Hello,

Gloomy, cold December early morning, hot coffee at hand and ready to rock and roll. Welcome to Sunday CET!

Top intel

Deal highlights from this week 

🇸🇪 ​Rivus​, producer of green batteries for stationary energy storage applications, raised $550k pre-seed with xista, Navcap and Innoenergy.

🇩🇪 ​Ryver​, developing a cybersecurity platform used to generate synthetic medical images, raised $1.4 million seed with Nina Capital.

🇫🇷 ​Pimento​, developing a generative AI-based platform used for the creative processes, raised $3.2 million seed with Partech and Cygni.

🇮🇪 ​W4 Games​, developing an open source gaming ecosystem that allows developers to create their own games, raised $15 million in Series A funding led by OSS Capital and Naval Ravikant.

More early stage deals on tomorrow’s intel, including:

• 🇬🇧 AI for lawyers

• 🇫🇷 AI for contract management

• 🇸🇪 SAAS framework for building AI-assistants

• 🇬🇧 consumer sub for solar energy

and

• new gigs for high profile VCs (two Romanian!)

• Euro startups at YC

• strategic moves of American investors

• write-offs, exits, secondaries

• fresh powder (10 new funds)

• and more.

Subscribe now to get it in your inbox tomorrow AM.  

Market signals

Got quite a few reactions about last week’s piece about the market convergence and how the VC business is going to be altered by tech rather sooner than later. Some follow up pointers:

• Europe has a trillion-dollar allocation gap when it comes to funding innovation and venture capital.

  • European do more startups every year and have gotten the talent pool, but have a capital allocation problem - it’s easier to raise in US than in Europe anyways, and it’s not only about investors mentality.

  • Is that a problem or an opportunity?

• Sten is bullish about it - Europe will add 25,000 new companies over next 5 years.

  • That’s a sizeable TAM, if fragmented, multi-cultural and highly regulated.

  • How do you support the winners and get them to stay in Europe though, with no context for investors liquidity events in sight, for example?

• Here’s what an European VC says (slightly edited by me, scroll to the Big Story):

  • If you’re raising a €200 million seed fund, to get one outlier company (like a unicorn) that would return the fund to LPs, you’d need an exit that would return at least €200 million. If I own 10% at exit, say, that means a €2 billion exit price. Not very common.

  • So, instead of shooting for the moon, this is the solution:

  • With a smaller fund of €20 million, a VC owning 10% needs just a €200 million exit price - or I can own 5% with a €400 million exit price.

    A smaller fund requires smaller exits to return the fund and also has more flexibility in ownership [percentage] at the exit.

  • The math certainly makes sense, just like the fact that the unicorns are rare.

  • The past years unicorn production was more artificial than organic and today’s economic reality is just a hard reset of multiples correlated to the cost of capital.

  • Besides, both history and reality indicate that Europe is simply not equipped for unicorn exits anyways, you gotta go to the US to bring in the rain.

  • Also worth noting that even the 100M-1bn exit range is not exactly a sizeable segment in Europe. The local IPO market is not ideal, and most of the big European companies are family-owned holdings ingrained with the NIH syndrome and which rarely have an aggressive M&A appetite. That leaves it to the Americans who want to strategically put the foot in the European door.

  • Alas, the above is just European investors adapting to the local realities and creating a strategy as such - if it sounds like survival, that’s because this is exactly it.

  • Hunting for unicorns requires differentiation and strength at scale - you either scale or specialise, building unfair advantages.

• Here’s how the big boys are doing quant on the street nowadays.

• VCs acting like PEs - tech funds adopt private equity strategies in race to return cash to investors.

• Mathematics is a singular domain in which [VC] BS is easier to detect and refute.

• Keep the feedback coming.

Market talk

🇪🇺 The EU found that Apple’s iMessage service may not be popular enough with business users to be the object of the regulation of new EU antitrust rules aimed at Big Tech platforms.

• Under the Digital Act, Apple would have been forced to make iMessage work with the likes of WhatsApp or Facebook Messenger.

• Apple has some 33% market share in Europe as per Q1 2023 - one in three people uses the services and that’s not popular enough?

