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Hey there,

Welcome to a new edition of Sunday CET.

Today: Europe’s delicate position, respect by fear and tariff’s reactions. Thanks for reading and keeping this a conversation - hit reply with thoughts and comments.

Best,
Dragos

PSA. In London this month, let’s hang.

Market talk

Topic du jour and on many people’s minds over this side of the ocean is the aggressive commercial strategy took by the USA with the world earlier this week. Some quick notes with what’s on mine:

• covid years were just a preview for what ahead could be one of the worse economic crisis of our lifetime - Trump is trying to resuscitate the American economy while rebalancing the world according to his strong views and this entirely shakes off solid value chains, trading relations and long standing partnerships.

• the general worldwide consensus is that this reset is seemingly a direct path to destroying the entire world (see reactions further below) - unclear how it will end since it’s not a well-defined plan but rather a gamble relying on uncertainty. Alas, please note that there is an old theory behind the tariffs strategy as well as a likely thread he is following. Quite certain however is that a lot of national brand equity has been destroyed - the post WWII looking up to the American values and ways of doing things have changed dramatically in a mere three months.

• it is also interesting to note the American public narrative switching from building relationships based on respect, trust and predictability to transactional terms driven by threats and fear. Aggressiveness begets aggressiveness - besides, it’s hard to get respect out of fear, incidentally that’s how dictators lead, Putin and his predecessors have been doing master classes in public with their country for decades now.

• reaching a new equilibrium will take time and, more importantly, a considerable worsening of the current situation everywhere in this world, impacted by exploding supply chains, decreased consumer spending, inflation and overall uncertainty. Add to that the Russians still actively warring with the Western world while pretending to negotiate with the US, China becoming more aggressive with Taiwan, US publicly speaking about annexing Greenland and Canada, or the Gaza and Iran situations. It ain’t pretty.

• Europe now is in a very delicate position because its own pre-Trump fragile fundamentals have become part of an even more complicated equation - i.e. re-arming, trade re-arrangements with the whole world with budget impact, inflation, protecting against the Russians (at the border, backing Ukraine and from within) and so on. It is a paradigm shift that requires vision, tact and quick and swift execution - dealing with ongoing fluid situations is more akin to the startup world rather than to politicians and clerks, and those are defining moments for the history books.

• the good news is that Europe finally has a better understanding what sovereignty entails, way beyond the bland politicianist claims that led to accidents such as Thierry Breton in the past years. Besides the clarity, it also has the means and the money to deploy, it’s been noticeably juggling with budget supplements for all sorts of emergencies - we’re at record high defence spending btw, which is likely a good economic driver for the next few years.

• the not-so-good news for our own startup bubble is that this adds to an already deteriorating economic environment for startups. While most of them are struggling, the growing ones will find it harder to recruit since in risky times seasoned people will stick to safe jobs not to high flying companies dependent on VC money. The ones doing business locally will face increased acquisition costs and decreased customer demand while the ones not already in the US will likely see higher costs to build biz there now. The American market remains the most lucrative for tech startups - the whole political situation puts by default Europeans and Americans at odds, which not only sucks but also impacts the cost of doing business.

• the EU will likely go after big American tech, it is an obvious leverage play when sitting at the negotiating table with the US, which is what Trump wants after all. As an aside, one of the reasons for big American tech supporting the new administration is precisely fighting against the European regulation, which for them means hefty fines for non-compliance with the local legislation, even though, at the end of the day, the law is the law and everybody should obey it.

• going after big tech could involve extra taxes on the profits and cutting off the Irish heaven loophole. The EU could also ramp up enforcement by imposing stricter rules on how US tech firms manage data, moderate content, or handle user privacy. They could also restrict the market access of American tech firms by limiting their participation in EU public procurement, or by curtailing their ability to bid for government contracts. This is not nothing - Europe is the second largest market of big American tech, after the internal one.

• NB: will they be ceding European markets to China though?

• all those will reflect on the price paid by the startup customers - hosting, cloud SAAS or GTM spending and so on. Fwiw, the EU signalled its willingness to better the environment for the local startups and the EU Inc is a handy example here. This can also be a good occasion to rectify the DMA a bit since the EU has notoriously shot itself and the local tech community in the foot by passing inadequated laws preventing the value creation process. Will see how much of an offset effect they will actually have.

• not least, the other party playing a part in the startup bubble is not that happy either - the VC market hardly has a pulse in Europe, with current deals either tapping on the public spending on defence or on the American copycats or local AI not focused on the US. The morale is low, the risk appetence is at even lower levels and multiple funds are in limbo, waiting for the years-long liquidity events, which seemingly every week are seeing yet another deadline pushed down the line since the American public markets are in turmoil. And will be for some time, it’s the cost of the uncertainty, which means risks, which means losing money - and a lot of all sorts of investors are holding the bag or are in waiting patterns while their valuations plunge.

• putting aside the overall bad industry’s economics in a never ending cycle, the smart VCs worry whether the current adverse macro will offset the AI’s unprecedented growth spurt - which unlocked multiple new tech levels and energy I only witnessed back in the 2000-2010 period.

• I, for one, am positive, adversity is a great innovation driver. And as the old saying goes - chaos is the new cocaine!

Signals

Interesting deals

🇧🇪 Markmi (AI price markdown for fashion) - 1.2 million​
🇸🇪 ​Vantel (AI for commercial insurance brokers) - 2 million
🇬🇧 ​Sohar​ (health insurance SAAS) - 3.8 million
🇳🇴 ​Wirescan (infra SAAS)

🔒 More for Pros

• a maiden 1.2B investment fund made in Sweden

• who is behind the newly ​100M minted fund focused on British fusion startups

• who is behind of a newly unveiled late stage fund in Europe

• the latest investors to jump on the ‘let’s do an AI agent’ mania

• pre-launch series A extensions deals done circa 2025 (I know, right?)

