French tech company Mistral AI was valued at $2 billion in December 2023, less than a year after its founding. Does this herald a bold new wave of technology coming out of Paris, or a familiar hype cycle? 

An Unlikely Tech Centre 

France seems an unlikely place for tech startups. With its traditionally left-leaning economy most known for strikes, it’s a not a natural home to free market entrepreneurs. Or at least, that’s the prejudice Hugo Mercier of Twin Labs had to overcome, according to a story he told to a recent conference. But in the past decade, things have changed, not just for Mercier but for other tech leaders. The government of technocrat Emmanuel Macron has been keen to encourage the tech sector and in particular AI, through mechanisms such as the state-backed Bpifrance fund. There’s been a growth in investment, with France becoming the EU’s top startup market in 2023. Now French AI is on the rise, while competitors such as California’s Poolside AI are moving to Paris, where they can access cheaper skilled staff. 

“Mistral has been heralded as a tech unicorn.” 

The Mistral Model 

The most dramatic of these successes is Mistral AI. Founded in April 2023 by former Goggle and Meta staff, it raised €385 million in six months, and by December was valued at $2 billion. A creator of large language models (LLMs) – AI software that generates text – Mistral aims to compete with the giant of this trend, OpenAI. Mistral has publicly released two versions of its main LLM, which promises a different approach to ChatGPT, with open source software that will run on local machines. The company is a natural fit for Parisian investors, with two of its founders coming from prestigious French universities, and it’s been backed by politicians. It’s being taken as a symbol of France’s tech potential. 

A Bright Future? 

Mistral has been heralded as a tech unicorn, but the problem with the original unicorn was that it was a myth, and there’s a risk that Mistral’s promise will prove as ephemeral. The so-called AI market is already full of companies clamouring for attention and soaking up huge amounts of tech investment. Even the subsector of LLMs contains several big players and many smaller ones. LLMs are also at the heart of recent legal challenges to AI, which claim that these models infringe on copyright. And with the huge energy output needed to power them, there are serious questions about their sustainability, both environmentally and financially. Even if the French versions succeed, there’s no guarantee that they will stay in France – the founders of Hugging Face moved to the US, where they can better enjoy the benefits of the tech investment sector. Will Mistral prove the naysayers wrong? Only time will tell.