquote essentially worthless, even as he was working on what would become a very popular image generator, which was Stable Diffusion. So Hodes is essentially, he's kind of like a self-described, he calls himself a world-round thought leader in artificial intelligence. And he said that Stability AI and Mustac never revealed that they were in talks with venture capital firms before they bought his stake.

7:48So, you know, they're saying, hey, this company is probably not going to amount to anything. Your shares are probably worthless. We'll just buy them off of you. Meanwhile, they were in talks with some venture capital firms to raise a lot of money, right, a billion dollar valuation for this thing. And he seems to be a little bit upset about that. So Stability AI last August, it actually, that's last August is when it raised that$101 million dollars in financing to hit that billion dollar valuation and they most recently were looking for a four billion dollar valuation i don't think they actually quite hit that in any case um what what he has said is that mustak's conduct uh the ceo quote unquote epitomizes corporate greed at its worst and simply shocks the conscience um hodes is suing to get his 15 stake restored plus punitive damages for the defendant's alleged fraud and uh mustock's alleged breach of fiduciary duty stability ai said in the email quote the suit is without merit and we will aggressively defend our position um and it announced its most recent financing last october hodes is a former advisor to the united arab emirates and artificial intelligence program director at harvard University's John F.

9:00Kennedy School government. But he has, you know, he said that he's worked, quote, countless hours since early 2020 at Stability AI. And that was including working on a project that was ultimately unsuccessful to help the government respond faster to COVID-19. So I think that's kind of interesting. I feel like this happens a lot where you'll have someone in a company, they'll do something, you know, right, he had this project to try to work with the government for COVID-19, which appeared to be a big, you know, hopefully successful. I'm sure they had a lot of hopes that this was going to be a big success of a project.

9:35And inevitably, it never actually panned out. And unfortunately, I feel like you see this where he may have done a lot of work, but because his project never panned out and it wasn't what actually brought in the money, and they moved on to the new thing, which was inevitably image generation, which became super popular. It feels like they kind of just kicked him out of the company because they're Like, look, you were working on something that didn't work. We were working on something that did work. So you're out. That's kind of how it feels like. I feel like I see this in startups from time to time.

10:04Stability AI describes itself as, quote, the world's leading open source generative AI company. They're really focused on being open source, open to the public, as opposed to a closed source company. but they were actually sued in May by Getty Images, who actually asked a London court to stop Stability AI from selling its image generator systems in the UK, saying that there was a bunch of copyright violations. So I think it's gonna be really interesting to see what happens with this lawsuit. If he is able to get his shares restored or not, I think that's up to the courts to decide. But in any case, Stability AI continues to forge ahead with a lot of really impressive and cool new features.

10:42So I'm excited to try out this new doodle feature. I'm turning sketches into images with the all-powerful stability AI