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Welcome to Sunday CET!

The market still looks bad for the end of the year and everybody seems depressed - one trick for when you’re blue is to go shopping because spending money makes you feel good. Not in the VC world though - their job is to buy low and early and sell high at the peak, regardless of emotion. This week, I had a look at some of their expensive bets made in Europe this year, in spite of the market situation. Are they just dopamine hits or will they turn into nice success stories in 5-8 years? If I knew the answer to this, I’d be rich.

Let’s get to it.

Top intel

August and February are the months when the highlight of a bunch of interesting startups ready to present at the YC demo day represents the (usual now) investors complaining that being part of YC makes them unreasonably expensive compared to other assets available in the market.

Whether they’re right or not - that’s a discussion for another time. Suffice it to say that YC is the best startup talent magnet on the planet and its de-risking process results in an almost 50% seed to series A conversion rate, which is pretty high by the industry standards - there’s a premium associated with those.

However. All these pro and con discussions and investors eye rollings made me curious about what are some of the overpriced seed deals closed in Europe this year. That's also because it is a tough market for VCs, in Europe and not only - investors still need to find an equilibrium between over-priced ZIRP valuations, being relevant in the market and not closing the business down. The dealflow still contracting 3 Qs in the row indicates that an equilibrium is yet to be reached.

And so I screened all the seed deals closed in Europe in the first half of 2023 and ended up with a list of roughly 100 startups that were seeded with a minimum $5 million rounds.

On the top of it, there’s Mistral, of course, the French hope to make some American investors some unicorn-sized money and Macron happy. There’s also two Spanish teams (1, 2), which both went straight to US to find suitable value-add investors, and there’s a Swedish crew that was pre-seeded with 19 million in 2021, yet it’s still in pre-alpha and raised just as much in seed this winter. In the top 100, the Brits and the Germans got the lion’s cut, with the largest number of startups that raised 5-15M seed rounds, while on the outer markets there’s two Irish startups (1, 2) and a Spanish one that went to YC last summer. There’s also notably a few expensive pre-seed deals - 1, 2, 3.

There a whole lot more to chew in a comprehensive cheat sheet that’s available for our customers.

💲 Other cheat sheets

• Q2 series A deals in Europe - link

• European startups at Y Combinator this summer (the complete list) - link

• What non-locals invested in in Europe in 2023 - link

• Investors who slowed down Europe funding in 2023 - link

• Notable American investments in Europe in H1 2023 - link

Deals highlights

🇬🇧 Jitty, using AI to read property floor plans and understand photographs and descriptions of homes, raised $2 million from investors led by Gradient Ventures. (Sky News)

🇳🇱 Valyuu, operating a circular marketplace allowing consumers to buy and cell pre-owned electronics raised $2.7 million in a round led by Rubio Impact Ventures and Slingshot Ventures. (Silicon Canals)

🇬🇧 Clock bio, developing novel regenerative medicines for age-related diseases, raised a $4 million round and added Markus Gstöttner, who’s a EIR at BlueYard, as CEO. (press release)

🇩🇪 Ivy, developing an API platform for instant bank payments., raised $20 million in Series A funding led by Valar Ventures. (Techcrunch)

🇸🇪 Polarium, manufacturer of Lithium battery technology for telecom companies, raised $40 million and lost its unicorn status (Digital DI)

Fun fact: Europe has two startups called United Robotics, one in Sweden and the other in Poland, with only one building actual robots and which just raised seed money. The other sells AI-based SAAS to media companies.

We cover (much) more early stage intel from the European long tail every week over at Monday CET.

More context

• Omer leaked it on a source that it left Europe due to logistics related to being a solo LP operation and not because the market is tough.

• Kat Borlongan, known for her work as Director of La French for Macron administration (the national startup agency), quit her job as Chief Impact Officer at Contentsquare. She’s been at it for 1.5 years and recently returned from maternity leave.

• Mustafa Suleyman says the US should restrict sales of the Nvidia chips that play a dominant role in training advanced AI systems to buyers who agree to safe and ethical uses of the technology.

• Johan Brenner on his career and job at Creandum.

• Life as an early stage AI startup founder in London - and how it differs from working as product manager at Google.

• Startup extinction season is going to kick into high gear soon.

• A journalist went on a sailing trip with VCs in order to do slow networking.

• One of them has to change 1 vs 2. At least something.

• VCs sobering up + trying to stand out.

Data

Tech services

• Tech services currently accounts for 25 to 30 percent of the total assets under management in tech.

• While they can generate significant returns, tech services companies have a different business model than software and software-as-a-service assets.

• The Rule of 40 applies - tech services companies have lower valuations compared to software and SaaS companies with analogous performance as measured by the Rule of 40 (that the sum of a software company’s growth rate and profit margin should be greater than 40 percent). However, tech services companies that exceed the threshold of the Rule of 40 see a disproportionate jump in their valuation multiples.

• source

SAAS

• SaaS growth rates have stabilized in the last 3 quarters.

• Best-in-class SaaS businesses grow over 100% each year.

• Top-tier SaaS startups reach $1M ARR within 9 months.

• The majority of SaaS startups grow from $1M to $10M ARR by growing their subscriber base.

• Sample data: 2,200 startups. Full report here.

Other stories

🇸🇪 Klarna’s H123 numbers are out. They’re good.

🇪🇺 EU regulators plan to block Booking’s €1.63 billion acquisition of Sweden-based Etraveli due to competition concerns; UK's CMA approved the deal in 2022.

