the bastard kid

#225

Author

Dragos Novac
March 16, 2025

Howdy people - welcome to Sunday CET. This week we look at the local investment ecosystem, Euro IPO candidates and the egg prices in Europe. And a whole lotta more, hit reply for questions and comments.

Cheers,
Dragos

If the Thiel Fellowship and YC were to make a bastard kid in Europe, that would be named Project Europe. The gist of it: program providing European folks under 25 willing to build a startup access to mentorship and 200K in funding for 6.6% equity. I love the idea - it’s valuable, timely and something the European startup ecosystem needs. A few quick notes:

  • The European investment ecosystem is pretty grim nowadays, and basically nobody does anything to differentiate. The top investors are seeing everything that’s valuable, and the competition in this segment is fierce - plenty inbound mostly, with little incentive to work out an extra angle and produce new opportunities, they take whatever the market gives them, usually with more than they can chew. This created for the others a positioning problem, as they cannot deal at the high end of the market, and needed to repackage their product gravitating towards a clear PMF. Unless they are not already ghost VCs, out of money or not able to raise - and spending most of their time posting on Linkedin, there is a correlation there. Probably a good anecdote reflecting the quality of the European investment ecosystem as a whole is that nowadays the climate investors are rebranding to climate security or energy security in this new political context.

  • On the other hand, we have a massive European founders exodus - there’s no incentive for startups to chase the tiny European high end when the switching costs of accessing a more mature American investor market are quasi-zero. At best, they talk to a few locals in order to get early feedback and crystalise value prop and then fly over to the US where the real market is. And after many years of VC evolution in Europe, the general consensus of the average joe pitching investors in Europe is that the said-investors are still poorly prepared to act as thought partners for building companies. Add to it that the costs of building business in the US are lower than in Europe - the early stage pre-PMF is cheaper due to homogeneity (one language etc) and the scaling is more lucrative. Going to the US for building meaningful business is not a problem, it is an opportunity.

  • And so, in this context, a premium product targeting the high end of the European market is a great entry point. Project Europe competes with other talent attractors - EF to some certain extent, and directly with Sequoia’s Arc and YC, which is a top early stage investor in Europe. And is priced accordingly - don’t believe the Linkedin spectators or woke media nagging about it, the demand validates a product and people vouch value props with their wallet, that’s how capitalism works. NB. the under 25 is just an initial mechanism filtering demand and which can be built upon by segmenting if/when further scaling.

  • Not least, there’s another problem that Project Europe can solve, at least on paper, as they’re yet to actually execute - education. First time founders in Europe have little or no idea about business concepts such as value proposition, USP, pricing, GTM, working capital and so on. This a real, acute problem, schools are crap and people are usually learning on their own, on the fly - thereby the need of quality mentorship and talking to others who have done it. Not from investors who are just consultants with money as leverage, but from doers, real people who’ve had real skin in the game because they have built a company before.

  • Here’s a closing thought. If the EU folks were paying attention, they would be smart to fire Harry an email with three simple things:

    1. a matching loan providing working capital for 12-24 subsequent months of the program’s graduates - the projects are already de-risked and the EU’s opportunity in this context is taking Silicon Valley Bank’s place, still empty after they went down a few years ago.

    2. easier company formation i.e. favorable tax and legal conditions for the program output - which should work as a lock-in for providing folks with European roots, even though they will go to the US for building sizeable business. You don’t want to prevent them doing it - that would be stupid, but need better incentives to also stay invested on the continent.

    3. an overall offer of investing money as a silent partner to massively scale this project across Europe.

  • Would they do it? I have my doubts. The EU folks need to understand that one of their problems when it comes to startups is that they are dumb money and will maximise impact of their overall efforts if they work with smart money. And history is a good indication that they have thrown shitloads of dumb money at the market and have very little to show for it. Yes, money is good. But having people with vision and strategy managing it is making a difference, like everything else in life.

Interesting startup deals

​🇬🇧 ​Jigsaw Stack​  (custom models plugged into AI apps) - 1 million
🇭🇺 ​Qneiform​ (AI single source of truth for recruiters) - 1 million
​🇪🇪 ​Frankenburg Technologies (defence missile systems) - 4 million​ (()
🇸🇪 ​Snigel (military equipment) - growth round​​ 

🔒 More for Pros: the new Wallenberg of Sweden, VCs doing PE, family offices moves, exits etc. Sign up.

