Good morning,

Welcome to Sunday CET, folks.

Already August, prepping the final push for the year end is on the way - time flies so fast yet the past seven months felt as eventful as seven years.

Today - we look at why the French have a problem, and how that is a good thing for the Brits. Keen to learn your thoughts on the matter - hit reply.

Enjoy,
Dragos

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Market talk

This week the UK's biggest pension funds including Railpen, Nest, Border to Coast, LGPS Central, and LPPI announced their ‘commitment to explore’ establishing a ​£1 billion​ UK Scale-up Fund.

Beyond the very British quote from above which can mean anything - this is more important than it looks like. In isolation it’s yet another venture initiative, in the grand scheme of things though, it’s another piece of puzzle for a much larger capital architecture the UK has been assembling over the past year.

A few notes on that:

1. This is political, directly endorsed by the newly appointed PM, aiming to address the domestic growth funding gap without relying heavily on foreign investors. Also a mean to an end as a timid hope to keep those companies anchored in the UK. 

2. It is not a straightforward process due to the cumbersome legal framework, possibly explaining the non-committal committal PR speak.

Pension funds are bound to something called Defined Contribution rules, which require them to offer daily pricing and daily liquidity to savers - in contrast to the illiquid state of a late-stage investment. The appointed fund manager will have to engineer a complex structural workaround to blend these illiquid tech investments with highly liquid assets so savers can still move their money whenever they want.

3. The final outcome needs to be insulated from shifting political agendas, especially in the current volatile local political establishment - they need an independent manager with absolute, legally binding mandate to make decisions purely on a commercial, risk-adjusted basis - not to fulfill political photo-opportunities. 

There's a subplot coming from France, from all places - this summer, the French have actively sought to block UK startups to access the EU’s own €5b tech-scaling fund.

  • The overall argument is understandable - keep EU money focused on EU companies, which makes for a coherent European industrial policy. It’s also aligned to the official open-ended legalese on including UK, which is not restrictive but rather subject to ongoing negotiations.

  • But as a principle, is this optimal for a tech ecosystem that’s deeply inter-connected yet globally weak? The current European narrative is about creating larger technology champions capable of competing with both American big tech and increasingly competitive Chinese firms. Shrinking the pie with a zero-sum game does not get you there - plus excluding British companies doesn't automatically redirect capital towards French companies, it just reduces the available opportunity set.

  • As an aside, from a VC perspective, that's also not ideal because the industry's raison d'ĂŞtre is to invest in whichever companies offer the highest expected returns, regardless of nationality. It is why excluding UK firms by default could reduce the overall quality of the investment pool - 40% of the VC deals closed in Europe happen in the UK, and London is Europe’s number one startup hub by far.

  • Industrial policy, of course, optimises for something different - not necessarily maximum financial return, but strategic autonomy, domestic capability and long-term technological sovereignty. Quite sure there’s middle ground here, should an UK company have an active R&D office in the Union, for example.

  • And again, as a principle, is the EU’s scale up fund a for-profit financing vehicle or just a policy mechanism they call ‘venture’ just because VC used to be cool 10 years ago? Meddling the two and bordering the VC management with politics ultimately creates just a smaller under-performative investment universe, and a mediocre environment the European business is already famous for.

Back to the UK - this episode may have accelerated something Britain probably was going to do anyway. Specifically, the fund would be a dedicated investment vehicle focused on later-stage UK companies - and fitting alongside the ÂŁ1b National Wealth Fund, ÂŁ200m British Growth Partnership and the ÂŁ500m Sovereign AI Fund:

  • the National Wealth Fund is funded directly by the Treasury i.e taxpayers money and is focused on doing infrastructure investments.

  • the British Growth Partnership is managed by the British Business Bank, funded by private pension funds and doing fund-of-funds deals - it’s a wrapper that lets the pension funds piggyback off the BBB’s existing 150-fund venture network.

  • the Sovereign AI Fund is also funded entirely by the UK Treasury and is a state-directed technology fund explicitly focused on AI adoption - it’s doing early-stage equity (up to ÂŁ10m) while subsidizing startups with non-monetary state assets like GPU hours on the Isambard-AI supercomputer and fast-tracked immigration visas for engineers.

It’s interesting to note that those funds are structured to complement each other on the premise that capital needs to be flowing into productive investments - under a new specialised architecture built from scratch, which is a hidden benefit of being a late entrant to the sovereign strategising games.

Together they make for a purpose-fit financing pipeline rather than a collection of disconnected ideas - infrastructure, fund-of-funds, strategic early-stage tech, late-stage scale-up capital. In contrast, France and Germany have older, broader and arguably more powerful state investment ecosystems than the UK's stack.

  • The French assume markets often underinvest in strategic industries, so the state should become a long-term investor and they have the all-mighty Bpifrance for this, an investment bank doing it all i.e. infrastructure, fof and direct multi-stage equity deals, AI focused or not - it is arguably the most integrated and venture-oriented mechanism from Europe.

