EQT’s Shocking AI Strategy: How They Discovered 10x More Startups Than Rivals! You Won't Believe Their Method!

EQT Ventures, one of Europe's leading venture capital firms, has raised €2.6 billion across three funds, targeting investments from the seed stage up to Series C. The firm, a part of the EQT Group, has made over 300 investments in various companies, including notable names like Einride, Wolt, Marvel Fusion, and Xeltis. Among its portfolio, it boasts several unicorns, such as Freepik and Beamery. Recently, I had the opportunity to discuss the firm’s approach to artificial intelligence and early-stage investments with Alexander Fred-Ojala, the Head of AI at EQT Ventures.

Fred-Ojala leads a dedicated team focused on developing AI platforms, tools, and algorithms to enhance EQT's early-stage investment strategies. His team also offers technical guidance throughout the investment process, helping portfolio companies improve their AI capabilities.

Transforming Venture Capital with Motherbrain

Among EQT's innovations, the proprietary platform Motherbrain stands out. Launched in 2016, it serves as a powerful synergy of AI and human expertise designed to evaluate large volumes of tech startups. Motherbrain employs AI to scan, model, and track potential investment opportunities, effectively managing the entire investment lifecycle—from sourcing and due diligence to portfolio management.

In a global landscape rich with investment opportunities, human analysts alone cannot process the sheer volume of data available. "Motherbrain has been in operation for over 10 years," Fred-Ojala explained. "What we're trying to do with these internal tools is build systems that give us an edge and boost productivity. For Ventures investing, data-driven methods can especially generate alpha in sourcing and discovering new opportunities."

Historically, EQT has utilized statistical methods like monitoring website traffic and predictive models to forecast company trajectories. Fred-Ojala elaborated: "We’ve had many internal discussions about opportunities—what we thought of a founder, market notes, past assessments. Previously, someone had to record and read all those notes to remember context. Now, large language models (LLMs) can analyze that data and proactively offer insights." This capability allows team members to reconnect with companies effectively, utilizing a wealth of historical context.

Fred-Ojala noted that the evolution of generative AI has significantly reshaped the landscape since the introduction of GPT-3 in 2020. The ability to analyze unstructured data, including market research and academic papers, enhances investment strategies. On the sourcing side, EQT has created an operating system to navigate myriad opportunities, with dealmakers able to access stack-ranked opportunities based on interpretable scoring models.

AI's Transformative Power and Market Dynamics

In our conversation, Fred-Ojala expressed optimism about Europe's role in the AI revolution. He cited Mistral as a prime example of a European company making strides in frontier model development, claiming it is just a few months behind global leaders. He also acknowledged the historical significance of DeepMind, founded in the UK, as a catalyst for many of Google's AI advancements.

Despite this, Fred-Ojala cautioned against the necessity of competing in foundational model development, suggesting that Europe may be at "peak foundational-model scale." He believes that while short-term hype exists, the long-term transformative nature of AI is often underestimated.

He argued that Europe excels in AI applications, with companies like Lovable, Cradle, Leya, and Helsing developing industry-specific solutions that thrive in the continent's diverse and nuanced markets. "AI thrives in environments where it can optimize complex workflows, and Europe is full of them," he stated.

Fred-Ojala envisions significant changes in knowledge work driven by AI, comparing the shift to historic changes brought about by electricity and the internet. He predicts a future in which typing on keyboards and static screens feels archaic, as systems will be managed through agentic workflows instead. He pointed to advancements in software engineering, highlighting that OpenAI recently launched an agent-creation framework capable of automating substantial portions of code generation.

Reflecting on the current state of AI versus past tech trends, he noted, "AI solves problems now. Even if progress stopped today, the integration of current capabilities would create massive value." He emphasized that the main challenge lies not in technology but in changing workflows and mindsets within organizations.

As EQT Ventures continues to analyze AI activities across Europe, Fred-Ojala noted a shift in innovation from traditional centers like London or Berlin to emerging regions. His team identified three distinct categories of AI innovation hubs: "Full-Stack Powerhouses," like Stockholm, which boasts over 50 AI startups and significant investment; "Founder Factories," with cities like Tallinn having the highest AI startup density per capita; and "Money Magnets," such as Heidelberg and Cambridge, known for attracting substantial capital.

In a final note, Fred-Ojala urged founders to focus on solving one or two problems exceptionally well rather than trying to address too many issues at once. "Generic wrappers won’t last," he cautioned, emphasizing the importance of velocity, distribution, and deep domain expertise in distinguishing successful AI startups.

As AI continues to evolve and reshape industries, EQT Ventures is at the forefront of this transformation, leveraging tools like Motherbrain to enhance investment strategies and uncover the next wave of innovation.