Hey there,
Welcome to a new edition of Sunday CET. This week:
• risk is putting the venture in venture capital
• VCs paying to make twitter entertaining
• selling 100 million hot dogs for marketing
Have a good one,
Dragos
Observations
The pace of the dealflow in Europe has gone down in Q3 compared to the one from 2021, in the general downward trend of the whole year, and is roughly at the 2019-2020 levels. Most of the investors are circumspect and prefer to sit on the money (2% interest rate at the bank at 8% inflation ftw), but in the grand scheme of things tech startups still remain an attractive asset class for professional investors.
Building a tech startup is a value creation process that requires less resources compared to the big behemoths and corporations that are affected by the coming recession. And also, if done right, a tech startup is poised to extract a whole lotta more value as it bets on the future transformation of old, traditional and inefficient ways of doing business.
Startups are risky though, I hear you saying in the back - of course, but that risk comes with the VC job, that’s why it’s called venture. From an investors job perspective, even though the macro is shitty and uncertain, there’s (a lot) of business to be made the right way, valuations went down (European assets were cheaper anyways), you just have to know where to look and adjust your expectations accordingly (no more 15 min grocery delivery suckers, that’s for the boom times). The market has more money than projects, the continent remains a comfortable place to build in spite of its flaws, and the competition on good deals remains super high in Europe.
On the other hand, any good reset means a market cleansing, with builders having to look closely at the fundamentals of a healthy business, as opposed to an unsteady foundation that only meant spending investors money for marketing. Cutting off unprofitable growth funding is the first step; however, laying off people from the core can lead to a dramatic pullback with long term effects - see the covid period, which made it hard to re-hire as quick to capture rebounding demand when the market turned. That’s why you see companies with more than one wave of redundancies (i.e. Klarna) - they are reluctant as it is hard to find, hire and retain great people.
So, besides this Darwinian moment that’s a reminder that a great business needs to be built the right way, not in 2-3 years, there’s a few reasons to be optimist. There’s a great talent pool for hiring in the market. Retention has also stabilised as folks think twice before exploring a career move in turbulent economic times. There’s more startups out there - anecdotal, I see more new projects than ever popping out, in all verticals. It is a great time to keep your head down and build. Not least, evergreen verticals still get funded at high levels, particularly climate, cybersecurity, robots. Speaking of climate - everybody and their mother is nowadays backing climate deals, so something’s gotta give, right?
On a final note, even the current announcements likely to be residuals from the summer, I had a quick look at who’s still dealing in the market. Here’s some names of investors that announced deals in the past 6 weeks or so:
DACH: Speedinvest (10 deals), HTGF (8 deals), Earlybird (6 deals)
Nordics: Creandum (9 deals), Icebreaker (4 deals), SNÖ Ventures (3 deals)
UK: Seedcamp (6 deals), Octopus (5 deals), Balderton (4 deals), Molten (4 deals)
France: Kima (10 deals), Demeter (3 deals), Singular (3 deals)
Spain: Big Sur (3 deals), Bonsai VC (3 deals), JME (2 deals)
Americans: Acequia+CS (4 deals), CRV (3 deals), Valar (3 deals), Headline (3 deals), Sequoia (3 deals)
source: N9
Euro startup intel
Interesting deals
🇫🇮 Enable Banking, building a financial connectivity platform, raised $600k.
🇧🇪 Ceeyu, developing a digital footprint SAAS, raised $800k.
🇫🇷 Nabu, doing a tool integrating shipping data with custom declarations, raised $1M.
🇸🇪 Steep, which does analytics for product and sales, raised $1M
🇫🇮 Tribo, mobile-first web3 game studio, raised $1.2M
🇨🇿 Munch, doing an all-in-one mobile app builder for e-commerce, raised $1.5M
🇨🇭 FANtium, platform for fractional investments in athletes, raised $1.9M
🇫🇷 Picsellia, doing an MLOps platform for computer vision projects, raised $2M
🇫🇷 Cuvée Privée, building a consumer ecommerce op for wines, raised $2.5M.