• Apple’s lawyers are good.

• Meanwhile, probably because it is not popular enough, Apple just decided to cut off Beeper, a startup that reverse-engineered iMessage in order to provide a service connecting iMessage texts to Android users.

🇪🇺 I don’t know, but look now, the EU is the first in the world to regulate AI subject to getting documentation enacted into law in a year.

• First of all, being the first doesn’t make you valuable nor provides a competitive advantage. Au contraire, this is just an impulsive and hasty move with a meaningful piece of technology.

• Second of all, and even more importantly, and how can you put boundaries on something that has no precedent - there’s no clear real cases, just hypotheticals. You prevent theory not reality.

• Not only the lack of precedents, but also the tech grows fast and unleashes so much creative value development that by the time the law takes effect (minimum a year) the ecosystem will be very different than the one when the law was written for.

• Is there an end game? Will that lead to innovative ways of using tech or to innovative ways to bypass regulation, if the best decide to still develop in Europe after all.

• Capping the AI innovation when all the important tech contributors in the field underline you may be wrong seems as yet again a mere political exercise showing much ego and little substance when it comes to understanding tech in Europe. Huge disconnect between the politicians and the reality they’re paid to administer.

🇬🇧 Which brings us to the UK, but on a different tune - the British excellence vs the China enemy:

• China is the largest manufacturer of automobiles. Competing with Britain? No.

• China will be the most important producer and R&D in terms of semiconductors. Does that mean that China competes with Britain? No.

• China will be the leading nation in terms of AI revolution. Is Britain a competitor? No.

• British government shouldn’t overestimate its impact on the global scene and view Britain as a China rival. China is a fact, China is a megatrend, for Britain to live with and get along with.

• All of the above from a video on a TV show aired a couple of months ago in the UK - check the comments too.

🇸🇪 Klarna selected Adyen as an acquiring bank.

• Klarna has been using Adyen’s suite of payment methods, including its interest-free Pay Now and Pay Later options to merchant customers, for over ten years.

• On top of that, Adyen assumes now the role of acquiring bank on behalf of Klarna’s different consumer offerings i.e. collecting card-based payments from customers and their banks, and then delivering them to retailers and merchants - both in-person and online.

• That’s strategic, meaning that Klarna’s priorities may have shifted from a fully banking op requiring money handling towards doing tech supporting its ecommerce SAAS marketplace.

🇩🇪 TUI, which is Europe’s biggest tour operator, is considering scraping listing on the LSE and making Frankfurt its primary listing - exploring the move after shareholders raised questions over whether its dual listing structure across London and the Frankfurt Stock Exchange was “optimal and advantageous”.

• Companies started ditching London as a stock exchange after Brexit, with Amsterdam holding the crown since 2021.

💪 Another week, another episode of Tesla’s dealing with the Nordic socialism, this gets more serious by day.

• A court withdrew a ruling favorable to Tesla deciding that Postnord (local Swedish post office) does not have to deliver license plates to Tesla customers.

• Tesla’s reps tried to get an audience with the Swedish Labor Market Minister, they were refused.

• Denmark's largest trade union joined the strike too:

  Even if you are one of the richest people in the world, you can't just make your own rules.

• Norway’s unions will join the strike as well, starting with December 20.

• Finland is warming up on the benches too.

• The Swedish union has produced a well reasoned document, in which it explains its action against Tesla is a matter of principle rather than actual bad working conditions for Tesla mechanics.

• Same goes for Musk, who also said that the idea of unions creates a lords and peasants sort of thing and naturally creates negativity in a company.

• For people not familiar with the Nordics, the unions have a wide support in the Swedish society - about nine out of ten workers are covered by collective agreements, and two-thirds of working adults belong to a union.

🇪🇸 More ‘life is unfair’ versus capitalism:

• A group of 83 Spanish media outlets filed a €550 million lawsuit against Meta, citing unfair competition in ads due to its massive and systematic use of data.

• The argument is that the use of personal data of the Facebook, Instagram and Whatsapp platforms users gives it an unfair advantage of designing and offering personalised ads, which they say constitutes unfair competition.

