Good morning,

Welcome to Sunday CET, people - today marks the 200th Sunday CET edition, which makes for a nice round number, thanks for keeping it real!

Summer’s fully kicked in, Northern Europe is officially holidaying, while the other parts are either fighting heavy raining (central Europe) or heat waves (South).

Not too much action on the VC/startup land either, other than a few interesting moves here and there, covered weekly on our pro intel, and which cannot offset the evident VC spending downturn in Europe, somehow masked by the public money financing. A bit of a depressing context - the macro is still bad, the Russian/Chinese war with the Western world gets worse by the week, and the Euro elections make for muddy economic waters, favouring rather singular business growth cases.

Today’s email includes some consumer finance coverage, as Revolut is priced higher than old traditional banks, and figures how Apple still makes money by fighting against the EU legislation.

Thanks for reading - hit me up with comments and feedback, I try to respond to every each of you!

Dragos

PS. We did our Sunday CET dinner event in London this week, amazing folks and conversation, really fortunate to get to meet so many excellent people. Already planning the next one - please let me know if you want to be considered. Tx.

Market talk

🇪🇺 Apple announced this week that it will delay availability of some of its new AI enhancements to European users by 2025 on grounds of regulatory uncertainties related to the DMA.

• Apple is, of course, at war with the EU, and this is seemingly a ‘right-back-at-ya’ move in its ongoing dispute with the EU enforcing Apple to open its ecosystem to the competition.

• are those features limitations however presenting a material impact to Apple’s P&L?

• not really - it’s just words and negotiation leverage, these AI features are not monetized; they serve more as value-added benefits rather than core revenue drivers. Thus, Apple has little to lose financially by postponing their rollout.

  • on one hand, this delay can be seen as a defiance strategy, reflecting Apple's broader resistance to EU regulatory pressures, ultimately resulting into providing the European consumers a sub-par product. But unlikely that those customers will buy less Apple products because of that - said features are relatively marginal to the core Apple products anyways.

  • on the other, Apple’s timeline is to make those features available by the end of the year anyways, if that, meaning that by then those things can be worked out at higher levels. If Apple wants to, that is - it’s all part of the larger ongoing back-and-forth with the EU, and this includes technical snags and legal clarifications on how the AI implementation would work in a DMA compliant way. It takes two to tango and those are harder to work out if Apple and/or the EU position as de facto antagonising parties, forgetting the overall common goal to be achieved by acting in good faith.

• on a broader context, how far would Apple go beyond alienating its Euro user base with an inferior software product on top of the devices it makes money from? Would it even pull out of Europe in the name of security principles trumpeted on the official PR narrative of contesting the DMA legislation?

• they could as an ultimate resort, I imagine, but it’s doubtful. That’s a 100B question - keep in mind that the Americans made sales of $94.3 billion* in Europe in 2023, which is not exactly chump money they will walk away from just because some politicians mess up with how Apple does business.

• my guess is that Apple takes calculated risks while navigating its EU legislation defence line to the limit of how much money it’s willing to lose - on one hand, it can add up, if we’re to judge from the regulatory penalties, while on the other playing this rebel game from a position of force still costs a small fraction of Apple's European turnover.

• let’s just put it this way: if Apple grows its European business by 5% yoy, that specific growth number can easily absorb a few billions a year in fines they presumably might get from the EU.

*btw, that’s 3X+ than what the most valuable European tech company pulled in global sales in 2023. 

🇬🇧 British supermarket chain Sainsbury's sold its banking business to NatWest Bank for £125 million in cash.

• that’s a rather low number for assets including 1 million customers, £2.6 billion in customer deposits, £1.4 billion of unsecured personal loans and £1.1 billion of credit card balances.

• Tesco offloaded its consumer finance unit to Barclays in a similar fashion earlier this year - paid £1 billion for 5 million customers making for £7.7bn in assets, and £6.7bn in liabilities.

• over in France, Société Générale has sold also its freelancer challenger bank Shine to Ageras from Denmark.

• the consumer finance business is hard, with low margins and a hyper-competitive environment - it is really difficult to build and manage an operation at scale.

🇬🇧 Meanwhile, Revolut is growing nicely, with all sorts of market signals indicating an IPO prep and reportedly involved in a secondary deal that would value it at $40 billion.

• that’s more than Germany's Deutsche Bank and Britain's Barclays or NatWest → the market prices Revolut’s growth odds much better, as it should.

💲 More consumer-finance-is-hard news: Apple shut down its Buy Now, Pay Later service.

