the new wave of Euro VC

#77

May 16, 2021

Hi there,

Warm welcome to the new subscribers!

Let’s get straight to business.

🔥 Interesting deals

Nordics

🇸🇪 Exeger, which does a tech converting light energy to electrical energy, secured $38 million in debt and equity.
🇩🇰 Contractbook, which does SAAS for contract management, raised $30 million.
🇫🇮 Swarmia, which does SAAS for software teams, raised $6.9 million.
🇳🇴 Kitemaker, which also does SAAS for software teams, raised $2 million.

🇬🇧 Unmind, B2B provider of a workplace mental health platform, raised $47 million.
🇬🇧 Yoto, which built an audio player for children, raised $17 million.
🇬🇧 Remedy Health, D2C producer of the personalised gummy vitamin brand Nourished, to raise $11 million in Series A.
🇬🇧 Quix, which does SAAS for real time data streaming, raised $3.3 million.

Other hubs

🇫🇷 DessIA, developer of a SAAS industrial automation platform, raised $6.7 million.
🇧🇪 MobieTrain, which does B2B micro learning SAAS, raised $4.9 million.
🇵🇹 Kitch, food startup founded by the guys who launched Uber in Portugal, raised $4 million.
🇳🇱 QphoX, a developer of quantum tech, raised $2.4 million.
🇮🇹 Dog Heroes, D2C for pet food which 3x-ed its ARR this year, raised $900k+.
🇸🇰 Bookee.ai, which does AI for accounting, raised €500k.
🇩🇪 KidsCircle, provider of a digital education platform for children, raised.
🇩🇪 Xolo, a 3d printing company, also raised.

✍️ Observations

The new wave of VCs in Europe

About 15-20 years ago the VC business in Europe meant having to deal with consultants in their late 40-50s, whose job was basically buying industrial assets such as factories, putting money in to re-technologize them, and then selling them at double digits IRR in a 5-7 years span.

Software or internet, what we actually now call tech, were exotic things and considered to be niched businesses.

Sure, we had a few internet entrepreneurs in the 2000s, Skype was on everybody’s examples as investors were talking about internet, and holding companies like Nasper actually were quite active in screening and investing in Europe’s best internet startups.

But fact is that the VCs in Europe wouldn’t really touch this kind of startups as they were considered to be risky. And they were risky because investors didn’t really understand them, they were from a different world.

That is one reason for which Europe is lagging in the top VC world - there was not too much capital risked at that time because those generations were supposed to get outside their comfort zone and back some 20 years old building intangible assets on an intangible medium (the internet) that hardly made sense for people born on the 1950-1960.

Factories, real estate and even restaurants surely looked more safer as they were tangible assets, right?

Fast forward 20 years, things have changed considerably mainly because several cycles had happened, there’s new people dealing with the money and we have already a 10-15 years track of investing with some moderate success compared to the top of the line people in this industry (yes, Silicon Valley).

The general consensus is that the European ecosystem is yet to become mature, the market is super fragmented which is a big deterrent for scaling, the legislation is a mess and the exit opportunities are limited.

However, due to historical high money supply in the market, the competition is higher than ever - and this increased level of competition is a good way for an ecosystem to mature very fast.

Euro VCs seem to have finally started to adopt best practices at doing their job (a software arms race going on as we speak) and we see more and more examples of players not being afraid of doing things differently and taking more risks - in an industry of followers, no less.

Who are those new people trying out new things? I am seeing three types:

i) former entrepreneurs - more and more founders decided to start investing, either on the side or as their main job.

ii) young people in their late 20s-early 30s, who decided to take their destiny in their hands and run their own show rather than working for traditional investment shops run by old school people.

iii) veterans who also decided to raise their own fund and become startup VCs rather than retiring as employees for traditional shops.

All those guys have energy, are knowledgeable and risk takers. They understand the value creation process and are trying their best to be a positive part of it. Some of them are idealistic, which is a good ingredient in a business where the KPI is a number which is usually correlated with the ego size.

And those guys, combined with a lot of outside competition, are the future of this VC-backed ecosystem, which is still an insignificant bubble in the grand economic scheme of things from Europe.

Over at N9, we made an inventory of the people part of the new wave of European VCs and profiled 25 of them.

The France ecosystem - followup

Got a bit of feedback on my last week’s anecdotes regarding the French startup ecosystem.

Here’s Pierre B (serial founder):

I am still operating in France because it is still easy for me to find talent. It is become competitive but if you know where to look you can find young intelligent people with good energy wanting to learn what they didn’t learn in school. I usually hire them while they are students, and try to put them on a career track that aligns with our company’s trajectory. Sometimes it works, sometimes it doesn’t, but most of the people I hired in the past 10 years have become my friends and we keep in touch.
But it is true, you have to be crazy to run a big payroll in France - the taxes are high and it is very difficult to fire people when things are not working. And that means I cannot startup over and try another idea because I have big costs of failure.

