Bloomberg Línea — US-based technology investment firm Coatue Management raised two artificial intelligence (AI) companies to unicorn status this week, both of which were early-stage startups for generating content and art through robots: Stability AI and Jasper.
The funding draws attention to how investors are looking at AI businesses, and how these new companies are looking to make artificial intelligence tools available to the public.
The machine-learning capabilities of the two startups make artwork or text based on a user-entered description. Both Stability AI and Jasper are considered “early-stage” companies, that is, companies that are still developing their products. In the venture capital market, a startup usually becomes a unicorn when it is mature, and with a consolidated market, and which, in general, occurs from a Series C round onwards.
However, this was not the case for the two companies, which have already reached a billion-dollar valuation following their seed and Series A rounds.
London-based Stability AI is the parent company of Stable Diffusion, an artificial intelligence tool that makes digital art. It has reached a valuation of around $1 billion after raising $101 million in a seed round led by Coatue Management and Lightspeed Venture Partners, according to a statement seen by Bloomberg News.
Meanwhile, US-based startup Jasper, an AI content platform, announced on Tuesday that it raised a $125 million Series A, giving it a $1.5 billion valuation, and which was led by Insight Partners and also featured Coatue, Bessemer Venture Partners, IVP, Foundation Capital, Founders Circle Capital and HubSpot Ventures.
“AI’s move into the mainstream is one of the most thrilling trends in technology in decades, and represents a fundamental architectural shift in computing,” said Thomas Laffont, co-founder of Coatue, in a press release.
Jasper becomes a unicorn 18 months after launching, and says the funding will be used to invest in the product, improve the customer experience, and bring Jasper to all the platforms that creators use.
The startup also says it is hiring for AI and machine-learning roles.
The funding follows on the heels of the addition of Jasper Art, a text-to-image generation functionality, and the company’s newest innovation is a browser extension that allows the startup to power textbox on almost any site.
Celebrating the new funding on Twitter, Dave Rogenmoser, CEO and co-founder, posted that Jasper’s journey was “far bumpier” than one might expect.
The company started as a tool to write Facebook ads. Now it says it allows anyone from individual freelancers to creators at enterprise companies to break through writer’s block, repackage what they’ve written, create original images, and adapt their content to different formats and languages.
After shutting down two failed software-as-a-service (SaaS) companies, Jasper’s partners “struck gold” by starting a digital marketing agency. Their first client was doing SEO for a porta-potty rental company for $300 per month, as Rogenmoser wrote: “I got my first paycheck of $375. We were ‘rich’.”
Welp, Jasper just raised a $125 million Series A at a $1.5 billion valuation.
— Dave Rogenmoser ⛳️🤖🦄 (@DaveRogenmoser) October 18, 2022
From launch to unicorn in 18 months. 🦄
We’re one of the fastest-growing startups of all time, but our journey to this point was FAR bumpier than you may think.
A thread… 🧵 pic.twitter.com/SWIFAt3zVq
After a year, they pivoted the company - called Proof -, and spent the next three years building a course startup teaching all things marketing such as “Facebook Ads Mastery”, “Webinar Bootcamp”, and “Web Conversion Secrets”.
“Course-businesses are great for learning, but hard to scale. We wanted to build SaaS. And we wanted to go big. That meant we needed to get into Y Combinator,” wrote the executive, referring to the Silicon Valley-based startup accelerator program.
Y Combinator’s Michael Seibel declined to host the startup because, he said, their idea was weak and they were thinking too small, according to Rogenmoser. “He was right, we spent six months growing Proof and applied to YC again. Turns out that going from zero to $175k-monthly-recurring-revenue in 10 months and having a big vision gives you a great shot at YC,” he said.
After joining YC, the company raised $2.2 million at a $12 million cap.
“We spent the next two and a half years learning many things, but perhaps most of all is that Proof was a feature, not a company, and building a website personalization product is very hard.”
In the fall of 2020, growth had stalled and Proof was burning money and growing weary, according to Rogenmoser. The company laid off about half of its team.
In January 2021, the startup launched Conversion dot AI, which would eventually become Jarvis, and would achieve its final form of Jasper, the CEO said.
“We thought it would be good. But we had no idea how good. The reactions from our early customers were visceral. The last 20 months since launch have been pretty absurd. Customers getting tattoos. People saying ‘their lives have been changed forever’, and even adding $3.6 million in annual recurring revenue in four days,” Rogenmoser said.
“Jasper probably looks like an overnight success to outsiders. The truth is, we’ve been working on this problem for eight years now. For six years we really struggled. But each failure gave us the skills needed to build the Jasper of today. I feel like I was born for this moment.”
Meanwhile, Stable Diffusion is among a handful of upstart AI models with the potential to upend the visual arts, along with DALL-E 2. But how does it work? Users type in a description of an image, such as ‘a horse drinking water’, and the program spits out a realistic, or surrealistic, picture.
What sets Stable Diffusion apart from its competitors is that its open-source software is available to the public. Users can build on its code to produce applications related to design, film, augmented reality, video games, advertising, and even e-commerce. It also works on small devices.
Its web application DreamStudio has more than 1.5 million users, and Stable Diffusion has more than 10 million daily users across all channels, according to Emad Mostaque, chief executive officer of Stability AI.
Practical uses range from designing applications in the metaverse to creating PowerPoint presentations, he said.
“Every creative company in the world is testing this out right now because it allows for instant creation of any image in any style, especially when fine-tuned,” Mostaque said in an interview with Bloomberg News. “There’s been this promise of interactive personalized content for many years. This is the first technology that can deliver it.”
Stability AI plans to use the funding to deploy custom versions of the model for users at a larger scale and to invest in more supercomputing power. It will also be hiring more people, with Mostaque saying he expects to grow to about 300 employees from 100 over the next year.
Coatue and Lightspeed have prior investments in the machine-learning and artificial intelligence spaces, with Lightspeed having backed video game maker Epic Games and Coatue investing in Scale AI, a data platform.
– With information from Bloomberg News
