the next big thing
#78
Hi there,
Warm welcome to the new subscribers!
This week we’ll talk about white spaces in the Euro VC market, have a quick look at how a Swedish VC hit two birds with one stone and about the next hot segment that investors will look for in Europe. We’ve also picked some of the more interesting deals from this week’s dealflow.
All this is backed by the work made over at Nordic 9, so if you appreciate this newsletter and would like to support an independent startup contributing to the European ecosystem, maybe this is the right week to subscribe?
✍️ Observations
The investment market fragmentation
Air Street Capital announced that their $17M fund was upscaled to $26M.
Air Street is a Britain-based, AI-focused one-man show, namely Nathan Benaich, a former academic guy turned investor. In case you didn’t know already, the background story of Nathan becoming a VC is interesting and it mainly involves Daniel Ek and Shakil Khan.
It’s not a singular example in Europe and I believe we will see more of this kind of vertical investors focusing on early stages and ultimately this is where the Euro market has a lot of white space.
The Americans have been doing this for some time already: small vertical funds tackling early stages - one or just a few people teams, with unfair knowledge of the market, ready to take relatively small risks while shaping future-companies.
If you take a step back and have a holistic view of the market, the VC business is swinging from scaling their AUM from a core to being active in more other stages and geographies. Two reasons for this:
high money supply level
the Zoom calls effect, which makes deal making geo agnostic i.e dealflow size increases exponentially.
Doing everything for everybody though - the so-called crossovers - is difficult to scale for a 10-30 consultants shop. It only works for the top of the market - hello Tiger.
Right now Europe is at the scouts development level - the market is infested with them. VC scouting is basically a banal affiliate sales program, or, if you like parallels, like football teams scouting talent for future hiring.
Make no mistake, any respectable VC house should have this kind of program in place, formal or informal, as the market matures and competition is heated. And exactly like in sales, the scouts are your ears in the market, the better the scouting, the better the intel and ultimately the optionality.
This VC sales process though is not going to help the bottom market emergence of interesting projects and founders - scouting is a part time gig against a finder’s fee rather than getting involved at professional level to get a startup ready for the next cycle.
This is the void to be filled by small vertical investment shops - deeply understanding trends and dealing with grassroots people, while taking lower risks (small checks), and capable to shape positively startups in order to become fundable at ulterior stages.
You can look at it geographically (multiple markets, 30 in Europe only), by industries (i.e. ecommerce) or by specialisation (i.e. Nathan’s AI-focused startups). The better ones are the ones with deep knowledge access across all three.
How to be innovative if you have money
I haven’t followed in a while the European saga of financing startups that acquire companies making a buck on Amazon’s marketplace in order to operate them from a holding company.
But this week, while I was screening the European dealflow, I just ran into a story of yet another startup called factory14 and playing the same game out of Luxembourg, with the explicit strategy and unique differentiator of, wait for it, acquiring only high-quality assets.
In plain English that means that if you go to supermarket to buy toilet paper, you will only get the more expensive one from the shelf, as a way of signalling you are a sophisticated consumer.
Quite sure none of the tens of Thrasio clones from Europe thought of this angle.
It’s amazing what you can do when you have a lot of money to play with, isn’t it? factory14 also found financiers to back their vision with $200 million.
The next big thing in Europe
In Sweden, a local manufacturer of light electric scooters called Vässla, announced a D2C op involving a $50 a month subscription service for getting access to their products.
Meanwhile, Dance, which is doing the same thing from Berlin (founded by the Soundcloud founders, also Swedes) is still silent, a year after raising more than $20 million. In fairness - they emailed a link to a customer survey the other week, so they’re probably still working on the thing. :-)
Jokes aside, this kind of business is likely going to be one of the hottest segment in Europe by the end of 2021, shifting the VC attention from financing grocery deliveries and Amazon FBA holding companies.
The market fundamentals are just there, consumer attention shifts to light, electric means of transportation (market is growing double digit growths), and a D2C subscription model is simply more suitable for a lifestyle where the car is not an asset but an utility expense.
So prepare your lists with the hottest startups in the space (I know quite a few actually), this is where it’s going to be at.
Scoring on diversity
The number of women working in private investment in Europe is so small that Sifted managed to list them all in an article.
I still think that this is more of a bottom up market problem - i.e. there’s not too many women interested to build a career in finance (I bet the number is small in investment banking or corporate finance as well) - but there’s plenty of evidence of a certain level of discrimination that Europe happens to be very good at (we talked about this here).
With this in mind, it’s interesting to note Creandum’s announcement of adding their first female partner in the company, as they rehired Sabina Wizander who had left in 2017.
According to an analysis from last year, Creandum, which is one of the better emerging VCs from Europe, had an only-male partner structure, with a partners founder/operator/investor ratio lower than 1, meaning the partners have background experience more in consulting startups than in building one.
