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Good morning,

Welcome to Sunday CET.

This week:

• seed to series A graduation rates for European investors

• Mistral’s series A - is it worth its price?

• valuable VC-backed Italian assets

Let me know your thoughts and comments. Thanks for reading, enjoy!

Dragos

Market talk

This week I had a look at the seed to series A graduation rates for seed investors in Europe.

I picked up ten of the more respectable early stage investors from Europe and crunched the number of their startups that were marked up after they were funded.

The analysis covered all their seed deals made during 2021-2023, and any superior follow-on round after that was considered to be mark up. I excluded any seed extensions and considered exits as mark-ups - the usual disclaimers apply i.e. rounds not announced etc.

So here’s what I got:

A few quick things to keep in mind here:

• numbers are impacted by the fact that usually a startup closes an ulterior round in a 18-24 months span - the analysis covers 36 months, so the 2022 and 2023 vintages are yet to produce results comparable to their 2021 peers and the three years conversion is thusly altered.

• we had lower cost of capital in 2021 and the first half of 2022, when mark up was the name of the game of some investors playing the venture factory model.

• for noobs, as a general rule, about 25% of startups that raised seed also raise series A. This number is considered bad by LPs though, when judging VCs work - 40% is decent and 70% shows really good performance.

• this of course is a longer discussion around the portfolio construction strategy but still makes for a good quick overview of how VCs are performing.

• as mentioned above, the numbers are more interesting to be judged individually by each year - in 2021, for example, 4 out of the 10 VCs from above had 70%+ graduation rates.

• all those number breakdowns (and access to the spreadsheet covering the numbers for other VCs too) available in this cheat sheet for our paying customers - you can become one from here.

Other cheat sheets

• American investments in Europe - H2, H1

• interesting series A from last year - H2, Q2, Q1

• (>$10M) seed deals from last year - H2, H1

• interesting angel deals from last year - Q4, Q3

Intel highlights from this week 

• two AI startups doing the same at the same stage, priced with a 10X+ delta by investors (!)

• notable deals:

  🇳🇱 ​Orbio, 🇩🇪 ​Naro, 🇫🇷 ​Lago, 🇭🇺 ​OpenMeter​​, ​
  ​, ​+ long tail curation of what’s interesting at early stages

• get them on your inbox alongside access to comprehensive proprietary data, long tail moves and strategic intel → subscribe.

Join hundreds of other investors and stay on top of the best early stage intel in Europe.

Also notable 

💪 Here’s a weekend question for you - is Mistral worth 10 billion?

• I can see some of you rolling their eyes already. 😋 

• the French were in San Francisco this week for series A talks with American investors.

• it’s about time, right? I mean, not really as it’s not the usual 12-18 months cycle in the life of a startup - Mistral’s pre-seed was announced in May and the seed was concluded in fall.

• but hell yes, really! And it’s not like Mistral’s running out of money, mind you, but the company’s built momentum - it released a decently good product in the market and stroke a few key strategic sales deals w/ Microsoft and Databricks. Fundraising 101 - you gotta align business moves to investors signalling and raise at peak momentum. This is it.

• Mistral is an easy sell if we’re to be honest, and I believe the market is willing to settle for the right price in what is already an over-subscribed deal.

• but putting aside the high investors demand, is Mistral worth 10X+ since when it raised seed at less than 1 billion valuation back in November?

• I think so - might be even higher. Some quick whys below.

• big tech needs competition as much as OpenAI does. Badly. Alas there’s not too many vanilla GenAI producers able to compete at scale with those guys too - that means very few assets with god-like returns potential that are at affordable entry points for VCs nowadays. Everything is taken and insanely expensive in this space and Mistral is a window of opportunity for those who were not lucky enough to hang out with the OpenAI bros.

• which brings us to comparables. Yes, Mistral is yet to produce revenues in a meaningful way but what will happen when they push for that? OpenAI already does almost 2 billion ARR 18 months after launch and remember, it just had a secondary event at 80 billion while Sam Altman shrewdly set the bar even higher saying he’d need trillion of dollars more in financing for a solid AI establishment.

  • Not too mention other American startups doing AI in all sorts of flavours and which inflated the market considerably.

  • And not to mention either Softbank sniffing around, which instantly puts an extra to any deal shopped around.

• so a 8X less expensive entry point for presumably getting within a couple of years to where OpenAI is now seems like a reasonable bet.

• product is at market par, comparables are there, the strategic execution is there as well and there’s another reason for which Mistral needs shitloads of money, capex aside: the war on talent.

• Europe may be well behind US when it comes to salaries but this is a global play - you cannot compete with the best and pay your people peanuts just because you’re from Europe. Europeans may be cheap and French socialists to the bones, but this is the big boys game, we don’t have time for patriotic chansonnettes and the AI is a paradigm shift opportunity where you need people not only to believe in the mission but also be financially aligned to the value Mistral is going to capture from the market. It’s what the VCs are aligned to, as well.

• so yeah, I could envision easily a pitch selling a bull case for Mistral at 10 billion, if it shows me the path to the 1-2b ARR. And again, real talk - I don’t think so far the French have executed spectacularly as much as they had a huge pull from the market. That should be priced in.

• 10 billion is a round yet steep number, even 5 is ffs, particularly for a 10-months old European startup hardly making money. You just bet on where the market is going and on the execution against it - it is the kind of opportunity you will not run into very often as an investor because of the huge multiplier effects in so many verticals.

