In a noteworthy pivot, prominent crypto investors and venture capitalists are channeling substantial investments into the burgeoning domain of artificial intelligence, exemplified by Stability.AI’s recent $80 million funding triumph. The esteemed backers of this trailblazing startup feature renowned entities from the crypto sphere.

Confidential company records disclosed by DL News reveal that Lightspeed Ventures and Coatue participated in a significant funding round, contributing $2.4 million and $4.9 million, respectively.

Lightspeed Ventures boasts a portfolio that includes titans of the crypto industry such as Ripple, Solana, and Yuga Labs. Coatue, similarly, has supported notable crypto enterprises including Chainalysis, CertiK, and Dapper Labs, with both firms also investing in blockchain infrastructure pioneer Alchemy.

This assemblage of investors underscores a discernible trend: as the allure of AI captivates both headlines and investment capital from Silicon Valley, the availability of growth-stage opportunities within the crypto sector is diminishing.

Stability.AI: Pioneering Beyond Crypto

Headquartered in Los Angeles, Stability.AI has garnered acclaim for its groundbreaking Stable Diffusion technology, which converts textual prompts into vivid images. Notably, the company’s operations and design are devoid of any cryptocurrency integration.

Broadened Investment Horizons

Eylon Aviv, a partner at crypto investment firm Collider, articulated the shifting investment landscape to DL News: “Many ‘crypto-only’ funds, having amassed substantial capital, are now grappling with the challenge of deploying these funds exclusively within the crypto market. Consequently, they are broadening their investment focus to encompass adjacent sectors, with AI being a prime beneficiary.”

Stability.AI’s allure extends beyond crypto-centric funds. Greycroft Partners, for instance, injected approximately $20 million into the startup, as revealed by internal documents. Additionally, Retspan, a fund supported by Silicon Valley magnate and former Facebook executive Sean Parker, invested nearly $12 million. Parker’s representative, however, refrained from commenting.

Another high-profile investor is former Google CEO Eric Schmidt, whose involvement with Stability.AI was confirmed by a source close to him. The AI firm highlighted Schmidt’s endorsement on X earlier this week.

In a notable funding milestone in 2022, Stability.AI secured $101 million, achieving a valuation of $1 billion. According to a document dated June 25, the company issued nearly 2 million shares, raising approximately $51 million, with plans to sell an additional 3 million shares for $29 million.

As part of the financing arrangement, Prem Akkaraju has been appointed CEO for a four-year tenure, with a base annual salary of $500,000.

A Shift in VC Focus

This funding round epitomizes a strategic reorientation among venture capitalists from blockchain technology startups to AI-driven ventures. Stability.AI boasts a vibrant community of 270,000 users on its Discord server and has facilitated the creation of over 400 million images. The platform also possesses capabilities for generating audio and video based on user prompts.

The advent of transformative applications such as Stable Diffusion and OpenAI’s ChatGPT has ignited investor enthusiasm. OpenAI, bolstered by a $10 billion investment from Microsoft in 2023, now commands a valuation exceeding $80 billion.

Lemniscap, a Cayman Islands-based firm specializing in crypto startups, allocated $2.3 million across three entities within Stability.AI, according to separate documents. The firm has also invested in layer 1 blockchain networks like Avalanche and Algorand. Through its Lemniscap Blockchain Fund, the firm invested over $66,000 in Stability.AI.