seed is the new drug
#76
Hi there,
Warm welcome to the new subscribers!
Writing this from Spain, I have been here for a week now. Things seem to get back to normal, slowly and surely - there’s a long way to go, and the economy is pretty much in bad shape, especially the traditional businesses involving physical interaction and travel. But we’re getting there, and love that everybody I talk to is optimistic.
Here’s what I’ve got this week.
✍️ Observations
Seed is the new drug
This week we had two interesting fund announcements in Europe: Moonfire, which made official its investment efforts from the past two years with a closing at $60 million, and Stride, with a close of a second fund at £100 million.
Both funds are run by solid guys, Euro veteran investors - Mattias Ljungman, co-founder at Atomico back in the day, and Fred Destin, who’s made a career working for Atlas Ventures and Accel.
Both funds focus on startups at the very early stages in Europe - that means more often than not being the first institutional investor in a startup or sometimes even the first money in.
Why is all of a sudden early stage interesting for investors in Europe?
For once, it is more profitable - finding and backing startups at the earliest moment with the upside of becoming a multi billion dollar business is a really good business. It *is* the business.
Both Mattias and Fred have been through many cycles and are super connected on the continent, especially with repeat founders, and it is a natural position for them to be in the loop and spot the opportunities among the first.
Probably a textbook example is Stride’s investment in Cazoo, founded by Alex Chesterman, who is at his 4th significant startup. Cazoo was seeded officially w/ £30 million in 2018 and exited via a SPAC at $7bn last month. It’s no wonder Stride closed its second fund in just a couple of months.
Second reason is that series A/B round is getting really crowded in Europe.
It used to be (and still is) the usual sweet spot for career investors in Europe, building networks with early stage local investors in order to get involved in startups already de-risked by achieving some sort of PMF.
Since the Euro ecosystem is not too mature, series A/B positioning is a safer bet for not taking too much risks too early with unproven founders. But how many serial entrepreneurs can you find in a 10-15 year old ecosystem, after all?
This game used to be easy and profitable in the past and it’s become quite competitive right now.
And so, the logical step is to move either up or down the value chain. Add to that increased pressure from the Americans which discovered that Europe is attractive and are not afraid to take big bold risks.
Up the value chain, investment at series B and later is still a rather empty market in Europe. It requires super deep pockets and a predictable path to liquidity, be that IPO or M&A. And that is a big problem in Europe - the more mature a startup, the better the odds for it to cross the ocean for a liquidity event. Europe is simply not suitable for larger deals, and Deliveroo’s IPO is an example of that.
Moving down the chain means taking risks earlier on, getting your hands dirty outside your comfort zone, mingling with angels, accelerators and incubator people. Need to work harder for inbound and reach out to weird people who seem interesting. Not a sexy job since it requires a lot of people skills and understanding grassroot environments, something that investors are not exactly taught in school or learnt in a prior consulting job.
Career conversion programs such as EF and Antler play a big role in this respect since they pre-shape a future investable format. They produce about a hundred startups per year, but it’s hardly enough.
Startup ecosystems across Europe is probably one the most important missing piece for investors crowding now the seed and preseed market.
The demand is there, but is there enough supply? Is Europe able to produce as many founders as the money to fund them is available?
Who are Europe’s seed investors?
The best proof showing the interest in early stage is the data.
In 2020, for the whole year, we tracked about 2000 investors active in deals of $1 million or less in Europe.
This year, in 4 months, we are already at the 1000 mark.
We screened all of them, selected a solid 100 names and produced a report with the institutional investors active at seed levels in Europe.
The report includes 20 investors from the UK, 17 from DACH, 15 from the Nordics, 13 from France, 10 each from Spain and Benelux, and 15 from other hubs.
It is available here.
The French startup ecosystem
This week I read this piece about the French efforts to create PR around the notion of building startups and throwing a lot of money hoping they stick in the ecosystem.
What the French have done for the past years is nothing short of remarkable. They have been trying their best and put huge piles of money to work, things are much different, in a better way compared to 5 years ago.
Yes, I still think Macron is doing this mostly as a PR exercise for winning the presidency and understand the collective effort of avoiding Le Pen in the next years.
But you have to give them credit, the French at least have a startup ecosystem today, as opposed to five years ago. That’s a good thing.
However.
Talking to my friends from France, either founders (some serial) or investors, there’s a common theme, which their government doesn’t seem to get: unbearable bureaucracy and high taxes with low returns.
Simply put, they don’t think the taxes and bureaucracy are justifiable as a cost of doing business in France. They are happy to pay taxes as long as they get some sort of return in the society but find the overall effort not worth it.
And so they are creative, like any startup people - they use companies incorporated in other countries (one of them officially moved to Belgium even though he is still doing business mainly in France). They operate in France with minimum interaction in spite of not considering the country ideal for doing or investing in startups.
That is the product that needs to be fixed. No matter how much PR you do, or quasi-free money you grant to startups, if you don’t fix the product, it is unlikely to get to product-market fit.
🔥 Interesting deals
Nordics
🇸🇪 Einride, which does self driving trucks, raised $100 million.
🇫🇮 Oura, which built a business based on a wellness-tracking ring and app, raised $100 million.
🇩🇰 Nøie, a D2C operator of a customized skincare platform, announced their $12 million fundraise closed back in March.
🇸🇪 Elonroad, which develops a high-tech electric road system, raised $2.6 million.
🇩🇰 Replay Institute, which does VR-based software for football, raised $730k.
