Kicking off our series on Most Interesting AI Companies with Mistral AI because they are a Unicorn among Unicorns

Why Mistral is a Unicorn among Unicorns

1. Insane Speed of Fundraising
2. Based in France, in a world where AI startups seem to only choose US or China
3. Going up against the Leaders. An absurdly hard task given the first mover advantage and insane amount of money the leaders already have
4. Being able to compete with the Big Boys so far (here is to hoping they can keep making things interesting). It is remarkable that a company founded on April 28th, 2023 is a frontrunner in AI services
5. Actually Open Source, not just in name
6. Very Interesting Products. Relentlessly adding new and improved products
7. No Drama. No fighting with World governments over retina scanning. No boardroom drama. It’s almost as if they are happy being an AI company
8. Undercutting the leader on pricing, albeit slightly. This is a very smart tactic as they are still priced well, just a bit lower than the current leader

All the drama and stupidity we see with the Big Technology companies makes it very refreshing when an AI startup focuses on just the technology.

Mistral’s Unique Challenges

Normal Startup Challenges

1. How to raise enough money to compete against the market leader
2. How to get to profitability and maintain profitability
3. How to do all of this in Europe which is nowhere as startup friendly as the United States
4. How to hire and retain the best, when some competitors are better funded
5. How to hire and retain the best, when some very large technology companies are offering absurdly high salaries to AI engineers
6. How to convince the best AI engineers to move to France (not counting some very good ones already in the Paris area and in France)
7. What products to build
8. How to get breakthroughs in AI research and development while still keeping the Commercial Product Pipeline going
9. How best to utilize funds that are raised
10. What products to build and how to evolve the product offering

Special AI Geopolitical Challenges

1. How to handle US interference as Mistral AI is in France and it becoming the world leader in any facet of AI would be considered a big threat to US hegemony
2. How to handle Chinese interference as, again, Mistral AI becoming the world leader in any facet of AI would be a big threat to China’s plans of world dominance
3. How to handle data related challenges. All the large countries now want to keep their citizens’ data within the country itself
4. How to handle espionage and spying as many of the employees are from the large US technology companies and might be, or could be, compromised by spy agencies
5. How to handle cyber attacks by Governments and Government funded hacker groups
6. How to keep the tecnology and trade secrets safe when many countries would consider Mistal AI technology a ‘must have for national interests’

It is interesting to note that Mistral AI, by locating in France, have opened up a Pandora’s Box of troubles for themselves

This might work, as the added pressure and threats might help them evolve faster and better and create better AI technology.

It might also backfire, as we are seeing what has been done/is being done to TikTok and Telegram for the unforgivable sin of successfully competing with US based companies (Which have always had the backing of the US Government – It is only now that is has become so painfully obvious that the game is rigged in favor of US technology companies).

The Not-So-Obvious Challenges

1. [Bringing this up again, because this is absolutely critical] From what has been happening to TikTok and Telegram’s Pavel Durov it should be obvious that any non US company will be heavily attacked by all means possible. Given the strategic importance of AI to America, it is a sort of madness that Mistral located themselves in France, instead of Silicon Valley or New York
2. Amount of Risk Mistral is taking on, is not something Europe or France are used to. Will there be investors with a higher risk threshold as Mistral AI need more money down the line?
3. Nearly all the Best AI Talent is still in America and China. It is one thing to relocate from Seattle to San Francisco. It is a much bigger move to relocate from America/China to France
   • Side Note: France isn’t really endearing itself to technology workers by arresting Telegram’s CEO on what seem to be rather flimsy charges
4. The sheer amount of money the large tech companies have. At some level, none of the AI startups can compete with Apple, Microsoft, Google in the long term. Until and unless the AI startups make some big AI technology breakthrough or hit massive profitability they are fighting against massive odds
5. The sheer amount of Governmental support the large tech companies have. We see a pattern of Governments letting large tech companies do relentless anti trust and illegal tactics. Then pay a fine and continue to do illegal things to smaller technology companies. It is not an exaggeration to say that Mistral will face many illegal attacks from the large tech companies (it might already be)

Mistral’s Insane Funding History

Mistral has raised money at an almost unprecedented rate, since being founded in April 2023

1. Seed Funding -> June 2023 -> 105 million Euros ($117 Million Dollars) raised at a valuation of roughly 240 million Euros ($267 Million Dollars)
   • Investors -> Lightspeed Venture Partners, Redpoint, Index Ventures, Eric Schmidt (former Google CEO), Xavier Niel, JCDecaux Holding, Rodolphe Saade and Motier Ventures and Bpifrance from France, La Famiglia and Headline from Germany, Exor Ventures from Italy, Sofina from Belgium, First Minute Capital and LocalGlobe from UK
2. Series A -> December 10th, 2024 -> 385 Million Euros ($428 Million Dollars) at a valuation of $2 Billion
   • Investors -> Andreessen Horowitz, BNP Paribas, Salesforce
   • Additional Investors -> Still researching
3. Series B -> June 11th, 2024 -> 600 Million Euros ($640 Million Dollars) in a mix of Equity & Debt (468 Million Euros Equity + 132 Million Euros Debt) at a valuation of $6 Billion
   • Investors -> General Catalyst led the round. The list of investors includes previous investors and some new ones such as DST (Yuri Milner), Nvidia, Samsung Venture Investment Corporation, Belfius, Bertelsmann Investment, Cisco, Eurazeo, Hanwha Asset Management’s Venture Fund, IBM, Korelya Capital, Latitude, Milennium New Horizons, Sanabil Investments, ServiceNow, and SV Angel

Please Note: There were lots of rumors of SoftBank wanting to invest in Mistral AI. So far, that has not happened. We do expect SoftBank to jump in, sooner rather than later.