• that’s how my American friends would evaluate an investment decision. Or, looking at it from European investors’ lens who are just pricing risks instead of upside - Mistral’s got top investors directly involved in the execution, it got them to this point and the chances to fuck it up down the line are decreasing by day. Buy the hedge if nothing else.

• either way, it’s too good of an opportunity not to jump on, if you can afford it. Gotta pay up to sit at the grownups table. Let’s see what the market says in the next few days.

🇮🇹 The Italian government is launching a ​€1 billion​ AI investment fund, which could raise another €2b from the private sector. 

• 1 billion is as much as VCs spend in Italy in a year.

• some of the more valuable VC assets in Italy include:

  • Satispay (neobank)

  • Scalapay (BNPL)

  • Bending Spoons (mobile)

  • Soldo (neobank)

  • Casavo (real estate)

  • Everli (ecommerce)

  • D-Orbit (spacetech)

  • Energy Dome (energy storage)

• what about some Italian AI startups? Not that many but if you have to have this discussion you can safely mention Aptus, Axyon, Platformatic, Vedrai or Omzey.

• which begs the rhetorical question - what will the Italians spend the 1 billion for?

• worthy reminder that Europe doesn’t really have a money problem, just an HR problem as it doesn’t really know how to spend it efficiently.

🇳🇴 Oda’s board let go of CEO and founder Karl Munthe-Kaas for poor international expansion results.

• he was replaced by a seasoned retail executive from the UK.

• Oda has been trying to expand to Germany and Finland after raising more than $300 million in 2021-2022, to not much luck - both ops were closed late last year.

• firing a CEO/founder who happens to have good rep in the local ecosystem is an unusual thing to happen in the Nordic countries - from what I gather dude didn’t take responsibility for it.

• last fall, Oda was merged with Swedish competitor Mathem and the combined entity was valued by Kinnevik (major owner with 23% of the shares) to some $70 million at the end of 2023.

🇫🇷 BeReal is weighing raising a Series C or being acquired.

• what is left of its $90 million in funding is set to run out this year and DAUs stagnate at 25 million

• BeReal closed a $60 million Series B funding round at an around $600 million valuation in late 2022, following a $30 million Series A earlier the same year.

• no business model, no USP, no chance to make it to the next level. But hey, the money was spent.

🇪🇺 The EU had the European Parliament pass the act to regulate AI in Europe, which will come into effect at the end of May.

• the EU has hard working folks you will never read about in the media who put an inordinate amount of work for this to happen. Sadly those folks are managed by politicians - this law was rushed out in order to feed egos not to serve the markets.

• by the time it will apply to general-purpose AI systems (a year from now on), it will become obsolete - now it just put additional burdens on the shoulders of the few AI innovators Europe still has left.

• here’s what you need to know about it.

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Mo’ Sundaying 

🇬🇧 We’re doing a Sunday CET dinner in London next month. Invite-only, check it out if you want in.
- We’ll be doing this in other cities too. If you’re interested to join, let me know by signing up here.

🇩🇪 Germany has 3 million family-held companies, which are the backbone of the country’s economy.
- But there’s a problem - the owners are getting old and their kids are not interested to take over.
- Around 125,000 small and mid-sized companies will be transferred to new owners every year until 2027, and nearly three-quarters of them see succession as a problem

🇸🇪 Foodora is now doing drone food deliveries in Stockholm seven days a week and is looking to do the same in Oslo.

🇬🇧 The UK decided that the half-naked Calvin Klein ad isn’t obscene.

🇸🇪 Swedish union striking against Tesla already for five months doesn’t seem to affect the Americans as they worked it around and registered 2800 cars this year.

🇸🇪 The boiler is the enemy - that’s what Aira UK’s CEO proclaimed as the Swedish company launched its first proprietary heat pump in London.

🦾 Figure AI made public its OpenAI-powered humanoid Robot - kinda creepy, the future is here sooner than we think. Reminder, these Norwegians are also building a similar OpenAI-based robot.

🤖 There’s a number of 16 companies behind at least 588 individual brands, which combined pick up around 3.5 billion clicks from Google each month.
- just like the extensive range of products we see on supermarket shelves is actually controlled by only a handful of companies.

💸 Why is the US the only place where people get paychecks once every two weeks? Thread

😥 A Norwegian startup dude died while snowboarding off-piste in Verbier. He was 39.

💪 When raising, all you need is a chip and a chair, just like in Vegas.

💲 How much do you pay monthly for your internet, how fast, and what country?
- in Switzerland we pay some $90 for TV + internet up to 1 gig
- in UK - $44 per month for 1Gbps up
- France - $22 for 1 Gbps up/down
- Slovakia - $28 for 1Gbps/100Mbit
- Romania - $9/month for 1 Gbps
- Australia - $72 for 100/20Mbps
- Canada - $170 for 130Mbps up and 15 down
- and so on

🇸🇪 Jailed spy will be forced by Swedish authorities to pay tax on the cash he was paid by the Russian intelligence service GRU.

🇩🇪 German military still faxes documents and cannot radio allies - yes, for real.

💭 When you have a kid in Iceland, you can pick only names which appear on the Personal Names Register. If not in there, you gotta apply for having it approved.

☯️ Five teachings from Dalai Lama you can use:
1. Serve the tea. 2. Show your teeth. 3. Change places. 4. Think, don’t just feel. 5. Let it go.

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Created every Sunday by @drnovac of Nordic 9 with weekly notes and observations from the European startup ecosystem.

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