Xavier Niel, one of Europe’s top technology investors, believes that even without the billions raised by U.S. competitors, unless founders fall into the temptation to cash out too quickly. We believe that this region can succeed in creating major artificial intelligence companies.
“I think you can do something big with hundreds of millions of euros,” says the French billionaire, who made his fortune in telecoms with telecom operator Iliad and now invests widely in start-ups. This includes backing Mistral, a Paris-based AI group whose valuation soared to €6 billion within a year of its creation.
“Europe can create competitive AI models today,” he said in an interview with the Financial Times. “But over the next two to three years, (success) will depend on the number of initiatives and the ability of the real geniuses, the people who build the best companies, to not get swallowed up or sold too quickly.”
This optimism for European technology comes as previous waves of disruption from the internet to social networks have seen the continent lose out to giants in the United States and China, with the region seeking to differentiate itself through regulation rather than innovation. This perspective is worthy of attention.
Neal’s views carry weight because he is a prolific tech investor with deep ties to Silicon Valley and serves on the boards of private equity group KKR and TikTok owner ByteDance.
There are few players in Europe that can compete with the likes of OpenAI and Google, which are building so-called large-scale language models to power AI applications. Some promising players, such as Germany’s Aleph Alpha, have given up.
Despite his optimism, Neil warned that if AI innovations do not take root, the region will be “downgraded” in the global economy. It will rely on tools from the United States and China that are built with disregard for “values” such as privacy and transparency. “If Europe doesn’t get this right, it will become a very small continent that has been abandoned for generations,” he says.
France is home to Mistral, one of the remaining up-and-comers in AI models, founded last year by three scientists from Google and Meta. Mistral, which has raised more than $1 billion in funding, has developed a large-scale language model that it says is leaner and more capital efficient than its better-funded competitors.
Mr Neil claimed that the message not to sell out early was aimed broadly at European founders, but it was especially true for Mistral. “Founders need to realize that if a large company offers to buy it for price X, it’s probably worth two or three times that.”
Neil said the company has supported the French AI ecosystem with around 500 million euros of investment so far, with the potential to eventually deploy billions of euros.
A nonprofit research institute called Kyutai aims to create open source AI models. Former Google CEO Eric Schmidt is also involved in the project. Niel’s cloud infrastructure company Scaleway operates one of the largest supercomputers in Europe’s private sector.
Neil has made initial investments of €15 million a year through his Kima Ventures fund and has also recently backed the New Wave Fund, which stepped in to end a power struggle between the founders.
Neil said there was still time to discover AI winners in Europe, given the quality of Europe’s mathematics and engineering laboratories and the fact that the tech giants have yet to establish their dominance. Moreover, the scale of the opportunity in AI means “it’s not going to be one company that wins, it’s going to be dozens or even hundreds,” he said.
“Yes, the world moves faster and has more resources now, but somewhere in the world there are always two smart kids working in a garage with a technological vision or a new idea. It exists.”
Niel, a 57-year-old iconoclastic entrepreneur, recently spoke in a memoir-like interview book called “Une Sacrée Envie de Foutre le Bordel” (The Intense Urge to Cause Trouble).
He dabbled in hacking as a teenager and was briefly part of France’s domestic spy agency as it built its first cyber force. According to the book, authorities had then-French President François Mitterand’s cell phone hacked in order to obtain more funding.
Niel’s first lucrative business was running an adult-only sex chat service on Minitel, a rudimentary pre-Internet French network.
But the real breakthrough in communications came when France opened its market to competition in 1990, when it founded Iliad as a low-cost challenger. It was listed in 2004.
Just months after the IPO, Neal was arrested on charges of misappropriation and pimping related to sex shop investments he made with his former Minitel partner.
He spent a month in jail and was later convicted on lesser charges. Niel writes that he will never forget the judge’s advice to him: “You can skim the line between right and wrong, but never cross it.”
Enriched by the success of Iliad, Niel invested in technology, real estate, and media, including Le Monde newspaper. He took Iliad private and expanded his telecom holdings to about 20 countries, most recently to Ukraine. Neil built the world’s largest startup incubator in Paris called Station F and opened a free coding school.
As the number of projects grew, Neil began to take on the role of a European technology ambassador. When Pavel Durov, the billionaire developer of the messaging app Telegram, was arrested and interrogated in France on suspicion of complicity in criminal activity, Neil was the first person he called.
“When I went to prison, everyone disappeared towards me. So when a friend runs into trouble in France, I’m not the type to not answer the phone.”
In September, Neal joined the board of directors of ByteDance, TikTok’s Chinese parent company. ByteDance has come under intense scrutiny in the U.S. and Europe over data privacy, misinformation and security.
US President Joe Biden signed a law banning the platform if its Chinese parent company does not sell its business by 2025, citing national security concerns. President-elect Donald Trump has said he could reverse the decision, a possibility Neal personally supports.
“I think it’s a positive for TikTok to continue to exist in the U.S. with a skilled workforce. We’re positive about competition, our people, and improving our product,” he said.
“What I’m concerned about is that if TikTok comes under pressure, all the other social networks will come under pressure, including the American social network,” he said.
Mr Neil said he had been a “small investor for a long time” and thought being the only European on the board would help ByteDance’s expansion plans in the region.
“We can welcome them in Europe and support their investments… and understand who we are and how (we) operate,” he said. said. For them, “it creates value and for us it creates future-oriented investments in Europe.”
