Stability AI became a $1 billion company with the help of a viral AI text-to-image generator and — per interviews with more than 30 people — some misleading claims from founder Emad Mostaque.
By Kenrick Cai & Iain Martin, Forbes Staff
Emad Mostaque is the modern-day Renaissance man who kicked off the AI gold rush. The Oxford master’s degree holder is an award-winning hedge fund manager, a trusted confidant to the United Nations and the tech founder behind Stable Diffusion — the text-to-image generator that broke the internet last summer and, in his words, pressured OpenAI to launch ChatGPT, the bot that mainstreamed AI. Now he’s one of the faces of the generative AI wave and has secured more than $100 million to pursue his vision of building a truly open AI that he dreams will transform Hollywood, democratize education and vanquish PowerPoint. “Hopefully they’ll give me a Nobel Peace Prize for that,” he joked in a January interview with Forbes.
At least, that’s the way that he tells the story.
In reality, Mostaque has a bachelor’s degree, not a master’s degree from Oxford. The hedge fund’s banner year was followed by one so poor that it shut down months later. The U.N. hasn’t worked with him for years. And while Stable Diffusion was the main reason for his own startup Stability AI’s ascent to prominence, its source code was written by a different group of researchers. “Stability, as far as I know, did not even know about this thing when we created it,” Björn Ommer, the professor who led the research, told Forbes. “They jumped on this wagon only later on.”
“What he is good at is taking other people’s work and putting his name on it, or doing stuff that you can’t check if it’s true.”
These aren’t the only misleading stories Mostaque, 40, has told to maneuver himself to the forefront of what some are calling the greatest technological sea change since the internet — despite having no formal experience in the field of artificial intelligence. Interviews with 13 current and former employees and more than two dozen investors, collaborators and former colleagues, as well as pitch decks and internal documents, suggest his recent success has been bolstered by exaggeration and dubious claims.
After Stable Diffusion went viral last summer, blue-chip venture capital firms Coatue Management and Lightspeed Venture Partners poured in $100 million, giving Mostaque’s London-based startup a $1 billion valuation. By October, Stable Diffusion had 10 million daily users, Mostaque told Bloomberg. In May, the White House named Stability alongside Microsoft and Nvidia as one of the seven “leading AI developers” which would collaborate on a landmark federal AI safety initiative. Mostaque recently dined with Amazon founder Jeff Bezos; reclusive Google cofounder Sergey Brin made a rare public appearance at Stability’s ritzy launch party in San Francisco last October.
Mostaque’s vision for open-source AI has mesmerized other longtime technologists. “He’s probably the most visionary person I’ve ever met,” says Christian Cantrell, who left a two-decade career at Adobe to join Stability in October (he quit six months later and launched his own startup). More premier talent has followed since the cash injection last summer. Among the 140-person staff: a vice president of research and development who was a Nvidia director; another research head who came from Google Brain; and three Ph.D. students from Ommer’s lab.
But to build buzz around Stability, Mostaque made an elaborate gambit supported by exaggerated claims and promises, overstating his role in several major AI projects and embellishing a quotidian transaction with the notoriously uncompromising Amazon into a “strategic partnership” with an 80% discount. AI researchers with whom Mostaque worked told Forbes he claimed credit he did not earn or deserve. And when pressed, Stability spokesperson Motez Bishara admitted to Forbes that Stability had no special deal with Amazon.
Mostaque’s other mischaracterizations to investors include multiple fundraising decks seen by Forbes that presented the OECD, WHO and World Bank as Stability’s partners at the time — which all three organizations deny. Bishara said the company could not comment on the presentations “without knowing the exact version,” but that they were accompanied by additional data and documentation.
Inside the company, wages and payroll taxes have been repeatedly delayed or unpaid, according to eight former employees, and last year the UK tax agency threatened to seize company assets. (“There were several issues that were expeditiously resolved,” Bishara said.) At the same time that workers faced payday uncertainties, Mostaque’s wife Zehra Qureshi, who was head of PR and later assumed a seat on the company’s board of directors, transferred tens of thousands of pounds out of the company’s bank account, per several sources and screenshots of financial transactions viewed by Forbes. Stability spokesperson Bishara said the spouses had been “making loans to and from the business” and that “any amounts owed from or to Mostaque and Qureshi were settled in full before the end of 2022.”
In responding to a detailed list of questions, Mostaque shared a statement saying that Stability had not historically prioritized the “systems and processes” underpinning the fast-growing startup. “We recognize our flaws, and we are working to improve and resolve these issues in an effective and compassionate manner,” he wrote.
