is Europe a first tier market?

Hi and welcome to Sunday CET.

Everybody and their mother is on Threads these days, less so Europeans since the EU made sure to have them safe and protected against what’s new in tech. We’ll have a look at it this week, even though talking about innovation tech in Europe feels like just beating a dead horse.

Ecosystem pointers

Investors backing AI startups in Europe We have tracked over at Nordic 9 more than 1000 investors with at least one AI startup deal done in 2023, out of about a total of 5000 active in Europe. That’s one out of five putting their money where the AI mouth is - we screened them all and produced a cheat sheet with a selection of 50 who were more active, along with their startups. Some interesting names you won’t read about in the media in there.

Other cheat sheets
- notable American investments in Europe in H1 2023 - link
- the EV startups from Europe - the grid upgrades market is expected to be 41.2 billion by 2030 link
- payment orchestration platforms in Europe - the sector is set to grow to $2.5 trillion by 2027 link 
- the heat pumps startups in Europe - Euro market projected to grow to €13.6 billion by 2027 link

The French early stage investment pulse through its most active early stage backer, Kima that is:

Just data points part of a moving image, the graph is from the raw data here.

Europe up, US down While in Europe the so-called climate tech deaflow has been up and to the right, in US it went down 60% yoy, as the number of seed investors active in climate is also down almost 40%. link

Building a startup is stressful That’s an unexpected insight resulting from a survey of 230 founders done to support the sale of Balderton’s health and fitness programme.

Speaking of Balderton, if you’re a very early stage founder in London you should check this out.

American VC office hours Nick Bontasos of General Catalyst is spending the summer holidays in Europe and did office hours in Paris this week, and in London next week. One has to wonder why GC is not doing this on regular basis (they have enough dealflow, of course, and word on the street is that it’s rather an old school kind of company).

Contextual add ons:
- interview with Maëlle Gavet, a smart, no BS French lady who’s acting CEO at Techstars.
- how Blossom calculates net revenue retention 
- Balderton’s version of SAAS metrics that matter - slides + video
- Dawn Capital’s learnings about AI
- some things Europe needs to do in order to be a friendlier startup environment
- which B2B SAAS companies got a significant boost from generative AI features they’ve added? Not many → hype <> $$
- startup dude declined YC because a Tier 1 VCs told him that just doing YC doesn’t improve your chances of being funded by them anymore. Went to Neo instead.
- thoughts on Mistral's investment memo, the French counter to ChatGPT that raised 100M+ pre-product.

Euro intel This week’s intel include:
→ the Nordics have produced yet another unicorn (no, not Neko though that’s in the leaves too)
→ the largest private AI lab in the making in Europe comes from the Nordics too
→ startups taking big valuation haircuts
→ … and a whole lot more. High signal, zero noise - get it too.

Observations

This week in consumer tech was all about Marc Zuckerberg showing off his skills at “how to clone Twitter in 6 months” project. It’s named Threads and it kinda worked as it exploded to almost 100 million signups with a shrewd move that solved the cold onboarding approach by pre-populating the app with content from the Instagram graph. Zuck has achieved the status of launching the fastest-growing consumer app in history and this really pissed Elon Musk off, who even threatened to sue in the true American spirit.

But will it stick though? It can definitely become a conversation alternative to Twitter, even though right now the feed is a rather boring amalgam collecting Insta celebs and fake gurus chasing clicks, likes and followers. There is a school of thought saying that a social network should work as an algo-driven endless scrolling feed, populated with entertaining content optimised for user engagement. An algorithmic feed is much easier to replicate than a follower graph, which makes the switching cost to a new platform low - that’s how Threads achieved incredibly high velocity adoption. And the more happy idiots scrolling and clicking on the network, the more successful it gets.

The litmus test is retention/monetisation though, how many of those you get to return, and hopefully convert into a money making model - either directly with subs or via advertising, such as Facebook/Instagram works today. It looks like Threads is getting there so far, with media companies and social influencers having yet another distribution channel they need to copy paste content for.

Not least, I also think Zuckerberg speculated a good market conjecture, as the hate for Elon Musk is bigger than the mistrust folks have had for MZ for a long time. So he got yet another chance - and it’s kind of funny how ‘the metaverse is Facebook’s future’ turned into ‘AI is the future’, turned into ‘yet another lame social network is the future’. Those are the times we live in and the tech leaders shaping the ecosystem - not a bad thing per se, the Silicon Valley ethos is trying and trying and trying until you get it, no matter how many times you fail.

Personally, I prefer the followers graph products to the algo-driven content scrolling, whereas I optimise the social network usage for a select number of people I am following for their content, as opposed to focusing on growing the number of followers I get and/or the engagement of my activity. Those are mainly just ego - that is the reason for me hardly using Linkedin and rooting for Zuck to steal Twitter’s thunder. Twitter works best for me as a niche circle capped at 300 people who are posting relevant stuff for me, not for popular user engagement - the purpose for using it is not for me sending signals, but for gathering them. Until Elon took over, it worked to make the best off of my bubble, in spite of many drawbacks. Not so much afterwards, and all the evidence indicate that Elon’s going to spoil it even more for me. But who knows, maybe some serious competition is what Twitter actually needed.

Threads got to almost 100 million users within a week as it was made available in 100 countries - but none of them is European. This is intentional, which begs the question - does Europe really matter for a tech startup with global scale ambitions?

