Often, when people ask me how the venture and startup market is doing, I have to take a moment. The easy answer is that we’re seeing a downturn. The correct answer is more nuanced: There is indeed a downturn, but it is impacting some much more than others.
One example of this as clear as day is Mistral AI’s recent $113 million seed fundraise. The company, founded by three French white men, was started just four weeks ago and doesn’t even have a product yet. That round, which values the company at $260 million, is being hailed as Europe’s largest seed round to date.
Mistral AI’s fundraise is, in some ways, unique to this point in time. There is much frenzy around AI right now, and this round did see some U.S. and international investors participating, which you don’t often see happening for many French startups.
But there are some things that don’t change, regardless of what’s hyped. The market may be improving for AI startups, but we’ve yet to see much money going to women or people of color. Don’t get me wrong, women are receiving money for building in AI (Black founders, not so much), but not at the rates at which men appear to be. Of course, these three French men fit the profile of those who are likely to receive a $113 million pre-seed check: ambitious Google’s Deep Mind and Meta alums, two of whom have diplomas from the École Polytechnique, practically the MIT of France.
Sure, there is more of an effort to back women in France today, but the fundraising environment for some French Black founders remains both obviously and discreetly discriminatory, which is unsurprising given the overall treatment of Black individuals in the country. There isn’t enough data on how many women and people of color are even looking for funding in France (tracking minority metrics in France is illegal, so such data does not exist), making it hard to gauge how much underrepresented founders raise.
There is generally less money in the French venture ecosystem, too, meaning there’s less capital for risks, which is what investing in women and people of color is perceived as.
The broader venture ecosystem, though, had mixed reactions after the Mistral AI fundraise was reported by the Financial Times. While there was a lot of talk around this apparent validation of the potential of AI tech, there was some negative commentary considering that funding for women in Europe still hovers around 2%. In the U.S., the reactions were similar, with founder Cindy Gallop telling me the fundraise was akin to a parody that The Onion might have published in response to how little money women founders receive.
Over in France, Adam Jones, founder of community-engagement platform FanFest, said the news of Mistral AI’s raise brought forth several emotions. “On one hand, it’s tremendous to see top U.S. firms like Lightspeed expand their investment aperture on a global scale and bolster the startup scene in a country like France,” Jones told TechCrunch+. “On the other hand, it seems like the nine-figure pre-product rounds always go to founding teams of a certain phenotype. It certainly reinforces the notion that there isn’t a market for Black moonshots.”
“It’s not a knock on the founding team, which by all accounts is exceptional. But exceptional founders come in all shades,” he added.
French entrepreneur Sarah Allali, the founder of AI assistant company Floode, is based in both Paris and New York and feels this fundraise sends rather terrible signals to the rest of the ecosystem. “The combination of a 100% male team, a startup that is not even a month old, and the risk that VCs are willing to take with regard to their LPs, seems completely disconnected from the market reality,” Allali said.
She added that nothing gives her hope in the current French VC landscape and she is looking to the U.S. to build and grow her company. “The prevailing justification for accepting such a deal is the background of the times, which is entirely legitimate. But we know very well that with an equal background, the deal would never have been made with a 100% female team,” she added.
The French venture landscape is still quite insular, though the creation of Station F has helped lower some barriers to entry for marginalized groups. Plus, French investors have spoken openly and more frequently about wanting to back women founders to help increase gender representation in what remains an overwhelmingly male-dominated industry.
Vianne Savoli, a venture partner at Ohana Venture Capital, said the fundraise shows how AI stands poised to revolutionize everything. It coincides with the ambitiousness in the French venture landscape and support from President Emmanuel Macron for investors to take more risks, she said.
“Unfortunately, these kinds of financing happen only to men, especially in France,” she added. If anything, it shows investors are keen to back AI right now, paving the way for more founders to possibly build backable robust AI technology. Once there are more women founders in this space looking for money, “only then can we measure whether they have been equally treated as men while fundraising,” she added.
Shaila Sahai, founder of the Parisian investment firm We Take Part, said she was upset by the Mistral AI fundraising story and added that it’s time to establish rules for achieving what is often discussed yet seldom acted upon: inclusivity, equality and diversity.
“It should be considered unacceptable to provide substantial funding to three men solely based on their competencies, entrepreneurial spirit and high ambition, but without any traction, revenues or a data room, while 200 other ambitious, hardworking, highly skilled entrepreneurs of color are struggling to secure half-a-million, which they will likely find extremely difficult to obtain,” she told TechCrunch+. “These hundreds of underestimated entrepreneurs, including those in AI, space tech and other highly regarded industries, could significantly contribute to Europe’s economy, too.”
The result of an opaque funding environment is that a lot happens in secrecy. Founders keep their heads down and people move in silence, especially people of color. You get the impression that discrepancies do not exist, but that’s at odds with the reality of the persistent racism and sexism that has been documented in other areas of French society. But since there is no evidence and people do not like talking about it, nothing changes.
So although Mistral AI’s fundraise is the beginning of something exciting for France, it is still reminiscent of the trappings of something that’s far from new in the Western world.
Oyinkansola Adebayo, a U.K.-based founder and angel investor, said the story of Mistral AI affirms the levels of inequity that exist in the Western funding landscape. “Some people hustle for nine months to raise £500,000,” she told TechCrunch+.
Stephanie von Behr, managing director of Berlin-based community platform Founderland, was also a bit frustrated by the news, saying that it was problematic to see well-known stakeholders from Germany cheering the Mistral AI round as a win for the EU in the race for AI.
“We can and must do better,” she said. “Let’s hope Mistral AI fosters diversity and ensures AI in Europe isn’t solely shaped by three white men.”