🇫🇷 TakeTurns, developing collaboration SAAS, raised $2.9M.
🇩🇰 Flatpay, developing a mobile payment solution for retailers, raised $3.4M.
🇩🇪 Solarize, which does SAAS for energy microgrids management, raised $4.2M
🇩🇪 Fides, which does SAAS for c-level governance, raised $4.3M
🇫🇷 Fairly Made, developing an intel SAAS for sustainable supply chains of the textile industry, raised$4.9M.
🇪🇪 Alvin, doing a data lineage SAAS technology, raised $5.9M.
🇸🇪 Kive, AI-powered visual content library for advertising, raised $7M seed.
source N9
More intel bits
💲 Powder: Verium (120M), 33N (€150M), Resonance (€150M), Capital Dynamics (€521M) Lightrock (€860M).
🥕 Groceries: Getir in talks to buy Gorillas, Crisp raised 75M, Kroger wants to buy Albertsons in a $25 billion deal that would make it the #2 player in US, behind Walmart.
🏦 Financial services: Idinvest, Partech, Cabiedes exit, Mediobanca catches up w/ BNPL, Pollen Street buys into a digital receivables platform.
🏃♂️ Toxic assets: Prosus to sell its Russian classifieds business Avito to Russia-based Kismet Capital for $2.46 billion.
⚽ Media assets Qatar Sports Investments, owner of French soccer club Paris Saint-Germain, agreed to buy nearly a 22% stake in Portugal’s SC Braga.
🦘 Social networks: BeReal reached 53M downloads and has poor Android engagement.
💪 Biz devel: Seedrs hires a head of Nordics.
How do you find investors for your startup?
👇 Last week our workshop was sold out, we’re doing it again tomorrow evening. 👇
We’re doing a lil’ workshop helping startup founders find investors and evaluate who is right or not for them. We still have a few spots open, email me if you want in, first come first served.
Watercooler talk
💭 VCs make Twitter to be fun This week folks on social media circulated a fake it till you make it meme for the VC business - somebody claiming he’s a founder at a later stage startup convinced some journalist that he’s making $200k per month out of writing content for VCs on Twitter.
Alas, be cool! European VCs won’t do this kind of thing because a) they’re cheap and b) they think they’re smarter than everybody else.
Jokes aside, doing ghostwriting is common practice* in the US, particularly for the Fortune 500 C-level execs, who have hired either in-house staff or PR agencies do this job. So it’s kind of a normal evolution for the VCs to get there, as the industry has exploded, growing at double digits every year for the past 3-4 years.
Now, what made the above become viral - for once, the VC is a pretend business with an “overpromise / underdeliver” mechanism, which does marketing by making noise about the value-add put on the table besides the money. That’s the claimed non-tangible differentiator for them wanting into deals, and that’s how investors benchmark against each other (apart from the ROI talk, reserved for LPs’ wine and dine events) - it’s a peacock showing off that led to a very high noise vs signal ratio in public channels, with investors literally inundating twitter, linkedin and tiktok with banal business banters in the hope of getting founders’ attention. Hence the next level, the emerging need to hire genuine voices producing quality content, since most of the investors are boring anyways - except that founders don’t really spend too much time on social media, and if they do and make their decision of choosing an investor over the social media media content, they’re in for a drastic reality check when they’ll meet the same investors in the boards, at their face value. “- But I thought you’re cool, and open minded, and smart. - Nope, that was just marketing”
Another viral side of the said meme - 200k is a lotta dough, and a decent pay for being genuine on twitter once in a while, considering that a series B/C CEO bags a salary of around 150k a year for working their asses off.
*Even popular Substacks or NL writers are doing this, you’d be surprised.