  • The Swedes took music streaming MSM: Spotify paid out $10 billion in artist royalties last year and there’s 200 artists making over $5 million a year via the platform, while nearly 1,500 artists generated over $1M in royalties from Spotify alone.

    • those numbers were un-conceivable 20 years ago and yes, Spotify never lacked critics, but undoubtedly the music industry is better than a decade or two ago and Spotify has its place in making a dent.

  • Retail banking is hard Vivid of Germany quit its retail banking focus, over 500,000 retail customers.

    • meanwhile Revolut added 10 million new ones in 2024 alone, now handling retail for 50+ million, 10 million of which in the UK - you noted that Revolut is trading at 60B, right?

  • Defence is harder The 15 largest European members of NATO may need to ramp up investment by $340 billion-$720 billion annually and large-scale rearmament will be slowed down by contractors’ huge backlogs.

    • we covered the impact of this huge demand in one of our recent intel digests, when we also looked into Helsing’s revenue numbers.

    • the good news - Europe needed a kick in the butt to drive growth, and defence it is it.

    • casual reminder - Silicon Valley was initially a hub for for the US military and then for NASA. And please, don’t start with ‘let’s do a Silicon Valley in Europe’ theme again, that’s just boomers’ nonsense talk.

  • Market validation Klarna filed for IPO at a $15 billion valuation, 5X revenue multiple.

    • kinda low number for the aggressive AI hype from the past year or so, for an asset that was priced at 40B+ a few years ago. Btw, $39 million in AI savings out of a total $2.9B expense seems rather marginal.

    • alas 15B is actually as good of a price as one could get considering the timing is not exactly great because the markets are terrible and will likely go way more in red in the next 6-12 months - hence the Swedes rushing it now.

    • alas interesting to note that Klarna won’t/can’t afford to do what Stripe is doing and wait it out, indicating the existence of some underneath fundamental problems.

  • Other European IPO candidates at work Bolt started rolling out in the North American market, now in Toronto and Washington, with more markets coming. They are also working towards an IPO - Bolt turns $10B+ in gross bookings (their take is 15%) and was valued at $8.4B when it last raised in 2022.

  • More market validation BeReal’s found PMF in Japan, where it handles 4.5 million MAUs, making it its second largest market. Also boasts 200 advertisers spending on the network - BeReal had zero revenue when it was sold for half a billion a year ago.

  • Italy takes over Germany, the saga UniCredit secured approval from the ECB to up its stake in Commerzbank, while the Germans are said to be still against. Next step - talk to the new German government.

  • Enemy of the enemy is our friend (kinda) YC sent a letter urging the Trump administration to openly support Europe’s Digital Markets Act (DMA)

    • Apple is the underlying reason - YC points to Apple reportedly delaying its LLM-powered version of Siri until 2027, years after competitors brought generative AI voice assistants to market - and argues this represents a lack of competitive pressure, noting that third-party developers of AI voice assistants are unable to integrate their services into Apple's operating systems

  • AI is chic The French launched yet another AI hub on the top floors of Galeries Lafayette in Paris. Now that we have so much AI support, maybe it’s time to make some serious money too - just saying.

Lists

Cheat sheets

Also notable 

🤔 An American investor recently told me: would you pay someone 100 bucks a month to keep you updated with what’s important in European VC? Filter out the media noise, break up the echo chamber and smartly connect the dots, a complement at par value to your professional job. A no brainer - he does and so can you.

🇬🇧 A British media pub used freedom of information laws to obtain the ChatGPT records of Peter Kyle, the UK's technology secretary - he has seemingly asked for advice on why the AI adoption is so slow in the UK business community, and which podcasts he should appear on.

  • other personal questions were not made public, luckily - btw, the UK government enforcement of getting access to such private data is the very reason for Apple fighting the UK government demand to access encrypted customer data.

🇬🇧 On a broader context, the Trump situation made European leaders kind of switch the public attention and related narratives from local problems, which will not disappear over night - the Brits remain nervous, for example.

🇪🇺 The Europeans have started stockpiling food, in case of a war - some anecdotes.

  • as a side note, I was surprised to learn that not too many people know that in the Nordics the governments had already sent detailed contingency plans and guidelines for their citizens in case of war or a crisis - om krisen eller kriget kommer, as Swedes would say, I got sent a pamphlet when I lived there in 2018 and a newer version was sent out last year.

