European investors are grabbing popcorn for OpenAI’s new ‘chain’, but fear repercussions
As the OpenAI saga continues to unfold around the world, the European tech community has been waiting for the latest updates as if a new line of “succession” is about to descend. In fact, the events were sometimes more like some Greek tragedy about the gods fighting on top of Mount Olympus, while we mere mortals watched. With only a few large-scale AI startups like Germany’s Aleph Alpha and France’s Mistral to get any drama from (London’s DeepMind was absorbed into Google’s Borg long ago), we’ve been grabbing our popcorn and watching this unexpected episode of Silicon Valley.
I poked around with a few avid tech watchers, many of them venture capitalists, but almost none of them wanted to sign up, perhaps for fear of catching the attention of one of the Valley AI gods in full battle mode.
A UK-based investor hypothesized that the drama would have positive effects on Europe’s emerging AI sector.
“This is great news for startups like Mistral, which can probably attract some good employees and catch up with OpenAI. For AI companies built on OpenAI, this will not bring any major changes in the short term, but it will mean market homogenization, especially if they lose direction and focus.”
Another noted that after OpenAI’s highly acclaimed demo day, it was seen as “the most extraordinary kind of work”, but now it seemed like “a completely trashy demo”. They likened it to the debacle at WeWork, “but at least there are no proper VCs in this crisis, because it’s a mix of nonprofits and for-profits and no one understands how that works.”
One European venture capitalist predicted that the events will have an impact on all term sheet negotiations: “I expect founders will become more resistant to board control over CEO replacement and other similar terms. They will clearly wonder: ‘If this could happen to Sam Altman. Why do I assume it won’t happen to me?
On a more practical level, a lot of European startups in applied AI rely heavily on OpenAI, which (as anyone would argue) outperforms most alternatives. The disruption to OpenAI appears to be pushing the business further into Microsoft’s hands and that could have very significant implications for companies that rely on the OpenAI platform… “particularly if that company is able to compete with or outside of Microsoft’s ecosystem,” they point out.
“From a POV platform, it’s a disaster,” another investor said. “Many companies are already working with OpenAI, and it’s like Facebook, Twitter, etc. The API is changing again and maybe even worse.”
There was also grumbling about European regulation: as we saw with the tough regulation starting at EU level, the government is not going to save us. We need more AI champions locally. “There is still time, but it is not clear how much time is right.”
Others were more optimistic that the disruptions provide useful time for European startups: “Which is good for European AI startups because it gives them time to breathe and recalibrate before the next shock wave.”
Finally, one brave soul registered in the form of DN Capital co-founder and managing partner Steve Schlenker.
One of his concerns is that access to the world’s most successful LLMs will move away from average start-ups — “like those in Europe” — and toward start-ups and researchers, mostly local to the US, who pass on some new projects that haven’t yet emerged. – A specific “vetting” process, such as that outlined by OpenAI’s controversial board of directors.
Moreover, if OpenAI’s best and brightest workers become full-time employees at a large, paid-for American company like MSFT, “the ability of the AI movement to remain open to everyone at a fair price will decline rapidly.”
Meanwhile, the upside of all this chaos is that it’s playing out publicly on social media, largely on Twitter/X. As one venture capitalist in Warsaw told me: “It’s interesting and unique that a lot of this nonsense is being publicly displayed on Twitter. Not possible in Europe!”