AI's French connection
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Mistral AI captures most of the French AI headlines and just raised €600 million at a reported €5.8 billion valuation this week, but it's far from the only AI startup in Paris.
Why it matters: Investors from Silicon Valley and beyond have definitely noticed AI's growing taste for croissants.
By the numbers: In the first five months of this year, French AI and machine learning startups have raised a total of $1.14 billion in funding across 19 deals that include U.S. investor participation, per PitchBook.
- Overall, French AI startups have raised $1.27 billion in funding across 52 deals in that same period.
The big picture: Beyond Mistral, H (formerly Holistic AI) and Poolside have raised big rounds in the past year, with a growing number of smaller AI startups cropping up in France as well.
Zoom in: French AI insiders attribute the current moment to a few things:
- Education: French universities have strong math and engineering programs, churning out graduates well-suited to working on advanced AI tech. "Math expertise was not that important on the world stage until now," Algolia co-founder and Y Combinator partner Nicolas Dessaigne tells me.
- AI research: Companies like Meta and Google have set up key AI research labs in Paris, helping the local AI talent flywheel go even faster in recent years. Most recently, Google opened a new lab in Paris, while billionaires Xavier Niel, Eric Schmidt, Rodolphe Saadé and others have funded Kyutai, a nonprofit research organization.
- Government: The French government, especially under President Emmanuel Macron, has been supportive — even proactive — about growing the country's tech and startup industry. Bpifrance, the country's public investment bank, has also been instrumental in financially supporting French startups.
- Mindset: More French technologists are taking the entrepreneurial plunge as the local startup industry grows, culture evolves, and some government unemployment benefits provide aspiring founders a safety net.
What they're saying: "It feels like a bunch of folks had this 'Oh, shit!' moment with the Mistral round — the U.S. doesn't have a monopoly on monster rounds and now I have pay attention to France," says Antoine Moyroud, a partner at Lightspeed Venture Partners.
- But: "To almost anyone who has been in the French ecosystem, it's been in the making," explains tech entrepreneur Liam Boogar-Azoulay, who also co-founded Rude Baguette, an early French startup tech blog.
Between the lines: This is a big change from the previous era, when virtually all tech entrepreneurs would set out for the U.S. to build their companies.
- "We could never have raised money in France with this kind of consumer project, with no monetization, saying we were creating a virtual friend for teenagers," Hugging Face co-founder Julien Chaumond recently told Sifted about the company's initial focus as a chatbot.
- The company set up shop in New York City after getting some seed funding from Betaworks, but today it has a large office in Paris.
Yes, but: As in the rest of the world, there is the question of how to best finance the compute resources AI companies inevitably need, says Atomico partner Laura Connell.
- The EU is providing access to supercomputers to local AI startups, among other initiatives, for examples.
The bottom line: Those American VC firms that set up European offices a couple of years ago are surely glad they did.
