strategy and execution

#223

Author

Dragos Novac
February 09, 2025

Howdy folks, welcome to Sunday CET.

Writing this from Dubai, where it’s 24 Celsius and sunny (I know, right?), and where the money is put to work at a very fast pace. First time here, lotsa things to learn and interesting folks to talk to. Anybody on the list around? Ping me.

Today’s edition is about OpenAI’s strategic options, Mistral’s (lack of) execution, and how Musk has a once-in-a-century opportunity. And more!

Enjoy,
Dragos

Market talk

🤔 An American investor recently told me: would you pay someone 100 bucks a month to keep you updated with what’s important in European VC? Filter out the media noise, break up the echo chamber and smartly connect the dots, a complement at par value to your professional job. A no brainer - he does and so can you.

💲 OpenAI this week: 15.5 million paid subscribers (almost 3X yoy), expects $11B+ revenue next year, smart GTM in Europe, Japan, Korea, Hollywood courting, Altman speaks in Europe etc

  • meanwhile, has Mistral even passed the $100 million a year mark yet? Anthropic did $1B last year, btw.

  • food for thought: is there a low cost play at the bottom of the value chain for generic LLM? Besides DeepSeek announced the other week, Americans also came up with a high-performance LLM for just $50 in cloud computing credits. Does it even matter if your model is distilled or not?

  • race to the bottom can be a play, sure, but the big bucks are made gaming all the segments, low, mid and high end, where you simply cannot afford to stay un-differentiated, like the French seemingly do - we’re in the still emerging, fast market grabbing phase and OpenAI above is just a mere indication that going to it at full speed in multiple creative ways is what makes it the leader by far, and justifies Softbank’s Masa going all in at $300B. It sounds insane because of the number magnitude - a rarefied layer available to very few - but that’s a calculated risk hedged by outstanding execution thus far.

💡 What does the future of search look like - OpenAI’s also smartly made the ChatGPT Search available sans an OpenAI account.

  • that is, of course, a direct stab at Google, which btw also has made a bunch of interesting announcements this week.

  • while the two search products may be at par, look at it from the business model perspective - will OpenAI ever sell ads against its free search results, as Google does? OpenAI’s freemium model supported by the above-mentioned 15 mill subs traction makes more sense to me and 3X yoy growth is strong demand evidence.

  • selling ads against data tracking behaviour seems like an old school paradigm already - would you ever pay for a non-ads Google search result? I personally wouldn’t, but I simply don’t trust Google with anything anyways. If more people are like me while ChatGPT grows that fast, then Google is in an impossible strategic position, as Clay predicted decades ago.

  • and yet another way to look at it - Google’s search product has a whole economy underneath consisting of media and adtech providers making a living off it. If Google goes down, they all go down. Unlikely but you get the point - what kind of comparable economy would (should?) OpenAI build, its output also provides some marginal links to their sources, but media assets don’t optimize content for it. Yet, at least. OpenAI’s consumer model is more akin to Spotify, which is licensing bulk music deals, while selling retail access to it. Alas, Spotify has also entered into the ad business, eventually, bought some media properties too.

  • fascinating stuff, makes you wonder what takes Mistral so long and why not execute at least at par to how the market does. Putting aside the underwhelming b2b market share dent, the French finally launched a consumer native app just this week, huge milestone for them but marginal for the market. Being so late to the party and far behind in terms of adoption is an uphill battle but it can also be a pretext to do things differently, which I just don’t see, why they need to exist and be the n-th generic AI engine out there - sure, they have the French loyal following they can rely on, but is that a competitive advantage? Right now they’re the Ask Jeeves of search engines, which still is around btw - AJ was acquired by a media company for some 2 billion in 2005, when it was the third banana competing with Msft, way behind Google and Yahoo.

🤓 Financing 101, the Musk edition - Twitter sold debt at par because it has $1bn of EBITDA from xAI royalty payments, which are funded out of a $5bn cash pile that came from a giant capital raise, which was preferentially allocated to Twitter investors as a sweetener.

  • meanwhile, many of the large American companies have announced deals with Musk’s businesses in recent days as they seek to curry favors - people kiss the ring, Musk is seemingly the de facto American president, isn’t he?

  • this gives a lot of weight to what he is doing on the DOGE front - if you put aside the heavy noise and political brouhaha, you like Musk or not, bulldozing top down a governmental bureaucratic system (in place since Bretton Wood’s times) in order to replace it with a lean and mean tech system, is a great thing. Having a bad ass back-end should lead, in theory, to efficient resource allocation, transparency, less red tape/corruption, and, not least important, credibility - which is a dramatic reset of how the world is run and decisions are made, be that in the US or anywhere else.