AI experts and prospective investors have been privately expressing doubts about some of Mostaque’s claims for months now. Despite Silicon Valley’s sudden, insatiable appetite for AI startups, a number of venture capitalists told Forbes that the Stability founder has been struggling to raise hundreds of millions more in cash at a roughly $4 billion valuation. Mostaque publicly claimed last October that annualized revenue had surpassed $10 million, but insiders say sales have not improved (Bishara said the October number was “a fair assessment of anticipated revenues at the time,” and declined to comment on current revenue). “So many things don’t add up,” said one VC who rejected Mostaque’s funding overtures.
A BILLION-DOLLAR GAMBIT
In 2005, Mostaque graduated from Oxford with a bachelor’s degree, not a master’s degree as he’d later claim. (Responding to an inquiry from Forbes, Bishara said Mostaque intended to apply to receive an “Oxford MA,” which the university grants to alumni without any additional graduate-level coursework. He is now expected to obtain that degree in July.)
Then he went into finance, joining Swiss fund manager Pictet. “He was very good at spinning a narrative,” said JP Smith, who hired Mostaque at Pictet and brought him over as a consultant at firm Ecstrat. In 2017, Mostaque joined hedge fund Capricorn, where Mostaque told Forbes he’d won an award for restructuring and running the struggling firm. “He was co-chief investment officer, but he didn’t pull the trigger on the investments,” clarified Damon Hoff, Capricorn’s cofounder. Hoff said the two-year run with the $330 million fund ended with its wind down in 2018 due to poor performance.
Following a string of abandoned startups (including a crypto project centered on a digitized Quran), Mostaque founded Stability in 2019 as an AI-powered data hub that global agencies would use to make decisions about Covid-19. It launched with a July 2020 virtual event featuring talks by Stanford AI expert Fei-Fei Li and representatives from UNESCO, WHO and the World Bank. But the project failed to get off the ground and was scrapped about a year later. “Lots of people promised a lot and they didn’t come through,” Mostaque told Forbes in January.
“One thing you learned from that is if you have a company with a huge press department, you can rebrand history in your interest.”
The company’s focus shifted several more times. Early employees said they researched building a network of vending machine refrigerators around London that would be stocked with grab-and-go items, as well as a line of emotional support dog NFTs (Snoop Dogg was interested, employees recollect Mostaque claiming around the office; the rapper could not be reached for comment). When generative AI started exploding, Mostaque saw an opportunity. Through a variety of maneuvers and exaggerations, he would successfully position Stability as one of the leading unicorn AI companies of the moment.
To get there, Mostaque began telling investors that Stability was assembling one of the world’s 10 biggest supercomputers. He branded himself to AI researchers as a beneficent ally, magnanimously willing to provide funding and lend use of Stability’s supercomputer to grassroots AI builders fighting the good fight against goliaths like Google and OpenAI.
This supercomputer, Mostaque said, was built from thousands of Nvidia’s state-of-the-art GPUs and purchased with a stunning 80% discount from Amazon Web Services. Five fundraising pitch decks from May to August 2022 list AWS as a “strategic partner” or “partner.”
“We talked to Amazon and said this will be the big thing,” Mostaque told Forbes from his bustling London headquarters in January. “They cut us an incredibly attractive deal — certain personal guarantees and other things, which I don’t particularly want to go into because she’ll be angry at me,” he explained, nodding to Zehra Qureshi, his wife and Stability’s then-head of PR. Qureshi declined to elaborate.
But Bratin Saha, a vice president for the Seattle tech giant’s AI arm, told Forbes in January that Stability is “accessing AWS infrastructure no different than what our other customers do.” Three former Stability employees said that prior to its venture capital injection, Amazon had threatened to revoke the company’s access to some of its GPUs because it had racked up millions in bills that had gone unpaid for months.
Asked for clarification, Stability conceded that the “incredibly attractive deal” Mostaque had claimed was actually the standard discount Amazon offers to anybody who makes a long-term commitment to lease computing power. “Any payment issues were managed in an orderly and communicative way with support from AWS,” Bishara said. AWS did not respond to multiple requests for additional comment.
Stability’s pitch decks contained other exaggerations: In investor presentations from May and June 2022, Stability described AI image generator Midjourney as a part of its “ecosystem” claiming it had “co-created” the product and “organized” its user community. Midjourney founder David Holz told Forbes Mostaque gave a “very small” financial donation but otherwise had no connection with his organization.
In addition, Mostaque directed his team to list groups like UNESCO, OECD, WHO and World Bank as partners in pitch decks, even though they were not involved in the company’s later evolution, according to four former employees. Bishara denied that Mostaque made this directive, but these organizations are indeed listed as “partners” in multiple fundraising decks as recent as August 2022, in which Mostaque also describes himself as the “UN Covid AI lead.”
A UNESCO spokesperson said the UN agency had no association with Stability beyond the Covid-19 data initiative, which had ended well before last summer. The other three agencies said they had no record of official partnerships with the company.