As Facebook showed this week, the EU is such an ‘innovative environment’ that dudes actually shipping interesting global products will rather make them unavailable by default to European consumers, or at best left at the bottom of the todo list. That’s because the EU market has become expensive and increasingly a pain in the ass to deal with - why allocate overheads for personalisation and spend $$ to comply to politics-driven rules when you can get to scale size without Europe, as Threads just did this week? This ‘Europe last, maybe never’ kind of product launch is a trend started by Google with Bard a few months ago, and likely to continue because of the risk of the EU hunting you down, while being available to Euro markets is expensive to begin with anyways. And a ‘first tier market’ such as Europe ends up as the last to adopt new tech, right?

Does that matter? Here’s some food for thought - is Europe a first tier market in the grand tech scheme of things? Putting aside the comfortability of an above average lifestyle on the continent, which money can buy for you anywhere on the planet, how ‘not being in Europe’ alter the odds of building a long lasting tech company fast? Not that much, if we’re to be honest, even though the local ego and VCs invested in the ecosystem would like you to think so. We have rather built Europe as some sort of a Pygmalion effect-driven ecosystem - high expectations will eventually lead to improved performance in a given area, if we throw enough money at it. But improved, which Europe has seen plenty in the last decade, is not the best, or at least top tier competitive.

Building tech products is all about shipping and iterating until you get it right. Zuck, for example, has relentlessly tried to replicate Facebook’s success with multiple types of products for more than a decade, and he has finally made it with Threads this week. There’s even a technique for this - it’s called A/B testing, explore multiple tech scenarios until you get the right one. This is how the US has developed a strong tech ecosystem and what the EU politicians will never get. Raising the bar unreasonably to be compliant from the get-go will get to an inflection point where startups simply won’t care about Europe - they will try and fail to get to PMF elsewhere, and will eventually launch to Europe when the products are mature, ready for the late stage adopters part of the curve.

And then again, you read this kind of stuff, with dudes claiming that Euro tech is about being concerned about preserving democracy and paying local taxes where they are due. Not saying they’re not important, but you gotta have an ecosystem nurturing innovation before worrying about maximising the value extraction via taxes. And fact of the matter is that while Europe has gone a long way, the road ahead is even farther away.

The reality is rather banal, beyond concepts and principles - it’s all human, a game involving power, politics and jealousy, all while startups need low drama environments. In life there’s usually two types of people - the doers and the talkers. Which kind do you think Europeans are?

PS. John puts it well: risk-averse rentiers.

July 4 sentiments for US investors

source

Other notes 

🥷 AI stuff

• Google updates its privacy policy to say the company may use "publicly available information" to train its AI models and build products like Translate and Bard link

• Authors sue OpenAI, allege their books were used to train ChatGPT without their consent.

• If someone trains their AI model on restricted twitter data, this data is most likely in the model forever unless the model is retrained from scratch - it is one of the reasons for which Twitter is no longer available to non-logged users. Here’s an example.

🇫🇷 It’s all about control Emmanuel Macron suggested that the government might need the ability to block social media access during riots.

That’s coming from one of the more tech open-minded politicians in Europe.

🇸🇪 Part deux While Google Analytics is transitioning toward a new product version, Sweden’s data protection watchdog fined it for privacy breach and publicly warned other companies against use of Google’s tool.

That’s coming from one of the more tech open-minded bureaucracy in Europe.

🇸🇪 Real talk Spotify’s public temper tantrums weren’t about fair opportunity to compete with App Store in-app payments, it was to use Apple’s powerful platform without paying anything.

🇸🇪 Swedes in London after three years Voi announced being one of the three operators awarded the right to run a scooter fleet in London. Contracts will run for two years plus an option to extend for one more year. The maximum fleet size for each operator is 6,600 scooters.

🇪🇺 Binance struggles The Netherlands and Belgium have barred it, Germany hasn’t issued it an operating license and French prosecutors are investigating it. This while everybody’s jumping ship left and right.

🇩🇰 No mo’ crypto Danish regulator ordered local bank Saxo to stop crypto trading and dispose of its own holdings of cryptoassets, saying banks aren’t allowed to conduct proprietary trading under current regulations.

🛎️ Encore Justin Bieber's Bored Ape NFT was valued at $1.3 million in 2022 - now it's only worth around $60,000. Bieber probably has an AI move in the works.

💲 Show me the money Twitter will make TweetDeck available only to paid, verified users.

🇰🇷 Any wear, anywhere Japan Airlines Co. and Sumitomo Corp. will offer rental clothing during visits to Japan and other Asian countries - instead of carrying their entire wardrobes, offering convenience and promoting environmentally responsible travel.

 👀 How to enter a market Apple will do a controlled rolled out for its $3,500 Vision Pro, as one would be able buy it by in-store appointment only - that’s in the US-only from next year on, maybe in the UK and Canada too if the stars align. It also revised its sale expectation to 400k units within a year, and announced a second cheaper version by 2026.

⬇️ Troubles Samsung revealed that its profits dropped 96% last quarter, the lowest quarterly profit since the first quarter of 2009.

⏫ Mattel (Barbie brand owner) is desperately trying to become relevant again as it licensed the company’s intellectual property to most every studio in Hollywood. Hence the aggressive marketing for the $100 million movie set to be launched this summer.

👍 A Canadian judge ruled that a thumbs-up emoji can be a legally binding agreement.

🚰 Do you drink tap water in the US? I’d rather not.

👁️‍🗨️ There will be no Eurostar ski train this winter, not even as a charter train for Travelski as in the last few years.

⚔️ Tripadvisor versus GetYourGuide

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