is Europe a digital colony?
Welcome to a new edition of Sunday CET, which covers what’s interesting in the startup ecosystem from Europe.
This week’s lineup:
it’s good to be investor, but better to be a founder
Euro hot markets are consolidating
Europe became a digital colony
🙈 2021 was the largest short-lived aberration in VC history, a combination of greed and incompetence where everyone - LPs, founders, and fund managers - were complicit and incented for it. Today, the exuberance is seemingly getting back on a somewhat normal trajectory curve as the money has become expensive and fund managers are finally being held accountable for their gamblings.
Looking back 12-24 months, other than the grocery delivery business which I’ll discuss in the next segment (part of an e-commerce trend altered by covid), notable big European bets were made on Amazon business aggregators (also e-commerce), BNPL, neo-banks and financial services, events (remember “the fastest unicorn in Euro history” Hopin that’s done 3 rounds of layoffs this year?), electric scooters/mobility or energy-related manufacturing and services (augmented by the Russian war).
Most European VC deals are SAAS and consumer-focused - putting aside the now-usual American clones, some also address big market gaps and macro transitions towards different consumer behaviour. In general we’re at a paradigm shifts moment in history, mostly impacted by the advance of technology use in society and which constructs solid premises of generational change and implicit economic value to be created and extracted. If you understand this shift, it’s not a bad moment to be an investor tbh, which has become fairly easy nowadays, and a great time to be an entrepreneur, which is way harder and more rewarding.
Also notably, this past couple of years included a fair number of investment deals explicitly made to find the next stage sucker by pushing unsustainable growth built on fake biz grounds - that’s what the 2021 abnormal unicorn spike from the above graph is a result of, and why you read about some of those doing layoffs these days.
Looking ahead, the next year will hopefully teach a whole class of first-time founders how to build properly, and focus more on fundamentals rather than listen to consultants advising on wealth growing schemes - they come and go as soon as they reached their number, while building great sustainable companies is a greater mission and more fulfilling than getting rich quickly, imho. Alas, it also boils down to personal values, this stuff is not taught in schools and it is easy to get distracted, that’s why good advisors matter and are hard to find.
It won’t be an easy period but totally worth the experience as those forefront guys are the future investors and/or serial entrepreneurs in the next 10-20 years, accumulating solid knowledge for building the next startup generations in Europe. And that’s a good reason to be positive in spite of bad macro conjuncture - some of my favs, right out of my fantasy portfolio include Crisp, Depict, Enode, Humaans, Heart, Ledgy, Lightdash, Monta, Nomagic, Payhawk, Peptone, Rayon, Sorare, Tinybird, TrueLayer or Upway.
🇩🇪 Getir finally acquired Gorillas for $1.2 billion, mostly with stock. After 20-24 months of “VC learnings” the whole quick commerce brouhaha from Europe has reached a consolidating point with multiple investors having lost money at peak market and two winners which took the cream: the Turkish Getir, now valued at $10 billion, and the American DoorDash, which took a solid Euro chunk via a $8 billion acquisition and a minority stake in a $2.1 billion asset a year ago. They’re the contenders to the more established likes Delivery Hero, Just Eat Takeway or Glovo.
Notably, Getir is also an American investors affair, as it was seeded by Michael Moritz of Sequoia’s fame (great timely catch, right?) and then flipped to series A to Tiger and Goodwater which took care of the later funding developments.
Other VCs holding European grocery chips include Index Ventures (Rohlik - raised $230M in June 2022), Target Global (Crisp - raised $70M in Oct 2022), Insight Partners (Modern Milkman - just raised $60M), Atomico and Lightspeed (both Zapp - last raised $200M in Jan 2022). Their companies are smaller contenders active on local basis, and presumably focused on profitability rather than growth as we’re all heading to an economic recession.