Super Rough Cap Table + Funding Details

How much equity did Mistral give up on its manic fund raising spree?

Seed -> 43.46% of the company for $113 Million USD at a valuation of $260 Million
Series A -> 21.4% of the company for $428 Million at a valuation of perhaps $2 billion
Series B -> 10.67% of the company for $600 Million USD at a valuation of $6 Billion

Equity Given Up -> 75.55% for $1.141 Billion. So the super-fast fund raising has come at the cost of giving up a rather large amount of equity for the first $1.141 Billion in funding
Left -> 24.45% with Co-Founders and Employees

Please Note: These are estimates based on reports. These might be inaccurate.

The CEO, Arthur Mensch, has said that the founders still have complete control. The Founders perhaps have special class of shares with higher voting rights and likely have over 50% voting rights. This is how the Meta/Facebook founder and the Google co-founders maintained their control of their respective companies.

What makes Mistral very Interesting to DealAI

Firstly, choosing France and foregoing the protection and hidden benefits of choosing America or China

Secondly, the complete and utter lack of Drama. No trying to scan irises. No Board trying to fire CEO

Thirdly, DealAI wanting the underdog to win. All the odds seem stacked against Mistral AI and that makes them a great story

Fourthly, wanting a massive technology company in Europe. There have been close to zero massive technology companies in the last few decades that have not been American or Chinese or Indian companies. Europe has been a wasteland (sorry, Adyen)

Fifthly, they are actually Open Source and not just ‘Open’ in name

Can Mistral take on American and Chinese AI Companies & Startups?

Yes and No

Yes, Mistral AI have shown the ability to take on the US and Chinese AI Companies

No, as the US Government will ensure that an AI company in France does not become the #1 AI company. It might even attack Mistral heavily to prevent it from becoming a Top 5 player in AI

China will perhaps take the approach of hacking and stealing Mistral AI’s technology, or building upon it. In the long run, China too will go out of its way to prevent Mistral from becoming a Top 5 Player in AI

Might Mistral be the Big Winner in AI?

Yes, as crazy as it seems, we do think Mistral has a non trivial chance of becoming the Big Winner in AI

Might Mistral be one of the Top 5/Top 10 Winners in AI?

Yes, this is actually very likely.

At that stage, we will begin to see lots of attacks by both America and China on Mistral.

If Europe realizes the strategic importance of AI and puts its weight behind Mistral, then it would be a very interesting Europa Vs America and Europe vs China battle, with Mistral AI right in the middle of it.

Who are the Co Founders of Mistral?

Mistral has 3 co-founders

1. Arthur Mensch – generally the ‘face’ of the company
2. Guillaume Lample
3. Timothee Lacroix

They have roughly 10 years experience each in AI and Machine Learning. Mensch worked at Google DeepMind and Lample and Lacroix worked at Meta Platforms. They met while students in college.

Which Investment Funds and Venture Capitalists and Investors have funded Mistral?

Seed Round -> Lightspeed Venture Partners, Redpoint, Index Ventures, Eric Schmidt (former Google CEO), Xavier Niel, JCDecaux Holding, Rodolphe Saade and Motier Ventures and Bpifrancefrom France, La Famiglia and Headline from Germany, Exor Ventures from Italy, Sofina from Belgium, First Minute Capital and LocalGlobe from UK

Series A -> Andreessen Horowitz, BNP Paribas, Salesforce. Please Note: This list is incomplete

Series B -> General Catalyst led the round. The list of investors includes previous investors and some new ones such as DST (Yuri Milner), Nvidia, Samsung Venture Investment Corporation, Belfius, Bertelsmann Investment, Cisco, Eurazeo, Hanwha Asset Management’s Venture Fund, IBM, Korelya Capital, Latitude, Milennium New Horizons, Sanabil Investments, ServiceNow, and SV Angel

What does Mistral’s strategy seem to be?

To Be Updated. We are still figuring out exactly what Mistral AI’s full strategy is. We will update this post when we have figured it out

Where does the name ‘Mistral’ come from?

Mistral is a cold and dry wind in the South of France that blows through the province of Provence.

It generally leads to good weather.

It can blow any time of the year. Sometimes it blows for a few days and sometimes for up to a week. Speeds are pretty high with 30 miles per hour to 60 miles per hour.

Please see the Encyclopedia Britannica link below for some very interesting information. It’s a fascinating wind, this Mistral.

Courtesy: Wikipedia and Encyclopedia Britannica

References & Credits

1. Wikipedia -> Mistral AI – Wikipedia
2. Encyclopaedia Britannica -> Mistral | Mediterranean, Provence & France | Britannica
3. TechCrunch -> France’s Mistral AI blows in with a $113M seed round at a $260M valuation to take on OpenAI | TechCrunch and Others