In yet another sign crypto venture capitalists are seizing on the artificial intelligence trend, the list of backers that propelled Stability.AI to its $80 million investment includes big names in the crypto industry.
According to company documents seen by DL News, Lightspeed Ventures and Coatue joined a fundraising round, investing $2.4 million and $4.9 million, respectively.
Lightspeed has invested in some of the crypto industry’s biggest companies, including Ripple, Solana, and Yuga Labs. Coatue has backed Chainalysis, CertiK, Dapper Labs, and other crypto firms. Both of the investment firms contributed funds to blockchain infrastructure start-up Alchemy.
The investor list is a sign that as AI hype grabs headlines and cash piles from Silicon Valley, growth-stage opportunities in the crypto industry are fewer and far between.
Based in Los Angeles, Stability.AI is best known for Stable Diffusion, a technology model that can turn text prompts into images. Crypto plays no role in its design or operations.
Expanding VC focus
“Many ‘crypto-only’ funds that raised large funds are finding it challenging to deploy funds solely within the crypto market,” Eylon Aviv, a partner at crypto investment firm Collider, told DL News. “As a result, they’re expanding their focus to adjacent fields, with AI being a prime example.”
Stability.AI didn’t lure only crypto-focused funds.
Greycroft Partners invested about $20 million, the document revealed. And Retspan, a fund backed by Silicon Valley investor and early Facebook executive Sean Parker, invested almost $12 million. A representative for Parker declined to comment.
Eric Schmidt is also among investors in Stability.AI, a source close to the ex-Google CEO confirmed to DL News. The artificial intelligence firm touted Schmidt’s backing on X this week.
In 2022, Stability.AI raised $101 million at a reported $1 billion valuation.
The document dated June 25 shows Stability.AI issued almost 2 million shares for approximately $51 million. The company may sell another 3 million or so shares for $29 million.
As part of the financing, Prem Akkaraju has been appointed CEO for four years. He will earn a base salary of $500,000 per year, according to the documents.
VCs go cold on crypto
The round signals a shift in the focus of VC to AI plays and away from blockchain technology startups.
Stability.AI has 270,000 users on its Discord server and has created over 400 million images. It also can create audio and video according to user prompts.
The arrival of applications like Stable Diffusion and OpenAI’s ChatGPT app has captured investors’ imagination. The valuation of OpenAI is reportedly more than $80 billion, helped by a $10 billion investment by Microsoft in 2023.
Lemniscap, a Cayman Islands-based firm that specialises in crypto startups, invested $2.3 million across three entities in Stability.AI, according to separate documents. It has also backed Avalanche and Algorand, both layer 1 blockchain networks.
Lemniscap invested more than $66,000 in Stability.AI. via its Lemniscap Blockchain Fund.
Liam Kelly is a DeFi correspondent at DL News. Got a tip about the election? Reach out at liam@dlnews.com.