By getting Sabina to return after she spent 4 years taking Kry from a $100 million company to a few billions ones, they hit two birds with one stone.
🔥 Interesting deals
Nordics
🇫🇮 Ilmatar, a green energy company, raised $244 million from Omnes.
🇳🇴 Cognite, SAAS developer for asset-intensive industries, raised $150 million in a round led by TCV.
🇩🇰 Forecast confirmed their Balderton-led $19 million round announced by yours truly 6 weeks ago.
🇩🇰 Pento, which does SAAS for payroll solutions, raised $15.6 million in a round led by General Catalyst.
🇸🇪 Sweef, D2C operators for selling furniture and interior design products, raised $3.6 million.
DACH
🇩🇪 Trade Republic, operator of a digital investment platform, raised $900 million.
🇩🇪 Pitch, SAAS developer of an alternative software suite to PowerPoint presentations, raised $85 million.
🇨🇭 Yova, another operator of a digital investment platform, raised $12.3 million.
🇩🇪 Senorics, developer of near-infrared spectroscopy sensors, raised $10 million.
🇨🇭 Fave, operator of a social network for music influencers, raised $2.2 million.
France
🇫🇷 Back Market, operator of a marketplace for refurbished electronics, raised $335 million.
🇫🇷 Ankorstore, B2B marketplace connecting brands and designers, raised $100 million.
🇫🇷 Regate, a fintech SAAS developer, raised $8.6 million.
🇫🇷 Ublo, SAAS developer for the real estate owners, raised about $1 million.
Other hubs
🇬🇧 Cervest, a software developer of a Climate Intelligence platform, raised $30 million.
🇬🇧 Causaly, an operator of a software platform for biomedical research, raised $17 million.
🇮🇪 Payslip, a payroll provider company, raised $10 million.
🇳🇱 Naduvi, D2C ecommerce operator of interior design products, raised $10 million.
🇪🇸 StudentFinance, operator of a student recruitment platform based on ISA, raised $5.5 million.
🇪🇸 Pangea, which manufactures engine components for space rockets, raised $3.7 million.
🇪🇸 Green Eagle, SAAS developer for wind farms and power plants, raised $3 million.
💡 Charts and data
Where we’re at
Total secondhand market projected to grow almost twice the size of fast fashion
Where we’re at p.2
🚀 Other notes
🇮🇸 It looks like the fund started by Davíd Helgason (Unity founder, active Euro angel) and his brother Ari Helgason (Index Ventures) will be operated out of Iceland.
🇬🇧 London would like to have Klarna IPO on their turf, and Klarna would like some regulations changed in exchange. This is how you do lobby in Europe.
🇪🇸 Is the Spanish ecosystem at the point where London, Berlin or Stockholm was 2 to 3 years ago? Not yet + a list of active business angels, seed and Series A VC firms in Spain + early stage startups from Spain to look at.
🇬🇧 Snap acquires Oxford company WaveOptics for $500m, backed in the early days by Imperial College.
🇧🇪 The Belgians got hot-headed: Alibaba is building a €100 million logistics hub in Belgium and some are worrying that China might use it to give its spies a firmer foothold in Europe.
🇨🇳 Tencent has invested in or acquired more than 50 game related companies in 2021, 5x the total in 2019 and up from 31 in 2020.
🇮🇸 Iceland has a new airline called PLAY, which will initially serve seven European destinations before expanding to U.S. routes.
🇵🇹 Debtholders in Sporting Lisbon are looking to sell out of the club - it’s Daniel Ek’s chance, now that he’s been ignored by Liverpool’s American owners. :-)
🇫🇷 In Paris, there are 700,000 cars parked in the streets, with twice that in London.
The average European spends €7,500 per car per year when you calculate parking, insurance, damage, taxes, and the price of the car averaged out. That’s €5 billion spent by Parisians, yet those cars are idle 95% of the time.
Forget the financial part and look at the impact cars have on our lives and livelihoods, occupying 50% of our urban space.
🇫🇷 Eurostar lands £250 million bailout from investors and French state.
🇮🇪 Irish drone delivery operator gets IAA acceptance to deliver goods to consumer’s home via drones.
🇬🇧 The reinvention of Canary Wharf.
💪 Overview of a good ol’ SAAS that is bootstrapped:
400k users
$27M ARR
GTM: Sales sales sales, affiliates, sales.
More insights here.
If primary GTM is bottom-up, founder needs to be great at product.
If primary GTM is inbound, founder needs to be great at marketing.
If primary GTM is outbound, founder needs to be great at sales
🗽 Google is opening its first physical retail store this summer in NYC.
💰 Amazon is in discussions to acquire MGM Holdings (owners of Rocky, James Bond movies) for $9 billion.
📙 An interview on product management at Stripe.
🧮 How family offices are investing into VC.
🤑 Judge to Apple’s Tim Cook: You’re charging the gamers to subsidize Wells Fargo.
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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