Public money backing Lovable is defensible. Public money rubber-stamping the $13.3 billion price tag it didn't independently arrive at is a different thing entirely. Intro
Lovable just raised $400M at a $13.3 billion valuation. The round was led by Menlo Ventures—and co-led by the EU's Scaleup Europe Fund (SEF), a public investment vehicle that uses EU taxpayers' money and endorses the $13.3 billion valuation.
But here's the catch: Lovable doesn't own the AI technology it uses. It relies on AI model providers (like OpenAI and Anthropic) to generate code. And those providers are betting hundreds of billions on infrastructure from Oracle and Microsoft—infrastructure that's now showing financial stress.
The AI boom has created a circular financing system: a small group of companies invest in one another, finance their customers, buy each other's products, and then use those contracts as evidence of future growth. Lovable's $13.3 billion valuation sits atop this pyramid.
Recent reporting on AI infrastructure reveals:
- Oracle (one of the biggest AI infrastructure builders) has $638 billion in future contracts
- Half of that ($330B) is from OpenAI alone
- OpenAI has never made a profit and burns billions yearly
- S&P just downgraded Oracle's credit rating to near-junk status
Translation: Oracle bet the farm on OpenAI. If OpenAI can't pay, Oracle is in trouble. If Oracle is in trouble, computing capacity shrinks or costs rise. If computing gets expensive, AI model providers raise prices. If they raise prices, Lovable's costs go up—or its service gets worse.
Why This Matters for Lovable
Lovable is three steps removed from the actual infrastructure:
- Lovable depends on AI model providers (OpenAI, Anthropic, others) for code generation
- Those providers depend on Oracle, Microsoft, AWS, and Google for computing power
- Oracle and Microsoft depend on debt and speculation to keep building data centers
Lovable doesn't own any of this. It's a tenant in a building owned by someone who borrowed money to construct it—and whose biggest tenant hasn't paid rent yet.
The Public Money Question
Here's what makes this different from a typical venture deal:
The EU's Scaleup Europe Fund (SEF), managed by EQT, co-led this round, thereby endorsing:
- Lovable's $13.3 billion valuation
- The assumption that AI infrastructure will keep expanding
- The belief that companies like OpenAI, Oracle, and the rest of the chain will deliver
But the infrastructure layer is a big unknown:
- Oracle's credit rating just got downgraded
- AI infrastructure is increasingly funded through debt and leases, adding financial risk
- Much of the demand traces back to a few unprofitable companies like OpenAI
The Bottom Line
Lovable's impressive revenue and valuation depend entirely on infrastructure built by others.
And now, a European fund, SEF, funded by European taxpayers, is being used to back assumptions behind a very high valuation of $13.3 billion.
Two scenarios:
- Everything works: AI adoption surges, infrastructure keeps expanding, costs keep falling (like the recent 80% price cuts). Lovable hits $600M+ ARR, SEF looks visionary.
- The chain breaks: Oracle stumbles, OpenAI can't pay, computing gets expensive. Lovable's costs rise, margins compress, the $13.3 billion valuation looks frothy. And European taxpayers' money has been used to endorse a bet that may not pay off.
The question isn't whether public funds should invest in companies like Lovable—there's a reasonable case that they should. The question is whether they should do so by co-leading at a valuation set by a VC portfolio model, without showing their own basis for that number—especially when the infrastructure layer itself is showing stress signals.
In plain English: Lovable built a great business. But it's standing on ground that might be shakier than anyone admits. Public money backing Lovable is defensible. Public money rubber-stamping the $13.3 billion price tag it didn't independently arrive at is a different thing entirely.
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