Nicolas Marchais - Investing in European AI startups with m-ai
November 9, 2023
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Nicolas Marchais is one of the founders of m-ai club, an AI-focused community open on Roundtable. Marchais spoke about the importance of educating people on AI's impact on society, and how he wants to expand internationally. He also is editor-in-chief of AI-focused newsletters, millefeuille.ai (for French readers) and muffin.ai (in English).
The Genesis of m-ai: Fostering European AI Innovation
Roundtable: How and why did you decide to launch your community?
Nicolas: I left Spendesk, a leading spend management platform, earlier this year. With friends who were business angels, we decided to build this investment community to support European AI-first companies.
The number one reason was growing interest and demand from startups. There's been an explosion of AI startups, in generative AI, computer vision, and other areas. On the other side, we have lots of experts in AI, entrepreneurs, or other actors such as lawyers who want to take part. So we decided to connect startups with capital, and with a network of business angels who are experts in AI. They are working for the best AI companies in the world and building the models that are being used by tech entrepreneurs.
We help startups with two things: talent, and potential buyers. A lot of entrepreneurs and operators in our network are in decision-making positions. So when we invest in startups, the angels promote those products in their companies.
Roundtable: What are your main concerns about AI, that you want to educate people on?
Nicolas: This new technology will have a societal impact. Like when computers or Excel were invented, some people lost their jobs, and new jobs were created.
To us, the most important thing is for people in Europe to educate themselves – it’s lifelong training. The main risk is that older generations will not be able to catch up and will be displaced by younger people more at ease with the different tools.
The second issue is what companies will do with the economic gains of using AI in their business. You will have three different options:
adapt working conditions e.g. work fewer hours, or
produce more and distribute gains to their employees and shareholders.
The third issue is we are seeing a globalization of services – it used to be a globalization of products. You have people from East Asia working at very low pay and using AI, competing, say, with an accountant in France. With increased competition, some white-collar jobs will lose out to other geographies. We want to ensure people are ready.
Investing in AI
Roundtable: Is AI quite a saturated market to invest in?
Nicolas: In AI you have different waves of technology. You have image, video, and text, which happened last year and this year, and now we’re entering a new era of models where audio is being reinvented. Every software company in the future will have AI features in their product, but it's very early. We are only at the very beginning.
It's still unclear where the differentiation is because of the speed at which the revolution is happening. The engine is being reinvented every six months. And if you launch a company, the difficulty is, if it's in a good spot today, will it be in a good spot a year from now? It's a rapidly changing space. The market is complex, and the differentiation between suppliers is not clear.
Community Governance and Member Involvement
Roundtable: Can you talk a little bit about governance and how you expect members to be involved?
Nicolas: When it comes to governance, the idea is to have an active investment committee. It is the team sourcing deals and preparing material so that everyone can form their own opinion. After that, we do a live Q&A session for interested investors to answer their questions, and so on.
We are not a VC. We owe nothing but the duty of preparing a high-quality deal flow. We are very serious about what we do and we've been doing that for a few years. But it’s the angel’s money. It's their responsibility to do due diligence based on the information we've provided and make the decision on their own. It's very good for the business angels: they have access but they are not forced to invest. What we advise is that they invest in a majority of deals, to have a nice portfolio.
Deal Flow and Selection
Roundtable: Can you explain the process for when a community member proposes a deal?
Nicolas: They can contact one of the three members of the investment committee. We have a call to understand the context. Sometimes the deal is disqualified straight away. It can be because of the team, the product, or we don't invest in the space, for example, we don’t invest in deep tech. Or it can be direct competition for someone we’ve already funded.
After that, we review the deal. We call the founders, discuss with clients, look at product demos, and then present it to the rest of the group. We usually expect at least 50% of the business angel group to want to invest. If more than 50% don't want to make the deal, usually we listen to their views or try to convince them. If we can't manage to convince them, there may be a problem, so we can't do the deal.
Roundtable: How many deals per year do you think that you'll be doing?
Nicolas: We don't want to take a volume-based approach. We consider ourselves as a small boutique. The idea is to do 25 deals over three years, to give you an estimate. So, seven or eight per year, and we've done four already this year.
We wait for the right startups, founded by ambitious, visionary, empathic people – kind people who respect their employees and clients and are aware of the impact of their technology. We will never back people who don’t have the same values of team spirit, collaboration, and empathy. This is the stuff we don't compromise on.
Seeking Investors with Shared Values and Vision
Roundtable: What kind of investors are you looking for to join the community?
Nicolas: Like our founders, we want people to share our values: a team-first approach, humility, empathy, ambition.
Roundtable's public communities enable us to increase our reach, especially in other geographies.
All three admins are French. So even though we’ve worked in international companies, our network in Spain, the UK, or Germany is smaller than in France.
In Europe, you want to internationalize from day one – so Roundtable is super useful to find enthusiastic tech buyers abroad.
Joining the Club: Benefits and Expectations
Roundtable: And what can the new community members expect from joining you?
Nicolas: First, they join a network of like-minded AI specialists in different verticals.
But they enjoy our access to the most interesting deals, thanks to our newsletters and the fact we are active in the space. Since we only focus on high-quality deals, we can make deals that they wouldn't be able to access on their own
A seed round can happen very fast, so if you're not well connected, there is a big chance you won't see the deals. This is the power of collective expertise and our brand, versus going solo.
If new members fit our criteria, we will teach them the basics of being a business angel, like how much to invest, the risks, and how we proceed. We will share our frameworks to assess AI opportunities, which we developed internally. Plus every three months, we will meet, either have a drink, a meeting, or dinner with the rest of the community.