After Microsoft invested billions in OpenAI, SAP is now said to be planning to invest in German competitor Aleph Alpha.
Rumors have been around for almost a week, and now the evidence is growing: The software manufacturer SAP wants to invest in the Heidelberg AI startup Aleph Alpha. The FAZ wrote this, citing the business environment. According to the information, talks are underway about an investment of 100 million euros as part of an upcoming Series B financing round, and a decision should be made in the next two to three weeks.
Neither SAP nor Aleph Alpha have commented on the information so far. SAP told the start-up scene that market rumors were generally not commented on. Aleph Alpha’s spokesman Tim-André Thomas responded to the Gründerszene request: “…I ask for your understanding that we are not making any statements or comments on the rumors surrounding a possible investment by SAP in Aleph Alpha.”
Possible reason one: Aleph Alpha can keep up with ChatGPT
There are certainly reasons for strategic participation, above all: Aleph Alpha’s model is considered by AI experts to be the German answer to Chat GPT. The artificial intelligence from Heidelberg can keep up with the world-famous AI from OpenAI, as tests have shown. In a standardized performance comparison, the makers of Aleph Alpha pitted their Luminous model against the OpenAI language model GPT, the Meta version and the open language model Bloom. The intelligent systems had to solve tasks for classifying, evaluating and creating texts, as well as answering questions about specific text content. Result: Luminous not only reached the performance level of GPT, but was also much more efficient.
Possible reason two: Together against the AI competition from the USA and China
An investment by an industry giant like SAP in the Heidelberg startup would make sense for both sides. Existing investor groups at Aleph Alpha told Gründerszene that there could be an opportunity as a European AI company not to be left behind by companies like OpenAI from the USA or Asian companies. A point of view that is also presented by M&A experts to the start-up scene – even if the question arises as to whether a strategic investor is better suited for this or a pure financial investor.
The rapid pace of technological development in this area has only been widely discussed in recent days. An industrial partner like SAP could provide the startup with financial support, particularly in order to remain in the race for pole position in the global AI market. That is Aleph Alpha’s goal, founder Jonas Andrulis – a former Apple manager – already said in 2021: “We are the only European company ready to deliver the basic technology for transformative artificial intelligence.” And: nothing less than “European sovereignty”. he wanted to secure for the key technology.
In early March, Andrulis said on the OMR podcast: “So far we’ve been more successful than many would have given us credit for. But of course we now have to stand up to the 20 billion that Microsoft is currently throwing on the subject.” He is referring to an announcement by the software company from January 2023. The company said it had made a “multi-year, billion-dollar investment” in the company OpenAI back then, according to insiders and Bloomberg, it was about 10 billion.
Either way, a financially strong partner would also be good for Aleph Alpha. Over the past decade, SAP has invested more than €30 billion in software companies, partly through its own investment fund from independent venture capital subsidiary Sapphire Ventures.
Possible reason three: Existing proximity between SAP and Aleph Alpha
As early as January 2023, SAP CEO Christian Klein said in an interview with the FAZ that SAP was already using ChatGPT, among other things to have the bot programmed for it. And what’s more: SAP’s headquarters in Walldorf is less than 15 kilometers away from the Aleph Alpha site. It would hardly be surprising if the two companies had already become close.
Most recently, Aleph Alpha, which was only founded in 2019, received money in July 2021: Investor Klaus Hommels with his Lakestar fund, the Berlin early-stage investor Earlybird and the Munich tech financier UVC and the existing investors LEA Partners, 468 Capital and Cavalry Ventures. Hommels in particular had repeatedly denounced Europe’s technological dependency on other countries in the past and became a member of the AI company’s advisory board. With the fresh capital, Aleph Alpha had increased the number of employees to around 50 and set up a fast AI data center in Bayreuth.
Andrulis himself reports that he returned to his hometown of Heidelberg from Silicon Valley a few years ago with the intention of building a European model AI company: “I believe that it is necessary for us to have an independent AI company , which is roughly in the same league as what’s happening in the US and China.” With SAP’s help, he would certainly get closer to that goal.