Georgia Stevenson: Partner at Index Ventures on investing in Mirelo - a European foundation model in

0:00Hello and welcome back to Scaling Europe show. I'm here with Georgia of Index Ventures. We are here to talk about a super exciting investment. Morello AI just announced$41 million seed round led by yourself and Andreessen. Exciting stuff. Can you tell me a bit about the company and the investment? Yeah, of course. Well, firstly, it's great to be here and excited to talk about Morello today. And yeah, sitting in London this morning about Morello. So, I mean, at Index, we are always looking to partner with founders as early as possible, be long term partners to them. So we're always therefore thinking about the founding team when we're making those investments.

0:36And something that stood out to us about CJ and Florian is that it's so rare to have the technical expertise and experience they have. They've been working in AI research for 10 years. They've worked in some of the top labs. They've worked under some amazing professors. Combined with this really amazing, not just passion, but talent for music. Obviously, CJ with the organ and piano and Florian with guitar. And it really feels like this gives them such a unique insight into their product intuition. You know, they're not just building a sound model. They really understand sound, both emotionally, culturally, structurally.

1:18And we're so excited to partner with folks that have that intrinsic and authentic motivation. So, yeah, that's why we're excited. And that's a little bit about who they are. Yeah, I mean, I thought the combination of their background was so interesting, both of them being academics turned researchers at Frontier Labs, both having a real passion and expertise in music. It's like they tick every single box in terms of what you'd want a founding team to be building, sort of like AI generated sound. How long have you known them? How did this deal come about? How long have you known the founders? Yeah, well, I think it again goes back to this kind of people first approach, right?

1:53So a lot of how we discover founders, evaluate them, diligence them, build relationships with them is building these talent networks and nodes of folks who either worked with them, have seen how they operate or build or know folks who have taught them to be so excellent. So this is, you know, like with a lot of our investments, we get high quality talent signals from folks we trust. And then, you know, we make sure as quickly as possible to meet them and put ourselves in front of them and build a relationship with them. So this is exactly what happened with Morello. And I think what was really cool about, you know, my first conversation with CJ is that we didn't talk about the products or we didn't talk about the go to market plans or commercialization.

2:41we simply went through every single person on the team that him and Florian had hired and talked about who they were, what they'd done, why him and Florian had chosen to work with them, and just really how they thought about their sort of longer term talent strategy. So that's what stood out. And that sort of talent first and team first approach is how we struck up the conversation. And when you're looking at a very early stage company like this, how important is the talent and the team around the founders versus the founders themselves? I think they're not like it's not an either or, right? It's so interconnected.

3:18And I think it's, you know, particularly important in this market when, you know, the hardest thing to build is an awesome, talented team, right? When we talk about like, the amount of capital folks can raise, like that's actually easier than building, building that talent density. So unless you have remarkable founders who are thinking strategically and thoughtfully about talent, you're not going to attract the team around them. And then they're always going to be limited or bottlenecked by their own ability. So we don't see it as an either or. We see one gives way to the other. And that's what we spend the majority of our time diligencing up front of doing any investment.

3:53And how soon after you'd met the team or CJ, were you like, I'm in, I want to be in this deal? Well, as I said, it was from the first conversation because, you know, seeing how thoughtful they had been about selecting their team and understanding more about their background and hearing these high quality signals from our network, it really came from there. And then, you know, what was really exciting is then actually learning about what Morello was. And, you know, we haven't talked about the product yet, but, you know, firstly, just the size of opportunity and be it content creation, gaming, advertising, film studios, you know, and the rest, but also and you know I hadn't really thought about it and I'm definitely not a scientist but something that struck me is that what I think is special about Morello is doing is it's combining two content modalities so it's it's audio for visual and I think why that's important is what I learned is actually you know when our brains process information uh we hear audio audio is the first thing that hits our brain so it hits within eight to ten milliseconds whereas visual content hits between 20 to 40 milliseconds.

5:00So we actually don't really appreciate how much audio affects us. Like, you know, to give the example, I'm sure if you started this interview with a, what's it called? A drum roll or booing, you know, it really sets the tone in a way that like our faces on screen actually then don't. And so I think why that's important is that a lot of like what gets us excited around this new sort of range of AI products is just like how they make people feel. and I think what CJ and Florian and what Morello was thinking about from the start is how they're making people feel, how they're shaping feeling versus just building content.