Last but not least, GoPuff and Jokr should get a mention in this VC malaise:
GoPuff, American startup that’s raised some 4 billion from, among others, Accel, Softbank, Blackstone, Peter Thiel’s Valor and US-German Headline, bought Dija and Fancy to grab share in Europe in 2021, where it is active in the UK and France - was also in Spain, and pulled out after trying for 6 months.
Jokr, w/ a German founder HQ’ed in NYC and active in Latin America, which raised about half a billion from the likes of Tiger, Softbank and Balderton (which got in opportunistically, at a high price). Jokr exited the Euro market at the beginning of the year, after it tried to build and sell a bridge op and couldn’t.
Interesting Euro deals
🇸🇪 Novatron Fusion, developing a new proprietary fusion power concept, was seeded.
🇬🇧 Charter, developing logistics software for satellite companies, was seeded.
🇪🇸 Magnettü, selling SAAS that helps companies sell more improving their employees personal brand, raised $170k.
🇳🇱 Pixyle, developing image recognition tools that detects fashion items in images, raised $1 million.
🇸🇪 Enerpoly, producing rechargeable zinc-ion batteries, raised $1.5 million.
🇷🇴 Nestor, YC alumni doing HR SAAS, raised $2 million seed.
🇫🇷 La Tournée, which does food delivery in Paris, raised $2.1 million.
🇫🇷 Rize, helping farmers build new income streams by earning carbon credits, raised $3.1 million seed.
🇫🇷 Cubzh, developing a free-to-play video game involving user-generated 3D content building (next Minecraft), raised $3 million seed.
🇬🇧 Phlux, a photonics company developing infrared sensors used for light detector and imaging systems, raised $4.9 million.
🇩🇰 Dreamdata, developer of SAAS for B2B attribution and revenue data, raised $6 million series A.
🇩🇪 Ostrom, reseller of energy in the consumer market, raised $10 million series A.
More intel bits
💲 Fresh powder:
AlbaCore Capital Group of London raised €2.2 billion for its third direct lending fund.
One Peak, which does growth stage B2B software companies in Europe and Israel, closed a third fund at hard cap of around €1 billion.
Iris Venture, a Paris, Berlin, and Munich-based VC firm, announced the first closing of its new €150 million venture fund dedicated to Seed and Series A investments.
Partech of Paris raised €120 million for its fourth seed fund focused on European and international startups at the pre-seed and seed stage.
Cavalry Ventures of Berlin raised €100 million of a target €160m fund — its third investing in early-stage technology companies
SquareOne (fka Paua Ventures), German early-stage investor, launched a third fund at €100 million, targeting B2B Enterprise Software / SaaS startups in Europe.
Jenson Funding Partners, a British early stage firm, launched a £60 million fund for startups focused on the energy transition to net-zero carbon emissions.
🗣️ Cheat sheets:
Investors in Europe:
Good to know basis
👉 What numbers are investors looking for? - basic stuff
👏 What to do when investors say no? - be human
🤔 Big tech cos are laying off, early stage startups AREN’T - founders sentiment
✴️ The European venture funding review - the 2022 edition
ℹ️ Forbes Midas List for 2022 - Europe & global
Have you produced useful resources for the community? They can be events, reports or tools - send me an email with submissions at email@example.com
How to find investors for your startup?
Tomorrow evening we’re running a workshop with practical advice 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.
🇬🇧 The UK startup Nothing, with $20 million revenue and 500,000 iPhone copycat sales so far, is going the U.S. with a phone that already looks like an iPhone replica, running Android and featuring a rear-facing lighting system that’s more a marketing gimmick than a useful feature.
I give it 6 months until they give up, and it’d be a really nice surprise if they proved me wrong. Nothing raised $70 million last spring, notably from Google’s investment arm GV and a bunch of second-tier investors.
🇮🇪 The Irish backdoor The European Data Protection Board regulator is about to overrule the Irish Data Protection Commission and declare Facebook's business model illegal.