  • Germany is more of a middle ground - neither state investor nor hands-off market - doing long-term industrial finance in a more decentralised manner, with KfW Capital acting as the fund of funds, with DTCF as a dedicated €1b fund, merged with HTGF and covering all the direct equity deployment spectrum - all assorted with Sprind and all sorts of semiconductor and AI programmes.

Getting the pension funds more involved is a directionally smart move for the UK, even though regulation remains challenging, implementation will be complex and technical realities are a real offset for political enthusiasm. Brexit is also a cold reality check for a country leading Europe in believing that markets alone would allocate capital efficiently - the irony of it is that while it narrowed Britain's access to European capital, it may also have accelerated the construction of institutions that otherwise might never have been built.

Signals

We have screened 528 fundraising deals closed in Europe in July.

We archive/transform deal-related data into an easy-searchable intelligent asset at N9, and email a selection of the interesting ones to our customers every week.

Every week, we grade the ones that matter by the capital event quality, proof vs. price, and investor signal. Below a selection of recent top grades:

Ⓐ+  🇩🇪 ​microagi - $55m seed, physical AI software
Ⓐ+  🇬🇧 Humanoid - $152m series A, industrial robots maker
Ⓐ+  🇬🇧 Kraken Techology - $175m series B, uncrewed surface vessels manufacturer
Ⓐ+  🇸🇪 Neko Health​ - $700m series C, health clinics using embodied AI hardware​
​
Ⓐ  🇩🇪 Skalar - $13.8m pre-seed + seed, AI-enabled service provider
Ⓐ  🇫🇷 Syntetica - $30m series A, textile recycling op
Ⓐ  🇬🇧 Greenjets - $40m series A, dual use manufacturer of jet engines for drones
Ⓐ  🇨🇭 SWISSto12 - $70m series C, sovereign satellite prime
Ⓐ  🇩🇪 ​Augustus - $180m series B, new-gen clearing bank

The DB with the graded deals here - by country, sector or investor.

Fresh powder tracker

In the first half of 2026, we have tracked 188 new funds closed in Europe:

  • 92 of which dedicated to VC (€11.4b)

  • a third of them are debut funds (median €50m, mean €83m)

  • half are industry agnostic

  • and 59 dedicated to pre-seed and seed.

The full list here.

Most active investors in Europe in H1 2026

Cheat sheets

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Outside in

Current talk over the ocean is about Situational Awareness, a hedge fund done by a 25 years old German who formerly worked as a researcher for OpenAI and SBF.

  • We actually did a profile on this guy in our N9 intel notes this winter as he’s done investments in Europe - not going to get into it, the TLDR is that the fund had massive loss after heavily leveraged bets on AI stocks went against it, forcing it to unwind positions.

  • People were quick to judge i.e inexperienced kid, fired by OpenAI for misconduct vs. diligence of being backed by Thiel, the Collisons et al while directionally on a correct compass - that’s just small gossip chatter typical in the investors world. What’s more interesting is that we’re looking at a broader deleveraging across the AI trade - rather a macro symptom, see also what happens in Korea, Footsie climbed to an all-time high this week, etc.

  • The real talk is that the stretched AI valuations don’t match the pace of the current value created, as AI is a singular short term growth narrative in an already volatile market that sees very little upside otherwise - inflation is up again, Iran is a mess turned into Russian-war-sized event with no ending in sight, trade frictions and export controls are high and so on.

  • We’re deep down in the middle of a worldwide economic crisis with no foreseeable rebound, the mood is bleak, markets are nervous and uncertain, while those events are stress tests for the long-term AI bull case. Btw, you noticed that SpaceX is 50% under its IPO price, right?

Trump administration bans new Chinese humanoid robots - it also banned imports of power inverters, devices used in data centres and solar panels, that is. That’s more impactful than it seems since the effects will reverberate across entire supply chains.

Klarna did a back-to-back with Apple - on one hand, it’s a win for the Swedes adding more US biz. On the other, a sad state of affairs as the most valuable company in the world is selling credit products to prop up its sales.

The London team part of NBA Europe's team expansion is priced at $1b+, interested investors including Americans such as Nikesh Arora of Palo Alto Networks.

PWC published ‘thought leadership’ reports on AI and EVs that contained hallucination errors featuring fabricated citations and misattributed material.

  • Putting aside that nobody cares what an accounting firm thinks about AI (they do this just as a reminder that they still exist), infesting the internet with dumb AI content under the banner of expertise is a current thing.

  • Publishing AI-generated content without rigorous verification isn't just sloppy - it's corrosive, and normalizes mediocrity, erodes trust, and pollutes the knowledge economy. Noticed the same trend with a number of newsletter authors - sad to see people outsource their thinking to a probabilistic text generator instead of using it as a tool to support original analysis.

Companies with venture funding are more likely to face fraud charges compared to companies that didn’t take venture funding - the current frothy AI startup environment is exactly the kind of conditions that tempt founders into fraud.

Some investors are ghosting the market - there’s a good tool to find out which.

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