Asked about the claims in Stability’s pitch decks, Bishara said that all of Stability’s investor decks included investment memos and appendix documentation that contained more context on the Amazon deal and details of “our relationship with partners and more.” But two investors pitched by the company told Forbes they received no such additional information.
THE DEVELOPERS BEHIND STABLE DIFFUSION
In June 2022, Mostaque offered to provide Stability’s supercomputer to a group of German academics who had created an open-sourced image generator nicknamed Latent Diffusion. This model had launched seven months prior in collaboration with a New York City-based AI startup called Runway. But it was trained using only a few dozen Nvidia GPUs, according to Björn Ommer, the professor who led the research teams at Ludwig Maximilian University of Munich and Heidelberg University.
For the researchers, who were facing shockingly high computing costs to do their work, the proposal seemed to them a no-brainer. The computing boost Stability provided dramatically improved Latent Diffusion’s performance. In August, the new model was launched as Stable Diffusion, a new name that referenced its benefactor. Stability issued a press release and Mostaque positioned himself in the public eye as chief evangelist for what he calls “the most popular open source software ever.” (Linux or Firefox might disagree.)
“What he is good at is taking other people’s work and putting his name on it, or doing stuff that you can’t check if it’s true,” one former employee said of Mostaque. In a statement, Bishara said Mostaque is “quick to praise and attribute the work of collaborators” and “categorically denies these spurious claims and characterizations.”
Within days of Stable Diffusion’s launch, Stability secured $100 million from leading tech investment firms Coatue and Lightspeed — eight times the amount of money Mostaque set out to raise, he declared in text messages to his earlier investors. Both firms declined requests for comment.
“The investment thesis that we had is that we don’t know exactly what all the use cases will be, but we know that this technology is truly transformative and has reached a tipping point in terms of what it can do.”
The round valued Stability at $1 billion though the company hadn’t yet generated much revenue. Stability’s fundraising decks at the time characterized Stable Diffusion as “our” model, with no mention of the original researchers. A press release announcing its funding said “Stability AI is the company behind Stable Diffusion” making no reference whatsoever to its creators. Ommer told Forbes he’d hoped to publicize his lab’s work, but his university’s entire press department was on vacation at the time.
Bishara said that Stability has made “repeated public statements” crediting Ludwig Maximilian University and Runway on its website and on the Stable Diffusion’s GitHub page. Nevertheless, the original developers feel Mostaque misled the public in key communications. “One thing you learned from that is if you have a company with a huge press department, you can rebrand history in your interest,” Ommer said.
In October, Stability claimed Runway had stolen its intellectual property by releasing a new version of Stable Diffusion. Runway cofounder Cristóbal Valenzuela snapped back that a copyright breach wasn’t possible because the tech was open source; Mostaque retracted a takedown request hours later. He later told Forbes that he was worried about the lack of guardrails in Runway’s version — though Stable Diffusion’s collaborators don’t buy the excuse.
The incident, Ommer said, “pushed it too far over the edge.” Valenzuela was equally disillusioned. “New people are coming into this field that we’ve been in for years, and really trying to own narratives that they should not,” he told Forbes in an interview last year (he declined a request for further comment).
Both his lab and Runway ceased working with Stability.
While Mostaque was touting Stability’s supercomputer and partnerships to investors and researchers, the company was facing a cash crunch. Wages and payroll taxes were repeatedly delayed or unpaid, according to seven current and former employees — in some cases for more than a month. Five of these sources said they personally experienced delayed payments between 2020 and 2023. Four of these people independently told Forbes that representatives of HM Revenue & Customs, the U.K. government tax collection agency, appeared at the company office and threatened to seize assets due to overdue taxes. Bishara said that delayed payments on taxes and employee salaries have been rectified.
Eric Hallahan, a former intern, told Forbes he is still waiting for payment on an invoice he sent the company last August for 181 of the 300 hours he worked. Bishara said that the company has no record of missed salary payments “in the regular course of operations” since 2021, but conceded that some may have occurred under “extraneous circumstances”; in Hallahan’s case, he said Stability is looking into the invoice after being alerted to it in April.
While staffers said they stressed over being paid last summer, tens of thousands of British pounds moved from Stability’s corporate account to the personal account of Qureshi, Mostaque’s wife, per screenshots of financial transactions obtained by Forbes.
Bishara attributed the transactions to Stability’s “owner-managed startup” origins, which he said included the couple making loans to and from the company. “As the company grew and matured, a full reconciliation was done and any amounts owed from or to Mostaque and Qureshi were settled in full before the end of 2022 by the new, experienced finance team,” he told Forbes. Qureshi’s lawyers declined to answer questions but shared a statement in which she said she had provided “emotional and financial support” to her husband’s business since 2021.
While Qureshi’s formal role at the company was head of PR, early employees told Forbes she had described herself as Stability’s chief operating officer — a title that also appeared on business cards. (Bishara said Qureshi never held an executive role and the cards were “created by a family friend for design purposes and were never used.”) After the company raised funding in September, Qureshi joined its board of directors.