TL;DR: In 2018 the EDPB has decided that Meta cannot force users to agree to personalized ads. Meta Ireland believed it could "bypass" the requirement by simply adding a provision in the TOC. Now the EDPB found Meta's alleged "bypass" of the GDPR illegal and rejected the view of the Irish Data Protection Commission who previously sided with Meta, after taking four years to investigate the case.
Context: When Big Tech companies violated the GDPR, they'd have to account for themselves to the privacy regulator in Ireland. For multinational corporations, Ireland is what old-time con-artists used to call a MadeTown, where the cop on the beat is in on the side of the criminals.
🇫🇷 Sovereignty ain’t paying bills Qwant, once a poster child for European tech sovereignty, came so close to bankruptcy that the company was forced to seek an €8 million loan from Huawei in 2021. Its founder left and started Altrnativ, an investigative platform that can collect, correlate, process and analyze data on a massive scale including by searching the dark web.
Altrnativ is called France's version of Palantir and its cybersurveillance op is monetised by investigating the critics, rivals and employees of some of the biggest brands in France.
🤔 How pros are doing it Thoma Bravo raised $32.4 billion for three new tech-focused funds in one of the biggest hauls by a private-equity firm this year even as some rivals struggle to close out funding rounds.
Thoma Bravo will collect $2 billion/year in fees to buy otherwise strong software businesses that are facing macro, temporary multiple compression - then flip them back in the market when the interest rates become normal.
How’s that for a business model?
🇫🇷 Brad Pitt sold his movie production company for $300 million to a French SPAC, founded by the telecoms billionaire Xavier Niel, investment banker Matthieu Pigasse and television executive Pierre-Antoine Capton, and whose shareholders include KKR and Bpifrance.
🇸🇪 Polestar, the Sweden-based, Chinese-owned car maker to launch its own electric bike.
🇬🇧 Brits and media Sky TV viewers who fast forward adverts will have to pay a £5 charge.
🇬🇧 Vodafone’s CEO got the boot, three weeks before Christmas.
💲 World’s Richest Family: Read and learn - how Abu Dhabi’s Royals made their wealth.
🖖 How web platforms collapse: the Facebook case study
💳 Credit cards as a legacy system - if credit cards were a person, they’d be retired already. link
🔥 AI Homework - AI output is probabilistic: ChatGPT doesn’t have any internal record of right and wrong, but rather a statistical model about what bits of language go together under different contexts. link
🦾 Comparing Google and ChatGPT Google employees explain why we haven’t seen ChatGPT like functionality in their products; the cost to serve an AI result is 10x to 100x as high as a regular web search today plus they’re too slow relative to how quick search results must be returned.
🔥 Europe became a digital colony.
Europeans went from being part of producing the silk to ending up as prey in the net. A region of 750 million people with few to no major, native tech services. Reduced to a vast pool of data, a captive collection of eyeballs, and potential in-app payment taxes for the great powers of the internet to contest.
This digital colony of Europe has been essential to building some of the most valuable, powerful, and entrenched conglomerates the world has ever seen. Trillion-dollar tech companies that today touch, if not control, all facets of modern life and commerce in our digital age.
👺 Remember Clubhouse? Clubhouse was slapped with a €2 million fine by Italy's privacy regulator for violating the GDPR.
🇫🇷 No more flying in France France will abolish flights between cities that are linked by a train journey of less than 2.5 hours, namely three routes between Paris Orly and Nantes, Lyon, and Bordeaux. The ban will be valid for three years.
🤔 EU to allow calls on flights - the European Commission ruled airlines can provide 5G technology on board planes, alongside slower mobile data.
🇫🇷 The Frenchest things in the world - there is no country on earth like France.
🇩🇪 Germany today The Reichsbürger believe that the modern German state, the Federal Republic of Germany, is a fake. They believe that it is not a state, but a private company - you would say, these people are crazy. But they are pretty numerous and active. link
🗽 New York discovered the robot-parking thingie and put it right at the top of the market - it costs $300,000 to $595,000 per year, and that’s on top of your hefty monthly condo payment.
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