Hi, this is Wayne again with a topic “Microsoft invests in yet another AI company | Equity Podcast”.
This episode is sponsored by Morgan Stanley, atwork visit morganstanley.com assessment to get your free transaction Readiness assessment today, hello and welcome back to equity, The Tech runch podcast, where we unpack the numbers and the Nuance behind the headlines. This is Alex, and today is February – 28th. 2024. Not the last day of February this year, there’s one more day, it’s a special February, but this is our Wednesday show Welcome. This is where we dig into the critical startup and Venture Capital stories from the week thus far and on today’s show we have a number of absolute bangers: we’re talking about Microsoft, putting money into Mistral AI, thy, hoes bankruptcy, glean and Enterprise Ai and mega rounds in The AI era and then two new Venture funds focused on early stage startups, neither of which that have ai in their name to start us off. Let’S talk about Microsoft, putting money into mistol.
Yesterday, mistol AI, the paris-based AI startup, that’s working on foundational models that we’ve discussed on this show several times announced a new large language model that could rival open AI gp4, a chat assistant and a distribution partnership with Microsoft. But most importantly, the company also raised for microsoft1 15 million EUR or about $ 16.3 million. Now this check was not structured as a priced Equity round. Instead, the money will convert to equity during Mr all’s next fund raise so there’s no valuation change to report. But I think the deal tells us quite a lot. First of all recall that Mr all raised about 385 million euro or $ 415 million back in December. Of 2023 – that’s just not very long ago, and I think it implies that the capital here is entirely strategic instead of needed in any cash sense.
Second, Microsoft is spreading its bets somewhat, even if its investment into mraw is worth less than 1 % of the company’s current two billion dollar valuation. It’S still money from a big tech company into an AI Foundation model firm and finally, and I think most santly – that regulatory oversight of tech these days is no freaking joke recall that the FTC launched a quote inquiry into generative AI Investments and Partnerships. In quote this January, the American FTC said at the time that this would and I’m going to paraphrase just a little bit here: scrutinize corporate Partnerships and Investments between AI providers and big tech companies to build a better internal understanding of the relationships and their competitive impact.
The companies that were called out there were alphabet Amazon, anthropic, Microsoft and open AI, two foundational model companies and several big Tech backers, but the US is not alone. The EU is also getting involved. The European commission announced this January that it was quote checking whether Microsoft’s investment in open AI might be reviewable under the EU merger regulation. End quote so how better to show that you are not merged with one massive AI model company. Even if you own a big chunk of it, then partnering with another and taking a small Equity stake. It’S very cheap defense from Microsoft, which is worth several trillion dollars and could find 15 million euro just by collecting loose change from its various office parking lots still.
This is good for mist all though the company gets drro from a mega CA, Tech, Giant and free money, not bad. Next up the story of Icarus, told in startup form after raising billions of dollars in equity and debt rounds to snap up e-commerce brands that it would theoretically centralize and then run more efficiently. Th has filed for bankruptcy protection now tchun reports that the company has secured $ 90 million in emergency financing from existing lenders.
So that way it can keep operating while going through bankruptcy. But oh my gosh, what a rise and then what a fall? What happened to thio? Well, I have a couple of ideas. First of all, the massive rush to push billions of dollars into e-commerce aggregators during the pandemic boom always seemed Rush, expensive and somewhat untested. At that scale, sure you can understand the hype as at the time e-commerce sales were growing at a far faster clip than we had seen historically.
But when you bet your business model on cheap capital and a market growth trajectory that turned out to be a short-lived Trend, you can run into trouble since thio raised its $ 1 billion series. D back in 2021, Capital has become more expensive, AKA interest rates and e-commerce growth has slowed. That combination seems to have wounded thio to the point when it’s going to have to completely reboot its cap table. Brutal thio had cut staff before so.