🇪🇺 Meta is considering paid versions of Facebook and Instagram that would have no advertising for users in the European Union.

• Those who pay for Facebook and Instagram subscriptions would not see ads in the apps.

• This will help Meta fend off privacy concerns and other scrutiny from EU regulators by giving users an alternative to the company’s ad-based services, which rely on analyzing people’s data.

🇬🇧 Babylon Health, the London-based telehealth provider, sold most of its assets to US-based eMed via a bankruptcy process.

🇳🇱 The Dutch e-scooter startup Dott closed down its Swedish operations.

🇬🇧 Lavoie, the British e-scooter maker owned by McLaren Applied, has acquired Van Moof.

• Van Moof is a Dutch e-bike brand declared bankrupt earlier this summer. It had raised over $200 million from the likes of Norwest Venture Partners, Felix Capital, Balderton Capital and Hillhouse Capital.

🇮🇹 JC Flowers is in talks to sell Romania's First Bank to Intesa Sanpaolo in a deal that could value First Bank at about €200 million.

• The US fund took over the Romanian subsidiary of Greek group Piraeus in 2018 and absorbed Bank Leumi in 2020 to hold a market share of some 1.3%.

🇨🇭 UBS posted the highest quarterly profit ever for a bank in Q2 - $29 billion -thanks to its controversial rescue of rival Credit Suisse in March.

• UBS is now the second-largest bank in Europe behind HSBC.

• Colm Kelleher (of UBS) was always meant to become Europe’s most powerful banker.

🇨🇭 Rolex acquired the Swiss watch seller Bucherer - news that crushed shares of rival retailer Watches of Switzerland. The rationale of the deal.

🇬🇧 Four types of Paw Patrol snacks that were sold in the United Kingdom are being recalled by Lidl after a website URL listed on the back of the packaging was compromised with explicit content unsuitable for children. link

Startup radar

Every week we send to our Monday CET subscribers a curation of interesting early stage startups from Europe (we come across TONS of industry intel every week) based on signals such as product, business model, growth, key investors, or team.

• Think of it as a personalised startup sourcing concierge - if you want to sample it, you can sift through 100+ startups from 20 European countries (most of them doing AI btw 😀) from this cheat sheet (available for free for the next 24 hours)

• Subscribe from here to get in your inbox such a list every week, alongside cheat sheets focused on European VC and weekly curated early deals.

• High signal, zero noise - we’ve got the best Euro VC intel money can buy, get it too.

Mo’ Sundaying

Clash of the titans:

• OpenAI launches ChatGPT Enterprise and is on track for $1 billion of annual revenue.

• Google is selling broad access to its most powerful AI technology for the first time as it races to make up ground in the lucrative cloud-software market.
  
  Gemini is set to be a direct competitor to GPT-4 and boasts computing power 5 times that of GPT-4.

  
  Trained on Google's TPUv5 chips, it's capable of simultaneous operations with a massive 16,384 chips. The dataset used for training this model is around 65 trillion tokens, and it's multi-modal, accepting text, video, audio, and pictures. Moreover, it can produce both text and images. The training also included content from YouTube and used advanced training techniques similar to "AlphaGo-type" methods.

  
  Google plans to release the Gemini model to the public in December 2023.

 Apple sent out invitations for its Sept. 12 event expected to feature iPhone 15 and Apple Watch Series 9. What else to expect.

• Here’s a good way of predicting Apple services.

📉 Google Search was the invisible force that determined the ebb and flow of online content. Now, for the first time, its cultural relevance is in question.

🥕 The real story of Musk’s Twitter takeover

🙈 BlackRock says that the ESG movement has gone too far, and that it will be part of the solution to prevent its excesses from destroying the US economy.

💪 French billionaire Francois-Henri Pinault is close to a $7 billion deal to buy a majority stake in Creative Artists Agency, the Hollywood talent giant that’s home to actor Brad Pitt and basketball’s Chris Paul. The dude just turned 87.

The $7 billion valuation of CAA marks an increase from the $5.5 billion placed on the business last year when it acquired rival agency ICM Partners.

Pinault, whose family controls a luxury goods empire, is seeking the majority stake held by private equity firm TPG, while Temasek may also increase its stake in CAA by buying out China’s CMC Capital

🤭 Shell quietly ended the world’s biggest corporate plan to develop carbon offsets, the environmental projects designed to counteract the warming effects of CO2 emissions.

🇪🇺 The EU's approach to regulating tech discourages both innovation and competition - and now Brussels has its targets set on AI. The costs of Europe's GDPR regime.

➕ Politics is politics 

• Before becoming Italian prime minister, Giorgia Meloni was one of the most strident voices on migration in the European Union. During her time in office, she has taken a markedly different tack.

• Austria is offering free public transportation for a year, but you have to get a specific tattoo first that includes “KlimaTicket”, the name of Austria's eco-friendly public transport pass. They probably think this is cool.

• Meanwhile, their Northern brothers discovered in the midst of the €9 and then €49 ticket euphoria - heavily subsidised by the state for encouraging public transport usage - that they cannot afford it.

• Hungary’s Viktor Orban offers incentive to women: Have 4 kids and never pay income taxes again.

• Guess who? → "It just feels like we have completely lost control, the country is falling apart. Nobody really believes the PM can win the election anymore.”

🐟 What a $5 Million retirement looks like in America.

👁️‍🗨️ AI vs a giraffe with no spots.

🔗 The tail end.

🤔 Fukuoka driving school lets participants try drunk driving to expose dangers.

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