One current and four former employees who declined to be named for fear of retribution said Qureshi regularly scolded employees so harshly that she drove some to tears. Qureshi described her management style as “direct” in a statement shared through her lawyers. “Unfortunately it seems that my views or directions were taken personally by a few individuals, which was not my intention.”
“Start to finish,” Mostaque told Forbes, he needed just six days to secure $100 million from leading investment firms Coatue and Lightspeed once Stable Diffusion went viral.
Bishara said Qureshi left the company in late January to pursue personal endeavors and that she is no longer on the board. However, an organizational chart from earlier in May listed her as the “Head of Foundation,” at the top of the company hierarchy equal to Mostaque’s position.
Qureshi, through counsel, shared a statement: “I recognised that the time had come for us to move in different directions and I stepped down from my role as Head of PR at the start of this year, and have also resigned from the Board. Emad and I have young children who need my focus, and I also intend to pursue other, personal projects, but I will continue to support my husband in his quest to build and grow Stability AI into a global leader in the field.”
Venture capitalists historically spend months performing due diligence, a process that involves analyzing the market, vetting the founder and speaking to customers, to check for red flags before investing in a startup. But “start to finish,” Mostaque told Forbes, he needed just six days to secure $100 million from leading investment firms Coatue and Lightspeed once Stable Diffusion went viral. The extent of due diligence the firms performed is unclear given the speed of the investment.
“The investment thesis that we had is that we don’t know exactly what all the use cases will be, but we know that this technology is truly transformative and has reached a tipping point in terms of what it can do,” Gaurav Gupta, the Lightspeed partner who led the investment, told Forbes in a January interview. Coatue and Lightspeed declined requests for further comment.
Mostaque says Stability is building bespoke AI models for dozens of customers. But he told Forbes that he is only authorized to name two. The first is Eros Investments, an Indian holding company whose media arm was delisted from the New York Stock Exchange and recently settled a lawsuit alleging that it misled investors, though it did not admit wrongdoing. (Eros did not respond to multiple requests for comment.) The second: the African nation Malawi, where, Mostaque said on a recent podcast appearance, Stability is currently “deploying four million tablets to every child.” (Malawi’s government did not return requests for comment.)
Less than two months after Stable Diffusion’s public launch, Mostaque claimed that Stability’s annualized revenue was higher than the “low tens of millions of dollars” that OpenAI was reportedly making at the time. Sources familiar with the matter said Stability’s ARR is now less than $10 million — and that it’s far outpaced by the startup’s burn rate. Like many AI startups raising vast amounts of cash right now, it will need more money to stay afloat.
In January, Mostaque implied that the company was having no issues with fundraising: “We have been offered by many, many entities and we’ve said no,” he told Forbes. But three venture capitalists told Forbes he has been pitching them and other investors on raising a fresh $400 million for several months; they’d all passed. (Bishara declined to comment on revenue, but said the company has “significant” cash reserves remaining.)
Stability is also facing a pair of lawsuits which accuse it of violating copyright law to train its technology. It filed a motion to dismiss one from a class action of artists on grounds that the artists failed to identify any specific instances of infringement. In response to the other, from Getty Images, it said Delaware — where the suit was filed — lacked jurisdiction and has moved to change the location to Northern California or dismiss the case outright. Both motions are pending court review. Bishara declined to comment on both suits.
In an open letter last September, Democratic representative Anna Eshoo urged action in Washington against the open source nature of Stable Diffusion. The model, she wrote, had been used to generate images of “violently beaten Asian women” and “pornography, some of which portray real people.” Bishara said newer versions of Stable Diffusion filter data for “potentially unsafe content, helping to prevent users from generating harmful images in the first place.”
AI research has not come easy for Stability — even on its flagship Stable Diffusion product. The last version of the model published by the original developers (released in October 2022) received three times as many downloads last month on Hugging Face, which hosts the models, as compared to the most popular version published in-house by Stability. And StableLM, its ChatGPT competitor, was released in April to a tiny fraction of Stable Diffusion’s fanfare.
Mostaque is unfazed. Stability has a seasoned technical leader to spearhead research: himself. He claims to have discovered a bespoke medical treatment for autism years ago by using AI to analyze existing scientific literature and build a knowledge graph of molecular compounds. (Bishara said the research was done privately and declined to elaborate further.)
“I’m a good programmer,” Mostaque told Forbes in January. It all dates back to a gap year he said he took before Oxford to be a developer at software company Metaswitch, he continued. “I didn’t know how to program before that, so I taught myself over the summer — quite naturally actually,” he says. By his account, he submitted several pieces of code and made a personal plea to the company: “I want to be a programmer and you should pay me to be a programmer. They said sure.”
“I can be quite convincing at times,” he says.
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