5:36Yeah. Yeah, and that's super powerful. Can you touch a bit on the product more broadly and what excited you about that as well? Because I think it's a really interesting case of an amazing product being built here in Europe. Yeah, I think it goes back to this whole, you know, we've seen this first wave of better, faster, cheaper and now we're seeing this next wave of, okay, let's take a more nuanced approach in how we build product. Let's combine different modalities and really think about the commercial and sort of human-versed ways that AI can be applied. And I think that's what's cool about Morello.

6:10It's leveraging the progress that's already been made, but thinking about, you know, not just, hey, we can create a bunch of content, but how are we going to make people feel and how are we going to leverage ai to make different content as a result yeah amazing and look let's talk about the size of the round itself 41 million dollars for a seed round it's like in sort of in two minds about it in some ways it's massive for a seed compared to most companies when you talk about frontier models it's like reasonably small but it's also got that really interesting dynamic of being voice ai or sound ai which has a much lower inference cost and much lower cost generally so kind of i guess like you know the size of the round what kind of dictates a round of this size yeah well i think you know you you you said it right i think given the size of opportunity that morello is going after the round this round side is like barely scratching the surface right when we think about again the sort of content creation ads gaming film studio etc so this is less about oh you know is this an oversized seed round it's more like oh why wouldn't you raise more i mean clearly the team could have raised more and we're seeing a lot of teams raising a lot more but what What I find really exciting and the types of teams that we love to work with is also teams who are thinking around that discipline and actually what they need in order to get to certain milestones and leveraging the progress that's already been made in order to, again, focus much more on how they build talent density than just like raising a lot of capital to then sort of like that in itself be a goal.

7:44So yeah, I don't think it's a question of like, oh, this is an oversized seed round. And it's more like, you know, could they have raised more? Yes. But do they need to raise more at this juncture? No. And actually, they're focusing on the right things, which is team. And, you know, they're hiring across the board now for both on the research and technical side, but also on the product and go-to-market side. Yeah. And I think that go-to-market piece is going to be really interesting. They've scaled. They've built this amazing model with like 10 people, I think. It's 10 or 11 people so far, which is just crazy.

8:13And they're looking, I guess, forward now. And they're looking at U.S. expansion and go-to-market there. What kind of role will you and Index play, you know, now that the round is closed, you know, you've done that bit. Like what role will you play in helping them get to that next stage? Yeah, it's a good question. I feel like, you know, we've got our scaling to the U.S. Scaling to the U.S. Yeah, that's it. Winning in the U.S. You know, so that's one. No. So, I mean, look, obviously, we're a global fund. And so a lot of our value proposition is around the fact that we do work a lot with our portfolio companies on bridging that transatlantic gap and being truly a fund that doesn't have a HQ.

8:51And, you know, we are all equally incentivized across our global portfolio to help out. That's number one. But two, you know, we always say to founders that we work with, like we are, you know, if we were operators, we'd be building businesses. So we are always cautious never to be prescriptive around what founders build or like dictating product roadmap, but it's more helping giving them leverage when it comes to what they're spending their time on, who to complement them with as a result. And also particularly on the commercial side, you know, what I think is really, really exciting about this time is we're seeing a lot of, like Morello, highly technical teams that live and breathe research, but have less pattern recognition and muscle on go to market and commerciality.

9:37And that's something that, you know, sitting across such a range of businesses, we have great insight into. And of course, we're learning how those things are changing as a result of some of these model first companies. So, you know, we have to make sure we're continuing to have a growth mindset in what great looks like. But I think we can, you know, definitely be additive there in pulling folks from our network and, again, helping them build talent density across these different functions in the team. Amazing. Looking, I guess, more broadly across Europe, I think there's like a really interesting trend that we're seeing where we are building these sort of like foundation models in a way that I think there's been some criticism that Europe is not building enough of the models.

10:17We're doing great on the application layer. We're not building enough on the models. And I think that's wrong. And I think Morello is a great example. We're also seeing like 11 Labs is another great example. Synthesia are developing some of their own models. And there's a lot of these like lower cost models that I think are being built in Europe. And I wanted to get you a view on, do you think that that is perhaps something as a result of more restrained capital here in Europe? That companies like Morello are being funded and being built here. They're much cheaper. they're much leaner and so we've got this almost like market leading expertise across 11 labs morello's model performance is phenomenal um there's others as well like black forest labs on like text to image you know like really amazing companies that are beating the benchmarks but on generally on the much lower cost stuff do you think that's like a a function or a symptom of the more capital constrained environment we have here in europe

11:15yeah i really don't think we have a capital constrained environment in europe i think you know we have so many investors both you know who are based in the in the us and in europe being excited to invest in these early stage teams and i think this whole narrative like europe can't produce winners like it's just so tired and like just like can we stop talking about it you know there's as you pointed out right there's a bunch of examples already there's been a So I don't think building more efficient models and having a more nuanced approach is indicative of capital constraint. I think it's indicative of actually the sophistication of talent that we have here.

