- Sunday CET
- Posts
- data points
Hey there,
Welcome to Sunday CET!
Last week’s email brought a lot of replies stirring good conversations about Mistral, bubbles and European vs American investors. Keep it coming. :-)
This week’s edition is all wrapped up and a go. Thanks for reading, enjoy!
Dragos
PS. In London this week, let’s do coffee etc
In-depth intel you won’t find elsewhere
Nordic 9 is the best way to get familiar fast and stay updated with who’s who in the Euro VC land.
The startup deals and investors database are assorted with a library of hundreds of cheat sheets + weekly intel covering verticals, geographies and whatnot from the European startup world.
👇 Subscribe now 👇
Intel
Cheat sheets
a list of 259 interesting early stage Euro startups
manually curated by me with what’s hot in Europe - startups you won’t find in the media and which will likely raise this year
it comes with a downloadable xls file, w/ description, signals and investment history
one time cost, no subs - hit reply if you’re interested.
top mark-up seed Euro funds - link (also comes with a file)
This week:
notable:
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
🇫🇷 Got quite a few reactions about Mistral being worth 10 billion - even though some were skeptical, made for a good debate. :-)
You can take either the downside or the upside, an asset is worth as much as the market decides to pay. A series A deal for Mistral is likely to be 1-1.5b at 5 post but from what I gather from the market, it wouldn’t be surprising to get to 2-3 at 10 post.
You can also have a look at Cohere, another OpenAI competitor - $500 million at a valuation of $5 billion, while doing some 20 million in sales. Cohere’s been around since 2021 though, and already raised C series last year - notable investors include Index and Tiger.
If you buy into the premise that the French are able to build a decent business, here’s another market datapoint: just this year alone we have tracked over at Nordic 9 at least 20-30 European startups building on the LLM economy (take this one expensive crew as an example). They’re distributors in the value chain, selling on-demand, customised LLMs and post sales maintenance - think Wordpress/WooCommerce kids doing websites for end customers, but for LLM. This distribution layer will grow as the model developers will likely focus on enterprise deals, though going retail is not negligible - $20/month x 1M customers = a hefty 250M a year.
Bonus pointer: Accenture does $2.4 billion a year (3X+ yoy) with the same GenAI distro model from above - that’s more than OpenAI turns over in ARR.
10 billion is good price - high but good as my Turkish friends would put it for a good bargain. We shall see. And keep the comments coming. :-)
PS. The European VC cannot comprehend this
that’s a billboard on a West Coast highway
💲 Making a business out of AI, or software in general, is hard business.
Exhibit A: Emad Mostaque, Stability AI’s CEO, resigned because he couldn’t compete.
the writing was on the wall if we’re to be honest, only judging that the British startup has been bleeding talent for quite some time. Still is, btw.
Stability only raised $150 million from Lightspeed, Coatue and O’Shaughnessy.
Exhibit B: Another Brit, Mustafa Suleyman (also known for selling DeepMind to Google), announced also he will quit his job at Inflection (OpenAI competitor, raised $1.5b) in order to get a new one at Microsoft.
he quit alongside his co founder and 60 other employees, all to be hired by Microsoft.
an easy case made seem complicated, showcasing how Satya of Microsoft is playing at a few levels higher than where the market is.
it’s basically a Microsoft acquisition of Inflection legalised in a PR wrap for antitrust reasons - Msft gets the IP and team without FTC scrutiny or approval.
it looks like this:
Microsoft hires the founders and much of the staff of Inflection
pays $30 million for Inflection agreeing not to sue over Microsoft’s poaching.
it also does a commercial deal to license the tech for $620 million, money to be returned to shareholders who put the 1.5 billion in the startup - investors in the early $225 million round will be getting 1.5 times their investment; those in the later $1.3 billion round will get 1.1 times their investment via some equity compensation.
a tad more complicated than that though, but you get the idea.
Mustafa and co did so because it’s easier to work when Satya’s gotten your back and don’t have VC pressure to build a multibillion company while competing with the best in class.
that makes the case of the French from Mistral mentioned above even more interesting, n'est-ce pas?
one last detail about how Satya does business:
“We [Microsoft] have all the IP rights and all the capability. If OpenAI disappeared tomorrow, I don’t want any customer of ours to be worried about it quite honestly, because we have all of the rights to continue the innovation. Not just to serve the product, but we can go and just do what we were doing in partnership ourselves”
that’s what he said shortly after Sam Altman was fired from OpenAI.
now, by buying Inflection, he has another card in his hands - he plays to win.
🇬🇧 Sachin Dev Duggal, the CEO of London-based Builder is a suspect in a money laundering probe in India, together with his co founder.
it’s an ugly story - they deny everything and lawyered up but at this point it doesn’t really seem to matter.
Builder has raised about half a billion from investors including Lakestar, Insight Venture or Iconiq.
💲 Looks like not only the EU politicians have a beef with Apple hiding behind “users security” for discretionary behavior - but also the Americans.
and so the US government sued Apple for power play - nothing new, it’s the same greatest hits collection of accusations.
meanwhile, on this side of the ocean, Mrs Vestager doesn’t seem happy with Apple’s pivot circumventing the law with new fees, as described here.
to add wood on the fire, dudes are ganging up - Meta, Microsoft, X, and Match Group are joining Epic Games in protesting Apple's cheeky plans to charge a commission for payments made outside the app store.