  • idle observation - the Nordics are running by far the more efficient bureaucracy out there, and that is tech-driven. I know, small countries and tech savvy people, but it doesn’t matter at the end of the day, does it?

  • anyways, what Musk seems to be doing is a once-in-a-century type of revolutionary change of a corrupt and ossified system, a type of shift hard to envision in Europe, since we do not have agents of change over here, nor do we expect them to emerge, minus a black swan type event - I do think Musk is a black swan making Trump’s term more comestible, and Trump himself more marketable, but I digress.

  • on our side of the blanket - yes, I know, Ursula may have good intentions and marginally she may be able to provide some impact because she’s gotta, since Europe is with the back at the wall. Candidly speaking, judging from her narrative and wooden language, she doesn’t strike me as a visionary, rather a traditional lady, ambitious and perhaps good executant, at most - she got points in my book because she got rid of Thierry though, but again, marginal stuff.

  • nevertheless, actions are stronger than words, and, also true, its easy to be a kibitz on a newsletter on a nice sunny Saturday morning - in spite of those appearances, she’s got one hell of a challenge in front of her and four years ahead of us to make things happen. One last observation - she’s gotten her new job three months ago in November (100 days), and all she did was talk, while Musk has been on the DOGE task two weeks now and seems to be all camped in with the full hands already, all while managing three other multibillion businesses. That’s the Europe-US delta, I guess. Ok, I’ll stop. :-)

  • fact is that on the old continent, the local politicians spiel is mainly people with a lukewarm job, old school or corrupted like hell (hello Russia!), and blabbering stuff that doesn’t resonate outside their bubble, unless it is extreme and populist. And this gets them the job going.

  • tangent question: when is the last time you saw in Europe a solid politician, vision-driven and with brass balls that made things happen? I’ll wait.

Interesting startup deals

​🇬🇧  Fern Labs​ (AI agents management) - $3 million
🇫🇮 ​Cactos (end-to-end energy storage systems) - $5.6 million
🇩🇪 ​Prior Labs (LLM for tabular data) - $9.3 million​ 

🔒 More curated deals (premium): expensive seeds and series As make a return, vertical AI models, agents, B2B marketplaces, AI consumer health, open banking, etc. All from Europe - sign up.

  • Europe’s pride: Spotify Q4 2024 - 675 million MAUs, 263 million subs, €4.2 billion revenue, €477 million operating income.

  • Mistral still does things: released a native app + signed up biz w/ Stellantis. And oh, got a le retweet too. :-)

  • Old school: ECB slaps the Czechs for bitcoin suggestion + similar Norwegian spat.

  • American write-offs in Europe: $944 million and a bunch of lawsuits.

  • If Americans can, why can’t we? The French want to compete with SpaceX by building a pan European consortium, advised by expensive American banks. Please note that they didn’t bring in McKinsey yet - that’s phase two, when they need to be told what they got wrong.

  • British renaissance vibes: while government needs to put the money where their mouth is, there is some good energy among local chaps willing to change things.

  • Europe has become expensive: American tourists lose interest in Europe on costs reasons. Alternate: Americans have become poorer. 😛 

  • Reality check: take the pulse of some of Europe’s conversation makers.

Events

Opinions

Also notable 

😱 The a16z games fund has 137 principals and 200 associates - sounds unrealistic for a $600 million fund though.

⛔ Merger talks between Honda Motor and Nissan Motor fell short after the two failed to agree on the valuation of the carmakers under a holding company.

🇫🇷 Pernod Ricard considers sale of Mumm champagne at at least 3X annual sales of 200 million.

💲 Indie media author bundles content sub with Superhuman, Perplexity, Notion, Linear, and Granola - sold for $200/year.

🧑‍💻 The real story behind Telegram founder and CEO Pavel Durov's 2024 arrest.

🤯 The most likely scenario for Ukraine is some form of Finlandization.

🇩🇪 Does Germany need an AI community?

🦫 In the Czech Republic, beavers built a dam in two days, which local authorities had planned for 7 years and have saved the administration $1.2 million.

🥚 There is a serious egg crisis in the US leading to restaurants charging egg fees.

🫥 North Koreans at KFC.

🪐 NASA: There's now a 2.3% chance an asteroid will hit Earth in 2032, up from 1.3% in December.

🎶 The Beatles won best song this year at the Grammys using AI - song here.

That’s all folks, have a wonderful week!

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