Microsoft invests $16 million in Mistral AI

Yesterday, Mistral AI, a Paris-based AI startup renowned for its work on foundational models, made headlines with the announcement of its latest large language model, poised to rival OpenAI’s GPT-4. Alongside this revelation, the company disclosed a significant distribution partnership with Microsoft, albeit with a crucial detail buried within the announcement.

As part of this strategic partnership, Microsoft has committed to invest €15 million in Mistral AI, equivalent to approximately $16.3 million based on current exchange rates. Notably, this investment is structured to convert into equity in Mistral’s upcoming funding round.

Importantly, this injection of capital does not alter Mistral AI’s valuation. Instead, Microsoft’s stake in the AI startup will be determined by the valuation established in the subsequent funding round.

Mistral AI achieved a valuation of approximately $2 billion following its most recent funding round in December 2023. In that round, the company secured €385 million (roughly $415 million), with prominent venture capital firm Andreessen Horowitz (a16z) leading the investment charge. Prior to this, Mistral AI had raised an impressive $112 million seed round shortly after its inception.

Given these figures, if Mistral AI can maintain its valuation or potentially achieve a higher one in the next funding round, Microsoft’s ownership stake in the French AI company would likely amount to less than 1% of equity.