4-Week-Old AI Startup Mistral AI Raises $113 Million Despite No Product And Little Staff

Read our Advertiser Disclosure.
Contributor, Benzinga
June 23, 2023

Artificial intelligence (AI) is revolutionizing the tech space, as ChatGPT's overnight success sheds light on the prowess of this next-gen technology. The tech sector has already demonstrated a fast-paced recovery from last year's low, with the tech-heavy Nasdaq Composite Index up 30.8% year to date, making it the best-performing benchmark index in the U.S. so far this year. 

Looking to be a part of the next big thing? Explore the opportunities to invest in early-stage startups and seize the potential for exponential growth. Click here for a list of startups you can invest in today.

As a result, investments in the tech space, including startups, have spiked. Microsoft Corp., who owns a substantial stake in ChatGPT, is up 39% year to date. Despite some volatility following the ChatGPT release, Alphabet Inc. stock is still up 35% this year so far. In the retail startup investing market AI companies continue to lead the way, with startups like Wigl and AtomBeam consistently raising millions from retail investors for their AI-based solutions.

But one startups venture-backed capital raise sticks out among the crowd. While there is certainly speculation involved in the AI market, French AI startup Mistral AI recently made headlines for raising a record $113.5 million (€ 105 million) during its seed funding without any concrete software outline. According to Dealroom.co, Mistral AI's seed funding was the largest equity funding raised during a seed round by a private startup in Europe's history. 

The 4-week-old startup aims to challenge ChatGPT's dominance in the text-based generative AI field. Mistral AI is co-founded by Arthur Mensch, Guillaume Lample and Timothee Lacroix, all of whom previously worked at Alphabet Inc.'s DeepMind and Meta Platforms Inc. (formerly known as Facebook). The co-founders bring a wealth of experience and expertise in artificial intelligence to the table.

"We are proud to initiate this global project from France, our home country, and to contribute, at our level, to the emergence of a credible new player in generative artificial intelligence from Europe," Mensch said.

See Next: New Battery Beats Tesla's Lithium-Ion By A Mile With 50% Cheaper Price Tag, 99% Recyclable and Three Times Longer Lifespan

The Up-And-Coming ChatGPT Rival 

Mistral AI plans to launch a large language model (LLM) that rivals OpenAI's ChatGPT. The platform aims to address the public misuse challenges and security issues facing ChatGPT, according to Mensch, the company's CEO.

"We believe that the benefit of using open source can overcome the misuse potential," Mensch said. "Open source can prove tactical in security, and we believe it will be the case here, too. 

"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." 

Mistral is backed by top-tier international investors that include high-net-worth individuals and institutions such as global venture capital firm Lightspeed Venture Partners and French investment bank Bpifrance, which invested in Mistral's last seed round. Former Google CEO Eric Schmidt also invested in the startup. 

Mistral is well-positioned to lead France and Europe's AI revolution to emerge as a credible European player in generative artificial intelligence. The startup's emphasis on open source, enterprise solutions and addressing real-world challenges sets it apart in an industry dominated by proprietary approaches.

To stay updated with top startup news & investments, sign up for Benzinga’s Startup Investing & Equity Crowdfunding Newsletter.

Challenges Ahead: Product Launch And EU Regulations

Mistral is slated to release its highly anticipated software in early 2024. Although investing in such a fledgling company without any customers or products might seem risky, Lightspeed Venture Partners has faith in Mistral AI's potential. Antoine Moyroud, who led the investment for Lightspeed, compares the AI landscape to infrastructure giants like cloud computing, emphasizing the importance of second-order effects and practical applications. Recognizing the talent and expertise of Mistral AI's founders, including Lample's work on Meta's large language model, Moyroud believes the team is among the few in the world capable of optimizing language models effectively.

But just last week, the European Parliament launched the European Union AI Act, the world's first comprehensive regulatory framework for artificial intelligence. The new rules add several restrictions on generative AI software, including ChatGPT. When the EU released a draft of the laws, OpenAI CEO Sam Altman said he might pull ChatGPT and other software designed by OpenAI from Europe rather than modify the software if it's incompatible with the latest restrictions. 

Artificial Intelligence: Growth Potential And Vulnerabilities

The recent hype surrounding artificial intelligence has caught the attention of critics as well. Even though the consensus agrees with AI's stellar capabilities, the investment frenzy surrounding this has raised concerns regarding a repeat of the dot-com bubble seen in the 2000s. 

"Companies that even mention the word AI in their earnings are seeing boosts to their share price, and that smells very much like the dot-com era," said James Penny, CEO of TAM Asset Management.

See more on startup investing from Benzinga.

Benzinga may receive monetary compensation from the issuer, or its agency, for publicizing the offering of the issuer’s securities. This content is for informational purposes only and is not intended to be investing advice. This is a paid ad. Please see 17b disclosure linked in the campaign page for more information.