🇳🇴 The Norwegian state put out a law proposal stating that people who move from Norway will be assessed an exit tax which must be paid in full upon moving out in 12 years time - that is the equivalent of how much tax you should have paid on the gains you have made if you lived in Norway.
the tax rate is equal to dividend tax, which is currently 37.8%.
the law is meant to prevent wealthy people moving out in order to pay less taxes than they’d need to as Norwegian residents. Here’s what one such guy who moved from Norway to Switzerland says:
We are not moving because we do not want to pay taxes. We are moving because the combination of the increase in wealth tax, the increase in dividend tax and the fact that the discount on values such as shares and property has been greatly reduced. The consequences of that are that these taxes take such a disproportionately large share of the value creation of the companies each year. That is what is difficult.
but - and this is a big but - the law has serious (I assume) un-intended consequences in the startup world. Here’s an example:
Per and Pål are doing a startup, owning 40 percent each after an initial pre-seed round in Norway.
In the seed round, they raise 20 million kroner at a 100 million valuation. The shares Per and Pål hold are then worth around 30 million each.
If Per now decides to move out of Norway, [the new law] it triggers a tax claim of 11,000,000 kroner. This claim must be paid unless Per moves back to Norway within 12 years, completely independent of how the startup fares afterwards.
in short, it is a tax on un-realised gains forcing founders to move from Norway before they even start building anything - if they have international ambitions, that is. And this exit tax is on top of another tax on un-realised gains - reminder, in Scandinavia and in most of Europe, stock options are still taxed as personal income even though they’re just hypothetical, paper money - and this, as is, makes aligning employees’ financial incentives to a startup growth super-expensive.
this is serious shit. Germany introduced a similar model in 2022, btw - and Germany is famous for making it hard for people to do startups in Europe. Alas, Norway is wealthy, sitting on great natural resources so it can afford to fuck up the startup ecosystem whereas Germany is in deep economic shit, depends on Russia etc.
🇫🇷 The queues for French founders looking to move to the US via an investment (E) visa are getting longer.
the reason is rather bureaucratic - the upcoming Olympics and the D-Day commemorations (June 6, 1944) mean more work than usual for the US embassy employees in Paris.
the embassy in Paris receives 20-25 investor visa applications per day - that’d be 2k+ ppl a year, a good part of which are startup builders.
otoh, European AI startups are chased by representatives from countries such as Canada and the UAE with requests to move their headquarters there.
🇩🇪 Not news: A majority of German executives think that the EU has become less attractive as a place to do business.
If you’re interested in sponsorship opportunities, drop me an email at [email protected]
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.
🇬🇧 Index Ventures added another book to its literature collection.
🦾 Redpoint’s market overview - there are signs that we’ve bottomed out.
🚧 The art & science of portfolio construction.
💭 What’s one company currently worth less than $1B that you think has the best shot of being worth $100B+?
🇸🇪 Tesla's Swedish manager says they don’t want to sign a collective agreement with the union because they have nice benefits and compensation that they are happy with.
Swedish unions have been boycotting Tesla’s business in Sweden for five months now, to not much economic impact.
🇩🇪 The German national football team leaves Adidas after 70 years of collaboration and signs a deal with Nike - local patriots are up in arms but business is business: Americans are paying twice (€100m per year to supply the kit) as much as Germans put on the table.
🇬🇧 British FMCG Unilever is separating its ice cream unit, which includes Ben & Jerry's and Magnum, as part of a restructuring plan.
🤖 Apple is in talks to license Google’s Gemini for the iPhone - it has also talked to OpenAI.
🇩🇪 Döner price in a popular Berlin spot doubled in 6 years - from €3.40 to €6.90.
🇬🇧 The decline in London’s nightlife has been rapid, with venues closing at a faster rate than most other cities in the UK.
🇫🇷 The former French socialist education minister says that the best way to combat fake news, screen addiction, and deepfakes is for everyone to have an internet limit of 3 GB per week. Because blaming the technology always works for politicians.
🇩🇪 Dealing with the German bureacracy reminds me why I moved from Romania more than a decade ago. The Germans are keeping us honest in Anno Domini 2024 - I know about French horror stories too, btw 😃
💪 In Bergen, Norway’s second largest city, there are no garbage trucks and no trash piling up on streets because all over town, there are receptacles that connect to an underground pneumatic waste transport system.
💸 Trump manufactured a financial combination involving TikTok as he desperately needs money - he could cash out some 3 billion out of this. Dude really makes Europeans covering their Russian money tracks look petty.
speaking of which, because the EU is more talk than show, it took the US government to have the Austrians from Raiffeisen Bank stop taking money from Russia.
anybody else still thinking Putin was careless attacking Ukraine when he knew he has Europeans in his pocket?
👫 As Vladimir Putin and Emmanuel Macron trade military threats, engineers from both countries are jointly plotting the future of their atomic industries.
🤖 Neuralink put out a cool video you should check.
🇯🇵 Toyota spent $10 billion for building a futuristic city in Japan and expects the first of the 2,000 anticipated residents to be moving in at the end of 2024.
🚿 Status showerheads are a thing now - the story reminded me of a Swedish startup that raised about 100 million from a bunch of seasoned investors including Niklas Zennström.
☕ Research suggests that coffee drinkers take an average of 1,000 more steps per day than non-coffee drinkers.
Did you find this email useful?
Thanks for reading! Please send me feedback by hitting reply.
To support my work, upgrade to one of the subscription options.
If this email was forwarded to you, please subscribe, it’s free!
Created every Sunday by @drnovac of Nordic 9 with weekly notes and observations from the European startup ecosystem.
You have received this email as you signed up at Sunday CET or are a Nordic 9 registered user.