🇪🇺 The EU wholesale egg prices are at the highest level in more than a decade, up 12% since December.

  • this is serious, as they match the American growth prices month over month, where the cost of eggs rose 58.8% yoy. Overall grocery inflation in the USA is up 1.9% compared to a year ago.

  • the biggest reason for this is the avian flu, which has led to the culling of millions of egg-laying hens in America - this reduces the supply, driving prices up.

  • a dozen large Grade A eggs cost nearly $5.90 in the US. Here’s a quick overview of some random European prices (for a carton of 10 though):

    • Switzerland - €5.2

    • the UK - €4.6

    • Germany - €4

    • Spain - €3.7

    • France - €3.6

    • Sweden - €3.6

    • Poland - €2.9

    • Romania - €2.9

    • Italy €2.3

  • 1 euro buys you $1.09 as of March 15.

🇪🇺 Romanian Laura Kovesi, who’s Europe’s chief prosecutor, is going after Chinese organized crime syndicates defrauding the EU out of €13 billion in tax and customs revenue.

  • that’s not peanuts money - be long on Laura.

🇬🇷 Greece officially got out of its debt crisis as its credit rating was upgraded to BBB, due to a healthier banking sector and the continued reduction in the country's general government debt ratio.

  • this is a truly European turnaround and a great success story of the Union.

🇫🇷 You’re French, 78 years old, and you’re a billionaire - what’s your next move? Well, not retire, that’s for sure.

🇪🇸 Spain approved a bill imposing massive fines on companies that use AI-generated content without properly labeling it.

🇨🇳 Everybody wants to be a VC and the startups are the future, the Chinese edition:

  • the Chinese set up a government-backed fund that will mobilize 1 trillion yuan ($138 billion) from social capital to support tech startups.

🇺🇸 Everybody wants to be a VC, the American version of it:

  • 1789 Capital, which is Trump Jr. (American president’s eldest son) VC firm, is looking to raise $1 billion for its first fund and make money by tapping into the MAGA ecosystem and its network of profit-minded believers like Musk - and all his connections lead to Peter Thiel.

  • as an anecdote, same Trump Jr traveled to Eastern Europe this week where he reportedly met with a bunch of local extreme right politicians, including the Romanian one running for the upcoming elections.

  • those politicians are notoriously supported, and paid, by the Russian government. Why are the Trumps meeting with Russian assets active in Europe?

💲 Binance, operator of the largest cryptocurrency exchange in the world, secured a $2 billion investment from Emirati state-owned investment firm MGX.

  • Binance’s founder, CZ, who did prison in the US for violations of the AML regulations in 2024, was also reportedly in talks with the US administration for letting the Trump family take an equity investment in exchange for an official pardon - he later denied it.

🇺🇸 Trump White House has asked US military to develop options for the Panama Canal including one of American troops' seizing the Panama Canal by force, if the private equity firm BlackRock was not able to close a purchasing deal for two ports from Panama.

  • BlackRock was working on a deal to acquire two ports serving the Panama Canal from Hong Kong's CK Hutchinson, as part of a larger $22.8 billion deal.

  • Trump has also made it clear that he wants US service members to be visible in the canal zone as a show of force.

  • as a side note, BlackRock’s founder Larry Fink was one of the largest donors for Biden on this past elections and now plays this kind of weird games on the other side - he’s gotten a business to run.

💲 Trump's tariffs is giving the top American CEOs a big headache (hedge funds too) - the question is how long is too long for a pain to turn into gain though, we’re a mere two months in, people keep their mouth shut and play ball for now.

🇨🇳 DeepSeek's owner asked R&D staff to hand in passports so they can't travel abroad.

🤖 Japan has been invaded by cat-eared robots - as the country copes with a labor shortage, the service robot market is expected to triple in the next five years.

🖖🏻 Bryan Johnson wants to start foodome sequencing → test 20% of foods that constitute 80% of the American diet based on stuff we eat everyday. It’s fitting since eating in the US is famously bad for health.

⌚ Fundamentals of the business of watches.

🙄 The average workday now ends at 4:39 p.m. - a notable shift from 5:21 p.m. two years ago. In USA that is.

👀 What it’s like to plan a $50,000 party for a 5-year-old.

That’s all folks, have a wonderful week!

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