French AI startup taking on Silicon Valley is set to stuff its war chest
Summary
Mistral AI is nearing a deal to raise funds at a $6 billion valuation—nearly tripling its level from six months ago.Mistral AI is nearing a deal to raise funds at a $6 billion valuation—nearly tripling its level from six months ago and giving the French startup added fuel to challenge Silicon Valley giants in the artificial-intelligence race.
Existing backers General Catalyst and Lightspeed Venture Partners are expected to be among the biggest investors in the new funding round, in which Mistral is set to raise around $600 million, according to people familiar with the situation.
The new round would indicate continued fervor among some investors for startups they think can compete in the battle to build and profit from AI tools that can generate everything from fluent writing to working computer code and summarizing blocks of text. It comes as there are also emerging signs of wariness, with some generative-AI startups recently struggling to raise new money to pay for the investments in chips and electricity needed for the technology.
Among the questions newcomers like Mistral face is whether they will be able to compete against the many billions of dollars that the tech giants, as well as Sam Altman’s OpenAI, have already committed to advancing the technology.
Paris-based Mistral was founded a year ago by local researchers for Google and Meta Platforms and valued at over $2 billion in December—which itself was a more than sevenfold increase from a valuation the prior summer.
Mistral’s 31-year-old chief executive, Arthur Mensch, says his company aims to outflank Silicon Valley leaders such as Microsoft-backed OpenAI and Google in the AI race by developing and commercializing lower-cost AI tools for businesses that can perform nearly as well as OpenAI’s ChatGPT.
Mistral is also, along with Meta Platforms, one of the biggest supporters of open-source generative AI tools, giving away powerful versions of generative AI software for other companies to use and repurpose for free. Mistral’s goal is to seed an ecosystem of users for its tools. Mistral put out its latest open-source model last month.
The company is also relatively lean, with roughly 60 employees, compared with the teams of hundreds that built AI models at Meta and OpenAI. Although Mistral is still small compared with rivals, investors have been impressed by the company’s efficiency and ability to build competitive technology.
As of December, Mistral had raised just over $500 million from investors, while also committing to sell small stakes to companies involved in AI, including chip maker Nvidia and business-software companies Microsoft and Salesforce. Microsoft also has a deal to distribute Mistral’s AI tools to users of its Azure cloud-computing platform. Some Mistral models are also available on the cloud platforms operated by Google and Amazon.com.
While Mistral is a French company, some of the biggest investors in the new fundraising round are American.
Mensch, the Mistral CEO, has said the company aims to show a successful company can grow in France. French President Emmanuel Macron has cited Mistral as a point of national pride and says development of homegrown AI is a step toward European strategic independence.
Write to Berber Jin at berber.jin@wsj.com, Sam Schechner at Sam.Schechner@wsj.com and Tom Dotan at tom.dotan@wsj.com