• Indeed life is unfair, and in business lingo that’s a competitive advantage any business should strive for. It’s not illegal to build and use competitive advantages in your favour.

• Fwiw, Meta just pivoted to the ‘pay or okay’ kind of advertising tracking which has been the standard European media model for many years already.

• This lawsuit basically means that the Spanish media wants some money because American tech is smarter than European media in general, an in particular now that Google is already paying French and German publishers yearly fees for grabbing their content - those AI models won’t train themselves.

🇸🇪 British media quoted Sebastian Siemiatkowski the other day saying that Klarna will no longer hire new staff beyond its engineering department, because AI would allow him to replace some of the staff.

• Totally understand the dude living off the AI hype, he went as far as he even calls Klarna an AI company now because it uses ChatGPT in its software - but is this a good way to publicly send a message to your employees?

• Compare it, for example, to a PR message fabricated for another Swedish startup leader.

👁️‍🗨️ Google released a video about what they might do with the AI - the video was apparently manufactured to look good. Something is fishy here.

• Google’s AI product was supposed to be released earlier this summer, then pushed for the fall, then pushed for next year.

• But to keep the hype going and the markets happy, they briefed the media about an actual release backed only by some PR materials.

• Which may or may not be real since there’s no product whatsoever - you can claim it can do anything, right?

• While Google released a fake video, OpenAI apologised for not having shipped anything in 4 weeks and Mistral just released a torrent of a new iteration this week.

• The French keep shipping, I’m really impressed with how they put the money to work and transitioned from an European OpenAI wannabe to a real market player. Must be the American investors. 🙃 

• Oh, and btw, Mistral also was said to have raised money from other American investors this week. $2 billion valuation.

• Related: look at how Adobe became a top tier AI tech provider.

🤔 There goes your Twitter pivot - also this week, it was revealed that Elon Musk is looking to raise $1 billion for its AI tool that sits on top of Twitter.

• Raised $135 million for it so far.

• Sexier to run a media company with a SAAS model rather than selling advertising against eyeballs. Smarter too.

• Understand now the middle finger showed to the ad people the other day, right?

Mo’ Sundaying 

🇬🇧 UK regulators are examining whether Microsoft’s $13 billion, 49% stake in the OpenAI’s for-profit division constitutes a merger, and if this could impact competition.

🇫🇷 Hermès created Europe’s biggest family fortune after spurning LVMH.

📹 TikTok’s most viewed videos in 2023.

🇨🇭 The Swiss city of Lugano started to accept cryptocurrencies for paying taxes, fines and all other invoices from the municipality.

🇩🇰 A British hedge fund trader accused of defrauding the state of Denmark of about $1.3 billion has been extradited from Dubai to Denmark to face criminal charges.

🇫🇷 The French government makes unemployed people go on blockchain awareness courses run by Binance, where if they gain sufficient blockchain awareness they're given an NFT diploma.

• It all started when Changpeng “CZ” Zhao met Macron at the Elysée palace in November 2021. That same month, Binance said it would invest €100 million into France’s crypto scene.

• Yes, that CZ.

🤭 How do you know bad times are coming? McKinsey cuts new partners class by about 35% for the lack of new client work.

💰 American music band KISS pulled an Abba (scroll down to Other Stories) and will hand their legacy over to three-dimensional avatars that will continue playing after they retire.

🥑 Spanish farmers are pulling up avocado trees and replacing them with mangoes, as the southern coast of Spain is struggling to support commercial avocado farms because temperatures rise and reservoirs run dry.

• Spain is the world’s no. 3 exporter shipping 150 million kilograms yearly, after only Mexico and Peru.

🐓 Meanwhile in France the government is examining a bill to protect farmers against lawsuits brought by their neighbors doing lawsuits against the rooster who crows too early or because of the smell of cows. The French farmers protested in style by spraying shit at government buildings.

🗣️ Have you tried Capture, what do you make of it? Amo’s ID seems too sophisticated for a simple guy like me, in spite of the media hype - I want to believe but think I am likely out of the target.

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