• medical coding SAAS notes

• active investors in Europe last month

All this and more in our European market coverage from tomorrow - sign up to get it in the inbox, it’s a banger.

Cheat sheets

• notable series B deals from H2 2024

• notable series A deals from H2 2024

• overpriced seed deals from H2 2024

• active angels and their deals in France in 2024

• 2024 exits

• seed bets made by multistage funds in 2024

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Also notable 

Local:

• Corporate espionage - Keith O’Brien, the Irish who allegedly was paid $6,000 a month to spy for Deel while working at Rippling, admitted to his actions. This is a mindblowing case, apparently masterminded by Deel’s British founder Alex Bouaziz and his CFO father, who told him he would be like James Bond.

• Klarna postponed IPO - originally planned to launch its road show this past Monday, and now in wait-and-see mode. StubHub and eToro also put their IPO on pause.

• The law is the law - Apple was fined with €150 million in France, while Mark Zuckerberg’s Meta is reportedly pleading with the Trump administration to intervene as it faces another EU penalty. Elon Musk’s X is as well on the line with more than $1 billion for violating the Digital Services Act. TikTok is also facing a €500 million fine from Irish authorities.

• Europe’s pharma powerhouse - Spain ranks first in Europe in clinical trials, 173 production sites and a €20 billion turnover, up from a €6 billion industry in 1995.

• Britain is strapped for cash - Blackstone, KKR, and EQT are urging the UK government not start taxing carried interest as income - for those who don’t know, carried interest is treated as a capital gain, meaning executives who receive it after moving away do not usually pay UK tax even if it relates to work they did while living in the country.

• London gets closer to Europe - Virgin got the green light to operate passenger trains between the UK and Europe, on top of the 500 rides that go through the Channel tunnel every week.

• Denmark moves in Panama - Denmark's Maersk acquired the Panama Railway Company, which provides rail-based freight and passenger services along the canal.

• AI dog-eat-dog - DeepMind introduced a tougher vetting process to make it harder to publish studies about its work on AI - they’re afraid that it could be exploited by competitors. All while DeepSeek and the other Chinese AI companies race to go open. Google’s Gemini GM Sissie Hsiao is also said to step down.

• Alpha seeking in distressed assets - Dutch lingerie brand Hunkemöller, which does half a billion in sales at a loss, was acquired by an American debtor against outstanding loans in a so-called creditor-on-creditor violence - Victoria's Secret stock went up post Trump’s tariff announcements fyi.

• Competing on price - it’s what the Chinese do best. BYD beats Tesla for a second straight year after producing more than 3 million cars in 2023. Alas Tesla’s problem nowadays is Elon Musk being toxic for the company which led to sales cut more than half in Europe in the past months.

Global:

• Tarrifs reactions 
  - Ursula, Europe, UK, Singapore (sober!) China, India, Japan.
  - the American consensus is predominantly negative.
  - France singles out digital services for EU’s tariff response.
  - France plans to increase its nuclear arsenal.
  - Germany considers withdrawing 1,200-ton gold stockpile from US.
  - Musk hopes for zero tariffs between US and Europe

• Hike the tariffs instead of taxing the rich - the world’s 500 richest people lost a combined $208 billion this week. Short term pain for long term gain, they say.

• Crash the markets on purpose - Trump shared a TikTok that claimed that the stock market’s nosedive is part of his plan. It’s called a detox - i.e. create uncertainty to push investors switch from stock positions into T-bonds to refinance the country’s debt. As I said above, a gamble.

• OpenAI eats Google’s lunch - some 130 million ChatGPT users have generated more than 700 million images in less than two weeks since OpenAI launched its image-generation feature.

• Respect by fear - Silicon Valley folks are horrified by what Elon Musk is doing but they’re increasingly afraid to say so.

• As bullish as one can get - Mr. Larry Fink: Today, we're standing at the edge of an opportunity so vast it's almost hard to grasp.

• Leverage that AI position - SoftBank is negotiating a bridge loan of $16.5 billion to fund its AI investments in the United States. ICYMI, the Japanese led OpenAI’s 40 billion fundraise made public the other day.

• Amazon goes to space - 27 satellites at an altitude of 450 kilometers above Earth, aiming for 3,200 satellites, compared to Starlink’s currently 7,000 satellites in orbit (which plans for as many as 42,000, btw). I looked a bit at who is making money out of it in Europe and how the continent is faring compared to them last week.

• Old distro is the new distro - Amazon is planning to release 14 movies a year in theaters across the USA.

Opinions:

• 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.

• Europe’s strategic reset - so good that Nicolas started writing again, you may not always agree with him but his observations make you think.

• Rediscovering British progress.

• The émigrés who made Britain modern.

• Fred Wilson and Brad Burnham in a rare podcast.

• AI 2027

• The ABCDE of re-invented marketing.

Sunday closers

🇺🇸 I was wondering when the Democrats in the US will push some of their people on the public stage after the elections’ fiasco - they finally got one now.

🚘 Jaguar I-Pace, BMW 7 series and Tesla S top the list of the fastest depreciating cars that you should buy used.

🥤 How Poppi grew from at-home remedy in 2018 to a billion dollar soda brand today - it was just acquired by Pepsi for $2 billion.

🤡 Recession signs everywhere, the fashion edition.

🇨🇳 China to launch AI courses for primary, secondary school students.

🛜 A look at seven39, an experimental social media site that is only open for three hours a day.

🐵 People are still using typewriters.

👀 Loneliness is as dangerous as smoking or alcoholism - word!

🎨 Color trends in fashion this year - more dark themes.

That’s all folks, have a wonderful week!

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