And here’s Nicolas C (investor):

I think the most critical issue is the cultural and political inward-lookingness (for lack of a better word).
The key to early success in France is to pay tribute to the powers that be: bad angel investors, bad VCs, Bpifrance (the government's investing arm), corporates, even cabinet members (they'll invite you for dinner or events if there's local buzz about your startup), and of course Macron himself. At this point, you may have the impression that your startup is successful but:
your cap table is a nightmare
everyone in the company speaks French
you're failing at international expansion
in general, you're resting on your laurels
There are very few French founders who are aware of this trap. And those who are, are in for a lot of pain, because France will make you pay your will to escape and look beyond its borders :-) (and it'll be impossible to attract international talent anyway, so succeeding at outgrowing France usually means relocating/expanding operations elsewhere, typically in the US).

Understanding signals

One way to understand what is going on in an ecosystem is to check what outsiders find interesting in the said ecosystem.

In the private investment sector, a good signal is looking at what outside VCs backed at the very early stages. Over at N9 we started a series of reports trying to figure this out:

Early stage startups from DACH that raised capital rounds from non-DACH investors
Early stage startups from France that raised capital rounds from non-French investors
Interesting early stage startups from Europe backed by American investors.

We also looked at Seedcamp’s portfolio of non-British startups they backed in the past 16 months or so - Seedcamp is one of the more active early stage investors from Europe.

Those reports are available for Nordic 9 Insiders. If you want to become one, you need to pay a membership fee of 149 euro - this gets you access to a library of about 100 intel reports, on top of updated databases about startups, investors, dealflow etc.

💡 Charts and data

Creators economy

Climate change is a thing but what’s that exactly?

Wheel of power/privilege

🚀 Other notes

🇫🇮 The fine people from Icebreaker, which is one of more active Euro investors at pre-seed level (i.e. pre revenue startups), are looking to hire a software guy to drive the development of their internal software tools.

The job is (can be) remote, and they’re looking for someone who’s a self starter and that can manage themselves, in a role that integrates deeply with their work as they already use software to help source and assess deals.

More details and what to do if it’s your thing (or know somebody) here.

💪 Alba Orbital from UK and Kitemaker from Norway, both part of Y Combinator this winter, announced closing fundraise deals this week.

🇺🇸 Accel made public details about how it’s running their scout programme, Sifted made a good overview of it.

🇬🇧 Balderton’s James Wise makes the case for changing the legislation in order to allow British pension funds to invest in VC. I explained here why this is a problem.

🇩🇪 There were more e-bikes sold in Germany in 2020 (~2 million) than electric cars across the whole of Europe.

🇳🇴 Remember Disqus? That little piece of software that 15 years ago publishers would implement on their site for comments and moderating tools management?

It just got fined by the Norwegian authorities for tracking people for programmatic advertising purposes.

🇬🇧 A 4 year old semiconductor manufacturer from Canada announced its London IPO after shunning the Nasdaq.

🚗 Uber used 50 Dutch shell companies to dodge taxes on nearly $6 billion in revenue.

I mean, sure, Jitse Groen of Takeaway.com has reasons to be pissed as Uber entering the German market means consumer competition. But competition also means how good the CFO and legal guys are at doing their job - whining about it on Twitter is just failing to recognise that things can be better executed.

🗄️ Here’s an open database for university spinouts.

🇪🇺 Understanding the current state of European tech through the three significant waves of activity in the ecosystem.

🦔 Venture Capital Is Changing ....Again

⛔ Spotify founder Ek says his bid for Arsenal was rejected.

✔️ Substack acquired a community building company:

A platform that supports independent writers has to be about more than just software. The current crisis that writers face can’t be solved with a beautiful publishing tool or a whiz-bang content management system. To really flourish, especially when starting something new, writers need a support structure to reduce the anxiety that can come with doing important work for the public.
They need peer support; they need advice and guidance; they need access to healthcare and legal support and design and all the things that could be offered if the economics of the media ecosystem made a little more sense.

💰 Apple robbed the mob’s bank.

Speaking of which, Ben’s big picture decomposition of Apple’s approach is a must read.

🧮 The economics of movie product placements.

👔 TikTok launching jobs service for Gen Z.

🕹️ The great online game

⏭️ Top gamers are quitting esports to become Twitch and YouTube influencers as esports organizations and game publishers reallocate resources to streamers.

⛵ There are 9,357 yachts over 65ft long that are currently on the seas - meaning those that have not sunk or that are being maintained on land.

The vessels are often bought by corporations and are then rented out by the company's owner, making it difficult to say for certain which yachts are owned by whom.

🇪🇺 Σικτίρ πιλάφι/siktirpilafi (fuck-off pilav) is the last treat that you serve when you are tired of your guests and want to hint that they should leave. In the past, a sweet rice pilav was served to guests at Rum weddings as a sign that the party was over.

faschinating thread

❤️ Some Korean couples have found a way to redefine romance - by gifting each other Tesla and other blue-chip stocks.

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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