11:56I mean, you know, what's really exciting and, you know, what one that another one on the list there is Mistral, which is another one of our portfolio companies or even some of the larger US labs like Anthropic building out more of a research team here that the talent density and Europe is extremely high. And in some ways, you know, and I think this is really exciting. What, you know, if we think about what AI is doing, it's essentially giving so many roles like this broad productivity suite, whether it's sales folks, developers, you know, content creators. And so what that essentially means is you can have much smaller teams with much greater output.

12:32So if anything, I'd say what AI enables European teams to do is build outside outcomes without hitting a talent wall when it comes to sheer number of people that they need to hire. So in fact, that arguably sort of amplifies these even smaller local ecosystems. I mean, obviously, CJ is based in Tübingham or, you know, we're seeing ecosystems like Zurich suddenly be sort of catapulted into far more of a global playing field because they no longer need to hire, you know, 600 engineers in order to build the product. So I don't think it's a function of capital constraint. I think it's a function of, yeah, sophistication, talent density, and they are no longer constrained by number of talent or talent volume in the same way that they were.

13:19No, that's really interesting. I hadn't thought of it like that. So yeah, it's like, yeah, you don't need to have access to the quantity that you used to need to, you just need the highly technical people. And we have those in so many great European cities. um i wanted to also ask like how is index more broadly thinking about ai do you have a thesis around you know maybe spreading your bets across uh foundation models ai infrastructure ai application you know is there like a strategy there or is it always just whoever whatever as long as they are world-class founders we don't care where you sit yeah so i think you know what is definitely important about index we never think it around spreading our bets right we are you know, we build very strong relationships with a few select companies and be proactive partners to them.

14:05So it's never a question of spray and pray or like, let's invest in a bunch of competitors and see who see who wins. So that's number one. Number two, absolutely. And we're proactively invested across infrastructure application, we continue application that we continue to do so. But your point, it really does come down to team first. And so, you know, So at the end of the day, we are not the experts on what the future looks like, what products to build, what products are going to get disrupted. Like, I think if anything, these last few years have showed everyone that there's only so much expertise can really bring.

14:39And it's been, you know, we're all figuring out what the world will look like in five, 10 years time. But what is clear is that, you know, high quality founders build high quality teams and that in itself builds really exciting products. So that's what, you know, we continue to double down on. And even in the past month or so, we've invested in a number of really exciting AI native European and American teams that I'm personally super excited to be working with. So, yeah, it is absolutely around founder first and in a lot of ways gravitating towards founders who are like, look, in some ways we're still figuring this out because the landscape is changing so rapidly that we also will learn as we build.

15:20But right now we're focusing on building, you know, proprietary insight and high quality team, which is exactly what Morel is doing. And I wanted to ask final question. You know, the strategy index is obviously going well. You've had like a phenomenal year in terms of I think I posted about it last week in terms of, you know, Revolut, Figma, Scale, Wiz, Dream Games. It's been like an amazing year in terms of real access to liquidity in a way that it's just been unbelievable, unheard of the scale. What's it been like working at Index throughout 2025? Has it felt like something special has happened this year?

15:57Look, so firstly, thank you for the kind words. And definitely, it's been a phenomenal year for quite a few of our companies and a huge testament to what those founders were thinking about however many years ago and the teams that they've built and what they've achieved. So, yeah, it's certainly been amazing to see a lot of those stories come to fruition. Does it change what we do on a day to day? Absolutely not. Like we are not, you know, patting ourselves on the back. We are, you know, we always say, Index, we continue to be a work in progress, even 30 years later. And the growth mindset that we want to see from founders and love to see from founders that we work with is what we have internally.

16:35So, you know, for us, our focus is on understanding what, you know, whether it's new types of profiles of founders look like, what these new breeds of companies look like, and continuing to learn ourselves on how to be, you know, the best partners to them. so yeah it's been a great year but fingers crossed many great years to come yeah what do people say it's like you're only ever as good as your next deal or something right it's like you just got to keep keep hitting the winners uh well look georgia thank you so much for joining me it's been great chatting uh and yeah congratulations on on the investment it's a it's an exciting one thank you so much seb ciao