Mistral AI secures €105M in Europe’s largest-ever seed round

A French start-up Mistral AI founded merely four weeks ago by a team of former Meta and Google artificial intelligence researchers has successfully secured a remarkable €105mn in what is now Europe’s largest-ever seed round of funding.

According to insiders, Mistral AI, headquartered in Paris, is now valued at €240mn, taking into account the funds raised. This record-breaking achievement highlights the increasing frenzy surrounding AI and Europe’s determination to establish a viable alternative to Silicon Valley giants like Microsoft-backed OpenAI and Google’s DeepMind.

Europe’s Drive for Transformation

The significance of this technology’s transformative potential and Europe’s imperative to respond as a regulator, customer, and investor are gaining prominence. Arthur Mensch, the CEO of Mistral, emphasized this sentiment, stating, “There is a rising awareness of the fact that this technology is transformative and Europe needs to do something about it, both as a regulator, as a customer, and an investor.”

Mensch, a former DeepMind researcher, joined forces with Timothée Lacroix and Guillaume Lample, who recently departed from Meta after working at Facebook’s parent company for several years, to establish Mistral.

Diverse Investors Reinforce Strategic Nature

Leading Mistral’s funding round is Lightspeed Venture Partners, a notable early backer of successful companies such as Snapchat, Epic Games, and StabilityAI. The roster of investors also includes former Google CEO Eric Schmidt, French telecoms billionaire Xavier Niel, and Bpifrance, the French state-backed investment bank, underscoring the strategic significance of the project.

While Mistral’s first product is still in the development phase, the company has recently welcomed its initial employees. The launch of a new “large language model” is planned for early next year, akin to OpenAI’s breakthrough ChatGPT app powered by generative AI.

Expertise and Capital Intensity

The unprecedented scale and speed of Mistral’s financing underscore the expertise of its three founders, all of whom are in their early thirties. Antoine Moyroud, a partner at Lightspeed, noted, “There’s a pool of 80 to 100 people globally who have the level of experience they have. Right now, for better or for worse, the capital requirements in compute and top-tier talent make [launching an AI start-up] quite a capital-intensive game.”

Europe’s Seed Round Milestone

Dealroom.co, a platform tracking private tech investments, reveals that Mistral’s funding represents Europe’s largest-ever seed round, typically referring to a start-up’s initial institutional round of equity funding. In 2023 alone, more than $4bn has been invested in AI-related companies across Europe, including the UK and Israel, compared to $25bn in the United States.

Despite the downturn in private tech dealmaking over the past year, AI companies continue to attract substantial investments, driven by the optimistic belief that generative AI can revolutionize industries ranging from customer service to programming. Several AI start-ups, including Anthropic, Adept, Character.AI, and Germany’s DeepL, offering AI-powered translation services, have reached valuations of at least $1bn since the beginning of this year.

Balancing Innovation and Regulation

Mistral’s funding arrives at a time when European policymakers and politicians seek to strike a balance between establishing a foothold in generative AI and regulating this emerging technology to prevent the negative consequences experienced with previous innovations, such as social media.

Jean-Charles Samuelian-Werve, the chief executive of French health-tech start-up Alan and an advisor to Mistral, expressed the need to demonstrate the benefits of being in control of Europe’s own technological destiny. French President Emmanuel Macron, who will be appearing alongside Mensch at a tech conference in Paris, shares this sentiment and has been advocating for the development of leading European companies in various sectors, including technology, energy, and defense, to reduce dependence on the US and China.

Cédric O, the former digital minister for Macron’s government and current advisor to Mistral, emphasized the critical role that AI tools will play in the competitiveness of economies in the near future. He stated, “We do not want all the value to be captured by foreign companies.”

Addressing Draft Legislation

The European Parliament recently proposed legislation aimed at curtailing the actions of AI companies during the creation and training of their models. While industry concerns have been echoed, Mensch cautioned that the current draft legislation would make it exceedingly difficult to innovate in a field whose implications are not yet fully understood.

It remains to be seen how European policymakers will navigate the path forward, striving to foster innovation and technological advancement while also ensuring the responsible use and regulation of AI to benefit society as a whole.

As Mistral AI secures an unprecedented amount of funding in its early stages, the European AI landscape is poised for further growth and competition, with the aim of establishing Europe as a major player in the global AI industry.

Source: Financial Times