The new financial distress is not a massive shock, but gosh. The e-commerce aggregator bet seems to be a little of Target in retrospect. Is your company planning to go public or conduct a shareholder liquidity program within the next 18 to 24 months? Did you know that proactively planning for your next project, private company, liquidity event or IPO, can help you maintain greater control over timelines and outcomes? Morgan Stanley at work believes that when you have the right technology and systems in place working in harmony, leading up to a transaction, you can prepare and execute with more accuracy and ease visit, morganstanley.com assessment to connect with their issuer strategy and Excellence team for a free Assessment to find out if your company is transaction ready again, that’s morganstanley.com assessment to get get your free assessment today. Moving on, we are returning to AI, because that’s the way Tech news rolls these days.
Generative AI has known issues. Teches Kyle wiggers writes, but one thing that it is known to be super good at is pulling answers from Big buckets of data, and that skill is what glean is betting on. The startup connects to Enterprise first and third party databases to field plain English requests.
So you can think of it as something like a chat. Gpt for individual companies after starting with search Roots, glean quote, grew into a platform that analyzes a company’s databases and data stores to answer employee inquiries after generative AI took off that’s according to Tech runch and we think it’s pretty cool and VCS definitely seem to agree Because glean just raised 2 200 million in a series D that was co-led by cler Perkins and light speed, Venture partners, and it seems that everyone else in the Venture World showed up to participate. Other capital for the round came from General Catalyst, Sequoia Capital, Adam Street coatu, iconic, ivp latitude capital and even some strategics, including Capital, 1 Ventures, City Ventures, datab bricks, Ventures and workday Ventures. That is so many VCS and corporates. It seems that there’s some companies out there who may want to buy what gleen is cooking up and participate in the upside, but they’re paying through the nose for it, because the company is now worth $ 2.2 billion, a figure that is predicated on its more than 200, customers, how big is glean in Revenue terms? Wouldn’T it be nice to know? I would love to know because it would help me understand how it just raised that large of round in 2024, so glean could have just shared more than just that its annual recurring Revenue nearly quadrupled in the last year. I don’t know really what that means from from $ 1 to four from 1 million to 4 million from 10 million to 40 million. Who knows glean does, but I don’t turning the page from startups to venture. Let’S talk about a couple of new funds: the first one zaku Adventures, has put together an inaugural $ 56 million fund. It intends to Target early stage construction technology startups and was backed by 19 of the construction sector’s biggest corporations, teun reports.
That does mean that the companies it invest in should have pretty easy connections to potential clients which smells like growth to me, and just to be honest, if you care about construction, Tech or prop Tech, we have covered this a lot on the show so feel free To go back through the archives, because Maryanne is an expert on all that, and so it’s been one of our key themes for several years, so cool to see zaka in that space. Finally, for them $ 56 million is not a massive fund. It’S about a quarter of what glean just raised in a single round, but for early stage startups firms like zaka are critical because they often have domain specific knowledge that helps them spot potential winners that General VCS might miss and then, finally, to close us out Dubai Based early stage Venture firm, kotu Ventures, that’s Co! All caps Ventures, not coatu – that’s different – has put together $ 54 million for its inaugural fund to support startups in the Middle East from preed to seed stages. Now, Mina funding fell 23 % last year according to magnet.
So the fresh fund and its focus on super early stage startups in the region is very cool. To see seed capital is the foundation on which all later stage Venture rests. So these funds are critical to keep our eyes on sure. The multi-billion dollar funds get more op pressed, but without preedee checks. How many startups would never get off the ground.
That is our show for this ever so lovely Wednesday morning. We are back on Friday with our news, Roundtable, Roundup, and then this Saturday we have an awesome interview with a leading fintech giant that you are going to want to hear Mary and led that so make sure that you are subscribed to equity in your podcast feeds Of choice, so that way you don’t miss it. We have bangers coming the rest of the week anyways if you need more from us.
In the meantime, we are Equity pod over on X and threads and we are techch pods over on Tik Tok. My name is Alex. You are amazing, I’ll talk to you soon. Bye Equity is hosted by myself, Alex Wilhelm and Tech rench senior reporter Mary, an aeto.
We are produced by Teresa loans, solo with editing by Kell Bryce. Durban is our illustrator and a big. Thank you to the audience development team and Henry pette who manages Tech, wrench audio products. Thank you so much for listening and we’ll talk to you next time. .