• it launched the service in the US 10 months ago operating via an in-house platform and used Goldman Sachs and MasterCard to help handle the process.

• it will now focus on what it does best - distribution - as it will re-sell other similar financial services instead.

• reminder, at the end of last year Apple has given Goldman Sachs a proposal to end their consumer banking partnership, which probably means an overall re-evaluation of its banking products performance.

💲💲 Related:

• half of Delta Airlines profits come from selling consumer finance on top of its loyalty program.

• why large banks left SMB lending to fintechs and smaller banks.

• how Revolut got to their first 10M users.

🇪🇺 A third of the GenAI startups founded in Europe and Israel come from the UK, according to a content marketing piece made by Accel using Dealroom’s muscles.

• sample data is rather small though - 221 startups, probably given the explicit GenAI devel focus.

• Germany ranks second with 14%, followed by Israel with 13% and by France at 11%.

• Netherlands (6%), Spain (4%) and Sweden (4%) are further down - alas fwiw those are also smaller tech startups markets.

• the ranking kind of makes sense, as the top countries have strong academic tech resources - top schools of the 500+ founders of the said startups are Cambridge, École Polytechnique, and Imperial College.

• add that, top down, the UK and France are the more visibly countries pushing an AI agenda at the governmental level, backed by solid funding too - both produced some of the more valuable AI startups from Europe.

• also notable, 11% of the founders are Google alumni, while 5% are ex-Deepmind, owned by Google. VCs love to fund this kind of startup founders, and the subsequent ease of raising combined with the AI hype leads to risk taking and jumping off a well-paid comfortable job. Not least, it also makes you wonder why Google is losing talent while working broadly on the same set of AI problems as any GenAI startup would presumable go after.

• on a larger note, fwiw, a quarter of the 1000+ AI startups we tracked over at N9 to have raised at least a round in Europe in 2023 are British, 15% are French and German, respectively, while Sweden accounts for 10%. This year’s roughly 500 deals closed to date show a similar distribution pattern, with a slight Swedish increase.

🇪🇺 NATO’s investment fund put out a press release mentioning what it’d worked on while being silent for a year - it says it’s achieved a tremendous milestone:

• four startups investments: ARX, Fractile, iCOMAT and Space Forge

• four FoF commitments: Alpine Space Ventures, OTB Ventures, Join Capital and Vsquared Ventures.

• reminder - NATO VC sits on €1 billion contributed from public funding from 24 countries.

🇮🇹 Italian sportswear brand Golden Goose, owned by Permira, postponed its Milan IPO on the grounds of political turmoil in Europe.

• this is serious - for example, the French markets have tanked as the country is heading into national elections, likely to be won by the far right.

• apropos of European stock markets - Atos has become a meme stock.

🇪🇸 Barcelona’s mayor announced a total ban on short-term rentals in the city as of 2029.

• they will cease renewing existing short-term rental licenses and stop issuing new ones so none will be permitted as of 2029.

• the evident target is to push the low end side of Airbnb inventory out into the long term rentals market while upping the higher end tourist spend. Will this work?

  • theoretically yes, practically it’s rather a temporary patch as the real problem is the government not able to produce new housing inventory aligned to the needs of a city that’s increasingly growing its economic output.

  • it’s also doing this in the context of a yoy increasing demand of tourists, in line with the overall European numbers - a non-growth scenario would probably not lead to the same restrictive decision

• related: American tourists are an economic engine for Europe’s growth - Italy, Spain, Greece, and Portugal brought in nearly $500+ billion from tourists, a third of the EU’s total international in 2023.

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More Sunday-ing

🧵 Is SAAS dead? (perhaps, if you don’t focus on fundamentals)

💬 Is SEO dead? (or will AI content farms > data from people’s browsers + Google Analytics + Chrome extensions?)

🇫🇷 French politics - why the economic program of the Nouveau Front Populaire (left coalition) is worse than that of the Rassemblement National (right-wing populist party).

⚡ How Google is reinventing the clean power market and how Big Tech is going all in on experimental clean-energy projects.

🚙 Uber has a competitor on Solana called Teleport and gaining some traction in the US (raised $9M in 2022).

🫣 Perplexity scraped a Wired article about Perplexity scraping Wired.

💲 Supermarkets are implementing dynamic prices at the shelves in the US.

🤷 PR people are flocking to Linkedin.

🖖🏻 Meritocracy as a marketing gimmick made by a job site.

💭 Getting a driver’s license is mainly a tech test.

That’s all folks, have a wonderful week!

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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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