Runway ML, one of two startups behind the popular Stable Diffusion text-to-image AI model, has raised new funding at a $500 million valuation, Forbes has learned.
Felicis Ventures is leading the new funding, the sources said, which follows a generative AI boom that has caught the public’s attention in recent months thanks to releases that also include OpenAI’s Dall-E and ChatGPT. Runway has quickly become one of the hottest startups with its video editing software, for which the company has released a slew of generative AI features. For example, from a photo of a forest, a user can type a short phrase of text into Runway’s software and instantly ward off a lake or a castle among the trees.
Sources say annualized revenue is hovering around $1 million, the latest indication that while frothy valuations have dissipated from most of the venture capital industry, the bustling generative AI space has been a exception. Called for comment, Runway CEO Cristóbal Valenzuela said Forbes that the company raised $50 million from Felicis with participation from fellow new backer Madrona and existing investors Amplify Partners, Compound VC, Coatue and Lux Capital. He declined to comment on the valuation, but noted that the ARR is now “under $5 million”.
The New York company was created by Valenzuela, Alejandro Matamala-Ortiz and Anastasis Germanidis. The trio met at New York University School of Art, where they bonded over a mutual interest in using digital tools for design. They collaborated on machine learning research that soon evolved into Runway, which was founded in 2018.
The company previously raised a total of $44 million and after a Series B funding round last December, it was valued at $200 million. The company employs 35 people, almost half of whom are immigrants with visas, an important choice for the founders who are themselves immigrants (Valenzuela and Matamala-Ortiz come from Chile, Germanidis from Greece). Valenzuela said it will use the new funds to bolster research efforts and accelerate its product roadmap. The company will be making new hires, such as for senior researchers and an in-house design team, but has not set a headcount target, he said.
“Imagine you’re watching a movie and you’re the main actor in the movie: your voice, your body, your face.”
Many of Runway’s customers are individual creatives, who pay $12 per month to use the software. It has also been used by corporate clients such as CBS Late Show with Stephen Colbert and the Hollywood hit’s visual effects team Everything everywhere all at once for video editing. New Balance used the software to design athletic shoes. Since the launch of Stable Diffusion, adoption of the product has been “much more mainstream”, according to Valenzuela. In the long term, he plans to create an Adobe-esque suite of native AI video editing software tools with some fantastic apps.
“You’re going to be in every movie,” he said in a November interview. “Imagine you’re watching a movie and you’re the main actor in the movie: your voice, your body, your face.”
Valenzuela said Forbes early November that the company was able to ramp up its product rapidly due to the lead it built up in generative AI long before it went flashy this summer. “It’s not that we shipped [features] so fast. There is no recipe. It’s that we’ve been training for this marathon for four years,” he said.
“We research fundamental AI models, we build the infrastructure to use those models, and then we build applications,” Valenzuela said. In the case of the popular open-source Stable Diffusion text-to-image AI model, Runway lead researcher Patrick Esser co-authored the initial research paper alongside academics from the Ludwig Maximilian University of Munich. Runway then helped create the original version of Stable Diffusion and now implements the technology into its design software features. “Stable streaming didn’t exist before we invented it,” Valenzuela said in November. Since its public launch in September, the template has been used by more than 10 million people.
Stability AI, another startup commonly associated with Stable Diffusion, stepped in at the second stage by donating computing power to help build more advanced versions of the AI model. As part of the agreement, the researchers renamed the project, Valenzuela said (originally the verbose academic name was “High-Resolution Image Synthesis with Latent Scattering Models”).
“Who are you betting on to deliver the future of creative AI? The world’s best AI researchers, artists and software developers… or hedge fund promoters? »
The open source nature of Stable Diffusion led to confusion over the ownership of the model which, on one occasion, leaked into the public sphere. In October, Runway released a new update to Stable Diffusion, prompting Stability to issue a takedown request on IP rights. “These are bad faith actors who agreed to one thing, didn’t get consent from other researchers who worked hard on the project, then turned around and did something else,” wrote Daniel Jeffries, CIO. from Stability AI, in a post on the Reddit internet forum. . Stability eventually withdrew its withdrawal request, with CEO Emad Mostaque saying Forbes back when he wanted more bad actor guardrails in place before releasing the model.
“Who are you betting on to deliver the future of creative AI? The world’s best AI researchers, artists and software developers… or hedge fund promoters? wrote Amplify Partners Founder Sunil Dhaliwal, Runway Board Member, on Twitter (Stability’s Mostaque was formerly a hedge fund manager). For his part, Valenzuela clarified that Runway does not have an official partnership with Stability. Runway has since stepped away from primary involvement with new Stable Diffusion releases, including version 2.0 which was released in late November, according to Valenzuela. “I’m not really sure what Stable Diffusion 2.0 is,” he said. Forbes Monday.
In any case, after the release of Stable Diffusion, both companies became benefactors of the same generative AI hype. Forbes reported that Stability raised a $1 billion valuation, while others like Jasper ($1.5 billion) and Descript ($550 million, according to a report by The Information) also raised significant rounds in recent months. In November, before Forbes learned of the funding, Valenzuela alluded to the herd of familiar and new VC faces who reached out to him.
“Everyone is now like, ‘I always thought this was going to work and I want to invest,'” he said. “But three years ago they had no conviction about it. It’s a great way for me to find out who is opportunistic or who deeply understands our technology.”
Alex Konrad contributed reporting.
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