Four-week-old AI start-up raises record €105mn in European push

A French start-up founded four weeks ago by a trio of former Meta and Google artificial intelligence researchers has raised €105mn in Europe’s largest-ever seed round.

Mistral AI’s first round of financing values the Paris-based concern at €240mn, including the funds raised, according to people close to the company. The record amount raised highlights the growing frenzy surrounding AI and Europe’s desire to create a viable alternative to Silicon Valley companies such as Microsoft-backed OpenAI and Google’s DeepMind.

“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,” said Arthur Mensch, Mistral’s chief executive.

The former DeepMind researcher founded the start-up with Timothée Lacroix and Guillaume Lample, who both recently left Meta after working at Facebook’s parent company for the past few years.

Lightspeed Venture Partners, an early backer of companies including Snapchat, Epic Games and StabilityAI, is leading Mistral’s round. Other investors include former Google chief Eric Schmidt, French telecoms billionaire Xavier Niel, and Bpifrance, the French state-backed investment bank, a sign of the strategic nature of the project.

Mistral has yet to develop its first product, and its first few employees started work only days ago. It plans to launch early next year a new “large language model”, similar to the “generative AI” system that powers OpenAI’s breakout ChatGPT app.

Antoine Moyroud, partner at Lightspeed, said the unprecedented size and speed of Mistral’s financing reflects the expertise of its three founders, who are all in their early 30s.

“There’s a pool of 80 to 100 people globally who have the level of experience they have,” Moyroud said. “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.”

According to Dealroom.co, which tracks private tech investments, Mistral’s funding is Europe’s largest ever seed round, a term that usually describes a start-up’s first institutional round of equity funding. Dealroom data shows that more than $4bn has been invested this year in AI-related companies in Europe, including the UK and Israel. That figure compares with $25bn in the US.

Despite a sharp downturn in private tech dealmaking over the past year, AI companies have continued to raise huge sums, driven by optimism that generative AI can transform industries from customer service to programming. Since the start of 2023, a handful of AI start-ups have achieved valuations of at least $1bn, including US-based Anthropic, Adept and Character.AI, as well as Germany’s DeepL, which offers AI-powered translation services.

The Mistral round comes at a time when European policymakers and politicians are seeking to balance the region’s need to develop a foothold in generative AI with a desire to regulate the emerging technology, to avoid the negative consequences seen with innovations such as social media in previous decades.

“We just need to demonstrate how beneficial it will be, for once, to be in control of our own destiny in terms of technology in Europe,” said Jean-Charles Samuelian-Werve, chief executive of French health-tech start-up Alan and an adviser to Mistral.

French president Emmanuel Macron, who will appear alongside Mensch at a tech conference in Paris on Wednesday, has pushed the idea that Europe needs leading companies in everything from tech to energy and defence to avoid depending on the US and China.

Cédric O, the former digital minister for Macron’s government who is now advising Mistral, said AI tools would be “critical to the competitiveness of economies” in the near future. “We do not want all the value to be captured by foreign companies,” he said.

The European parliament recently proposed legislation that would curtail what AI companies can do when they create and train their models. Echoing broader industry concerns, Mensch cautioned that the draft legislation “in its current state [would] make it very hard to actually innovate in a field whose implications we don’t really understand yet”.