DACH
🇩🇪 re:ceeve, which operates a B2B debt collection platform, extended its series A with $9 million.
🇨🇭 Foodetective, operator of a B2B markeplace connecting restaurants with service vendors, raised $2 million.
🇨🇭 Droople, which does water tech for real estate, raised $1.7 million.
🇩🇪 Hyrise Academy, which sells online training for tech sales matched by a job, raised angel funding.
🇩🇪 traceless, which develops compostable packaging out of agricultural residues, also raised.
France
🇫🇷 Teale, operator of a B2B healthcare platform for providing mental help therapy to employees, raised $2.4 million.
🇫🇷 Dalma, which sells D2C insurance for pets, raised $2.4 million.
🇫🇷 Direct Market, which operates a B2B marketplace for vegetables, raised $2 million.
🇫🇷 Polar Analytics, which does SAAS for D2C analytics, raised $1.5 million.
🇫🇷 Semana, which does SAAS for office management, raised $730k.
Other hubs
🇬🇧 Zoe, which operated in stealth for three years, raised $20 million.
🇪🇸Urbanitae, operator of a crowdfunding investment platform for large real estate projects, raised $3 million.
🇬🇧 Erase All Kittens, which does a game for teaching coding skills, raised $1 million.
🇷🇴 Bunnyshell, a DevOp software developer, raised $1.4 million.
🇳🇱 Cargoplot, operating a B2B marketplace connecting e-commerce importers and freight forwarders, raised $520k.
🇬🇧 Pure Pet Food, a D2C pet food producer, raised funding.
💡 Charts and data
It’s a sellers market
China fact of the day
🚀 Other notes
🇹🇷 Getir leaked their numbers to the press as it is looking to raise at $7 billion pre-IPO:
6 million users
$800 million GMV
9 million orders per month
🇸🇪 Sweden has two startups for horseback riders that got off the ground in the past couple of years: Ridely and Ridesum.
Both raised this week, wrote a bit about the space when it was hot.
🇪🇸 Barter Energy raised funding to create shared solar rooftop installations to generate energy for nearby neighbourhoods. Super interesting.
Fwiw, Fon, founded 15 years ago by the same founder with a similar concept applied to wifi internet, wasn’t a smashing success, just got acquired a month ago.
🇪🇪 Wise put out their product roadmap - only two secret tasks in a sea of features. Not sure making it public is meant for the customers or for the competition though.
🇸🇪 Vivino won the trial with the company owned by the Swedish government controlling the alcohol sales in the country.
In Sweden alcohol sales is a State monopoly and Vivino was sued because they were selling wine to Swedish customers from Denmark.
It shows hustling on Vivino’s side, as it exploited a legal loophole allowing for private import exemption, which was introduced after the European Court of Justice ruled that Swedish alcohol legislation is contrary to EU law.
Still, they’re not allowed to do direct marketing at Swedish customers, but the internet is a wonderful thing and destroys many barriers otherwise impossible to cross.
🇹🇷 Disclosed equity funding rounds in Turkey reached to $523 million across 78 deals in the first four months of 2021.
To put a little context, Spain has 111 deals and $1.3bn, w/ Glovo, Travelperk, Wallapop and Jobandtalent at $100M+ deals. NB: equity only, startups inc-ed Spain, no grants, no debt etc.
🚗 Uber will expand grocery delivery in the U.S. through a partnership with GoPuff, an American grocery e-commerce startup.
GoPuff will make inventory of convenience store and grocery items available to Uber customers in 95 cities starting next month and nationwide by the end of the summer, the companies said.
GoPuff will handle logistics and delivery for the orders, and Uber will take a percentage of each transaction made through its app.
“It’s a killer,” Buffett said about the influence of special purpose acquisition companies on Berkshire’s ability to find businesses to buy. “That won’t go on forever, but it’s where the money is now and Wall Street goes where the money is.”
“The gambling impulse is very strong in people worldwide and occasionally it gets an enormous shove and conditions lead to this place where more people are entering the casino than are leaving everyday,” Buffett said. “And it creates its own reality for a while and nobody tells you when the clock’s going to strike 12 and it all turns to pumpkins and mice.”
💰 In 2010, Universal Music Group owned the domain name for Uber. com
Universal sold the domain to the rideshare company for 2% equity.
A year later, Uber bought back the 2% equity for around $1M.
If Universal held its 2% stake until Uber IPO, it would have been worth over $500M.
🏦 Verizon sold 90% of media division to Apollo for $5 billion and renamed it Yahoo.
The division made some $1.9 billion in Q1 2021 - TechCrunch is among the 11 assets together with Yahoo, AOL and some American centric brands, but the name is not even mentioned in the official spiel. It kinda makes you wonder how much it’s worth it and how it will evolve in a portfolio management play of a PE house.
🛡️ 7-Eleven has built a store in a suburb of Osaka, Japan, while the shop next door remains tied up in court - inside the war between a very powerful company and a very stubborn franchisee, complete with threats, spies and videotape.
👋 Why the next 6–12 months will be the best time in a decade for startups to hire.
🇱🇺 You are hyped. What's next?
⚔️ Epic v. Apple: Everything you need to know about the biggest trial in tech.
🇨🇭 Robert de Niro to Roger Federer in a promotional video for Switzerland Tourism: “you should have said fuck you”.
Thanks for reading 🙌
Created every Sunday by @drnovac of Nordic 9 with weekly notes and observations from the European startup ecosystem.
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