The 70-Person AI Image Startup Challenging Silicon Valley Titans

Amidst the HumanX conference at San Francisco’s Moscone Center, it feels as though you’re standing at the epicenter of the AI universe. Leaders in technology fill the venue, and just a block away are the headquarters of OpenAI and Anthropic. Yet, a 70-person startup located 5,000 miles away in Germany’s Black Forest—a region renowned for its ham—has become a formidable competitor to Silicon Valley’s top laboratories in AI image generation.

In December, Black Forest Labs secured investment at a valuation of $3.25 billion, following agreements to enhance AI image-generation features for Adobe and the graphic design platform Canva. They’ve also forged partnerships with major AI organizations like Microsoft, Meta, and xAI to integrate similar functionalities into their offerings.

Nearly two years post-launch, Black Forest Labs can afford to be selective about its collaborations. In 2024, Elon Musk’s xAI enlisted Black Forest Labs to power Grok’s inaugural image generator. Although this partnership elevated Black Forest Labs’ profile, it stirred controversy due to the chatbot’s limited safeguards. The collaboration ended months later when xAI developed its own in-house AI image model.

Recently, xAI approached Black Forest Labs about licensing its technology again, according to sources familiar with the matter who spoke to WIRED. However, Black Forest Labs declined, considering it too operationally challenging to partner with xAI, which is known for its notoriously chaotic work environment. xAI did not respond immediately to WIRED’s request for comments.

In September, Black Forest Labs finalized a $140 million multiyear agreement to provide Meta with access to its AI image-generation technology.

AI labs are eager to collaborate with Black Forest Labs because its image generators rank among the best in the world, placing just behind OpenAI and Google according to benchmarks from the independent firm Artificial Analysis. The startup also hosts some of the most downloaded text-to-image models on Hugging Face, suggesting a number of AI image tools in the market are likely powered by a complimentary version of Black Forest Labs’ technology.

This achievement is particularly noteworthy given the company has traditionally had fewer resources than its competitors. This limitation has steered them toward a more efficient research approach known as latent diffusion, wherein an AI model initially drafts a rough outline of an image before adding intricate details.

Latent diffusion “allowed us to develop highly powerful models using orders of magnitude less resources than our competitors’ models,” stated cofounder Andreas Blattmann during an interview with WIRED at HumanX this week.

Despite its accomplishments, Black Forest Labs views image generation as merely the start. Blattmann mentioned plans for the startup to introduce a robot powered by one of its AI models later this year, though he did not disclose which company is providing the hardware. This initiative is part of a broader vision the company has for creating AI capable of perceiving and acting within the physical world.

“Visual intelligence encompasses so much more than simply content creation. Content generation is just the first step into this expansive technology,” Blattmann remarked. “What truly excites me—and it’s a recurring theme at this conference—is physical AI.”

Additionally, Black Forest Labs is in discussions with several hardware companies to potentially integrate features into products like smart glasses and robots, sources inform WIRED.

Building in the Black Forest

Blattmann, along with cofounders Robin Rombach and Patrick Esser, gained recognition in 2021 for their groundbreaking research on AI image models. In 2022, they were brought on board by Stability AI and subsequently released Stable Diffusion, a widely-used open-source AI image generator based on their earlier research. However, two years later, they announced their exit and launched Black Forest Labs.

Rather than relocating to San Francisco, the trio opted to keep their headquarters near their hometowns in Freiburg, Germany. Blattmann mentioned that this choice has been crucial to the company’s success.