Mistral, a tiny AI startup that aims to be Europe’s answer to OpenAI, is in discussions to raise a major round of funding that could push its valuation above $2 billion.
Its cofounders are in talks with venture capital firm Andreessen Horowitz to raise further funds, seven sources familiar with proceedings told Insider.
Mistral is set to raise around $400 million at a valuation of at least $2 billion, which could rise to as high as $2.5 billion, three sources said.
General Catalyst is also expected to be involved in the deal, two sources said.
The deal is not yet finalized and the round size, valuation figures, and participants could still change. The Information first reported news of the round on Monday.
Mistral releases open-source large language models that compete with those offered by Meta, OpenAI, and others. The Paris-headquartered startup was founded in June by CEO Arthur Mensch, Guillaume Lample, and Timothée Lacroix, alumni of DeepMind and Meta’s AI division respectively.
A round at this valuation would make the startup a unicorn just six months after its founding, and less than two months after the release of its first large language model, Mistral 7B.
The startup was last valued at $260 million in an earlier funding round in June, when it was just four weeks old.
Other funds aiming to offer term sheets to Mistral include US fund Abstract Ventures and Bezos Expeditions, the personal VC arm of Amazon founder Jeff Bezos, one source familiar with the matter said.
Andreessen Horowitz, General Catalyst, Mistral, Abstract Ventures, and Bezos Expeditions did not respond to Insider’s request for comment.
Competition for the new round is fierce with both existing and new investors pushing to put more money into the company. In order to maintain the size of their stakes in the company, existing investors will likely need to invest a sizeable chunk of the new funding.
Conversations around the deal’s valuation are contingent on ensuring that the company will be able to raise a future up round — at a higher valuation — one source familiar with proceedings said.
Existing investors include Lightspeed Venture Partners, which led Mistral’s seed round, Redpoint, Index Ventures, and French billionaire Xavier Niel.
After intense consumer and business interest in ChatGPT and generative AI more broadly, investors are racing to find the “next” OpenAI. That has seen big-name investors, under pressure from their own investors, willing to buy stakes at high prices early on. That has sent seed valuations and prices soaring, according to a PitchBook analyst report looking at the US market.
Large funds getting into early-stage deals can cause problems further down the line for startups, which can often struggle to demonstrate the increase in their value between rounds, the report said.
Mistral trains its AI models on publicly available data in a bid to help it avoid the complicated issues some of its peers are facing around copyright.
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