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Index Ventures has raised greater than $2 billion to capitalize on recent breakthroughs in artificial intelligence, a development the enterprise capital firm believes will ultimately transform your complete economy.
“It's an incredibly exciting time to speculate,” said Jan Hammer, partner at Index. The reason for it is a technological “platform shift” through AI, comparable to the introduction of PCs, smartphones or cloud computing. “The last 12 months or two have been characterised by AI, which has been in every single place.”
The 28-year-old company, which backs startups comparable to Revolut, Discord and Figma, has raised a complete of $2.3 billion from institutional investors. Index, which has offices in London, San Francisco and New York, in addition to Geneva and Jersey, has earmarked $800 million of that sum for early-stage startups and $1.5 billion for larger investments in late-stage firms.
More than half of the recent investments have been in AI, said Martin Mignot, one other partner.
Index was an early investor in Mistral, Europe's most dear AI startup, and Cohere, a Toronto-based startup that develops AI models for enterprises. The firm has also backed Scale AI, which provides infrastructure for AI modeling firms and was recently valued at $14 billion.
The company has studied the impact of AI on all the pieces from accounting to molecular research to data center optimization, Mignot said. “AI is a wave that can transform many sectors of the economy.”
The investment boom in AI last 12 months has fuelled concerns a few bubble. In a recent blog entryDavid Cahn, a partner at Sequoia Capital, one other Silicon Valley enterprise capital firm, warned of a “speculative frenzy” in artificial intelligence, adding that “plenty of people lose plenty of money during speculative technology waves.”
While Mignot acknowledged that valuations have been driven up by hype, he said this shouldn’t worry enterprise capitalists.
“Venture capital is just not about value games, quite the other,” he said. “With the best possible firms, you mostly feel such as you're paying more for it. That's what makes you uncomfortable.”
He added: “Often … big firms seem very expensive, but in five years they become very low cost.”
Index first invested in Mistral a 12 months ago. At the time, it was the biggest seed financing round for a European start-up. The Paris-based company was valued at 240 million euros. Its valuation has now risen to almost 6 billion euros.
The majority of the tens of billions of dollars which have flowed into AI startups have come from the biggest technology firms like Microsoft, Amazon and Google, which have helped a handful of firms like OpenAI and Anthropic get ahead of the sport in developing powerful AI models.
“There could also be models which might be in specialized niches … but we don't see established firms with latest models competing with the established firms on their very own turf,” Hammer said. “It's a fairly capital-intensive game.”
However, enterprise capitalists with more limited resources hope to still be competitive, betting that powerful AI models will create a platform for brand new applications, as was the case with the introduction of the Internet or smartphones.
There remains to be “plenty of room” for startups in areas that do indirectly compete with Big Tech, Mignot said. “AI is just one other platform to construct on, however the last mile (with direct relationships with customers) will proceed to be very necessary.”
Index's latest funding is below the $3.1 billion the corporate raised across three latest funds in 2021 at the height of the recent technology cycle. That reflects a really different marketplace for startups today, despite the large sums raised by just a few outsider AI firms.
“We need to adapt the fund size to the range of opportunities,” said Mignot, as round sizes in the expansion phase have “decreased significantly” over the past three years.
Nevertheless, the fundraising is the most recent sign of a partial thaw within the enterprise capital market after firms postponed their seek for fresh capital for 2 years.
Andreessen Horowitz closed a $7.2 billion fund in April, and General Catalyst is near raising about $6 billion, people accustomed to the matter said.