🐔 Come for the furniture, stay for the hot dog. You know how Ikea sells really cheap hot dogs so that now it has become one of the biggest vendors in the world with more than 100 million hot dogs sold every year. It’s part of their marketing mix, as a gratification of their emotional all-time-low-moment of the entire Ikea-experience - here’s a good explanation of how it works from an American perspective: Costco, which in a similar manner sells 100M+ units of fried chicken for $5.
🇺🇸 De-globalisation sucks The US government's new export controls are wreaking havoc on China's chip industry as the new rules around US persons are driving an industry-wide decapitation - all American suppliers of IP blocks, components, and services were forced to choose overnight between their jobs or US citizenship, thus cutting off all service to China. That’s one serious source of inflation on top of everything else, btw.
🤔 Doing porn is hard If you wanted to start an adult social network in 2022, you’d need to be web-only on iOS and side load on Android, take payment in crypto, have a way to convert crypto to fiat for business operations without being blocked, do a ton of work in age and identity verification and compliance so you don’t go to jail, protect all of that identity information so you don’t dox your users, and make a ton of money. You’d need at least $7 million a year for every 1 million daily active users.
💰 Apple the bank Apple’s users will soon be able to open an interest-bearing savings account, which is built on top of Goldman Sachs white label infra (like MVNO for banking). The service complements a payments network with Apple Pay and its credit card that has done incredibly well, used by some 6.4 million cardholders (data per as of 18 months ago). Apple also announced plans to allow people to use iPhones as point-of-sale devices and to offer BNPL lending later this year.
🙈 Trevor Milton, the founder and former CEO of electric automaker Nikola, was found guilty of fraud for lying to investors about the business and he faces 25 years in prison. He became a billionaire virtually overnight - he founded Nikola in his basement in 2015 and took it public in 2020 at a valuation of $3.3 billion, when the company hadn’t sold a single truck.
🇩🇪 Peter Thiel, the German-American billionaire investor that’s one of the largest individual donors for the U.S. midterm elections, is seeking citizenship in Malta. Thiel was born in Germany and holds an US and a New Zealand passport - there is no obvious tax benefit for applying for the Maltese one. link
🤖 Joe Rogan, the American podcaster, did a show by interviewing Steve Jobs about his early life by entirely using AI. Apart from the coolness of it, fast forward 20 years, if most of the internet content is AI-generated and farmed so that Google can sell advertising against it, media brands and credibility will become more important than ever.
Closing notes
🇩🇪 Plans to deepen Germany's Rhine river with 20 centimeters across 50 km to combat low water levels cost 180 million but hit resistance from environmentalists.
🇨🇳 Chinese technology poses a major risk to the UK's security, says the British cybersecurity boss.
👽 The Earth is subjected to a hail of subatomic particles from the Sun and beyond our solar system which could be the cause of glitches that afflict our phones and computers. And the risk is growing as microchip technology shrinks.
🤡 Solving the climate problems by destroying art Climate activists threw tins of what appeared to be tomato soup over one of Van Gogh's famous Sunflowers paintings on display at London's National Gallery. link
🇫🇷 The French are doing it better Meanwhile in France, young activists in Paris are using superhero-like Parkour moves to switch off wasteful lights that stores leave on all night.
🗽 New York seems to have a weed store on every corner. None of them are legal.
㊙️ Conductors conduct - what do conductors really do? link
☝️ How does the lottery work, and is it worth playing? We’ll gamble that you’re interested in finding out.
⌚ What your watch brand says about you? MB&F: You are an investor in various internet start-ups. You believe in “thinking different” and “changing the world”. Having gone through the various Pateks, Langes, and Journes that befit your station, you now find pretty much every other watch brand ridiculously boring. You wear an Apple watch concurrently on your other wrist. link
💋 You’re so beautiful You know Europe is not at its best when high profile investors do PR pieces about how the continent is “poised to lead the technological revolution”. It’s like looking in the mirror and telling yourself: “you’re so beautiful”.
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