Welcome to Sunday CET!

Writing this from Paris where local folks seem to have had it with immigrants and tourists, while the current thing is a TV show about online influencers inciting into a cultural aggressive war after the far-right accuses a football player of anti-White racism.

On a positive note, this week we have had a lovely dinner in London with a bunch of cool founders and investors, which was so interesting that I even forgot to take pictures. It was a great soiree, people from 5 countries flew into London for it - hot deals (and gossips) were talked over, business was covered and connections were made beyond the evening. I will do more dinners like that, will announce details about the next one soon - let me know if you want in.

Now, let’s get to this week’s agenda - enjoy and thanks for reading,
Dragos

Market intel

Early stage startups from overlooked European markets

It’s a cheat sheet we produced over at Nordic9 this week, with a selection of about 70 interesting early stage startups from overlooked European markets - the selection was made from more than 500 deals closed last year in 11 countries outside the London-Paris-Berlin-Stockholm axis.

Available here.

Other cheat sheets

• most promising 250 AI startups (and their backers)

• under the radar startups (updated every week)

• AI legal startups - link

• VC seed mark-ups - link (also comes with a file)

• American investments in Europe - H2, H1

• interesting series A from last year - H2, Q2, Q1

• (>$10M) seed deals from last year - H2, H1

• interesting angel deals from last year - Q4, Q3

The best investors in Europe get access to our intel every week. Don’t be the one that’s left out, subscribe! 👇️ 

Also notable

🇬🇧 Thoma Bravo will acquire UK's Darktrace for about $5.32 billion.

• the deal simply signals that Darktrace is 3-5X undervalued by the public markets.

• as a reminder, Darktrace listed on the London Stock Exchange in 2021 at a $2.4 billion market value, after which plummeted to more than half of it - fact is that the LSE investors didn’t really love the stock but have they ever loved any new kids on the block doing tech business?

• LSE seems like a ghost town nowadays - granted local institutional investors still hanging around don’t really make too much use of it (they mostly trade in the US anyways), giving little to no incentive to any private startup with global ambitions to use it up for a capital raising event.

• that leaves the said startups with the one and only option of going to the US - it’s where the big customers are to begin with, and where late stage investors are plenty as well, aka both sides of the marketplace contributing to a liquid market that behaves predictably.

• anybody feels like getting into that Europe’s US-independence argument? 😃 

• the real talk:

  • that’s utopia, at least on our lifetime. It can be done, of course - I mean, look at the Brits, they kinda did take their independence from the EU, but hardly worked out really. Now they’re in the worst shape they have ever been since WWII with no signs of optimism for better times. But I digress…

  • this LSE story is just yet another aspect of Europe not being able compete business-wise with the Americans.

  • yes, Europeans (and I include the Brits here as well, even though they feel they’re special, like everybody else) deserve to be independent and have the talent and energy for making it happen but those liberal minds who do are just a TINY minority at the edge of a margin error on a continent managed by people without any vision whatsoever, at best, and idiots clueless leaders, generally speaking.

  • happy to take contrary views and have you prove me wrong - email me!

• in not-so-related-but-oh-very-related news:

  • Europe can die, and needs to be less dependent on the United States.

  • could it be related to the fact that Europe is less hard-working, less ambitious, more regulated and more risk-averse than the US?

💲 Banks and card processors are the 21st century gorillas whose businesses are just waiting to be disrupted.

• Uber announced a pay option via bank used to incentivise users with cheaper rides if they choose that method over Cards and Wallet.

  • in business terms, that simply means cutting out the cards middlemen - a long shot, but worth trying.

  • in Germany, many shops still take cash only, sometimes at discount, because of the big processing fees, while in France customers have a minimum spend required in order to be able to pay by card at many small shops or cafes.

  • the likes of Uber, Bolt or even Klarna have a clear path disruption angle and they’re giving a good stab at it.

  • neobanks like Revolut and Wise are already taking deep market shares, coming from a different angle.

  • other vertical financial services providers are trying different GTM schemes either B2B and B2C, some of them with good success odds.

  • if you are an investor, your portfolio should account for at least a part of this market, as its configuration will be different in the next decade.

• another one with Uber, noticed in London this week - it’s doing a 10% cashback promo for customers using their app for booking train tickets.

  • it’s both good marketing and a tactic test as this kind of apps are the equivalent of the European super apps i.e. a brand umbrella handling financial payments for all sort of distribution channels or D2C services.

  • mentioned in a previous Sunday CET, but worthy reminder - more than 1% of all card payments in Europe are now done with Bolt.

• not least, Klarna launched a credit card for the US market last week.

💲 Elon Musk spun off xAI of Twitter, its AI tech unit for which it raised $6B at an $18B valuation pre from private investors.

• deal was hot, as apparently as of last week it was shopped for $3B at a $15B pre-money

  • “it’s now $6B on $18B, and don’t complain because a lot of other people want in.”

  • Sequoia Capital is said to be among those in the deal - which btw is not in Mistral’s captable, in spite of being super active on the French startup scene, per our last email.

• Mistral’s $5B leaked to the media last week seems small, doesn’t it? It will be north of that number that should make for a good growth foundation, we have talked about this already 1, 2 

• also for context, Perplexity, which offers an AI chatbot that summarizes search results, was just priced at $1B, 2X yoy.

🇪🇺 Sometimes you read stuff and just dismiss it upfront because it’s simply stupid. But this one seems as real as it gets:

• Europe’s privacy regulator thinks Meta should offer a free version of its services without targeted ads and without a subscription fee.

• driving the opinion is a privacy group from Austria, which last November complained that Meta’s offering - of a free service supported by ads or one that was ad-free but cost money - wasn’t structured fairly. They say that the subscription was a “privacy fee”.

• however… this is the same model used today by most of the media companies with digital assets - it’s as old as the world, media companies, including Meta, living from selling advertising against a free service need to track user behaviour data in order to serve ad products. That is how the business model works, and there is nothing wrong with it as long as it is legal.

• how about this crazy idea as an alternative - Europeans who don’t want their data tracked for being served ads could simply stop using Meta’s services? Who says that having access to a social media site, developed and managed by a private entity, is a fundamental human right and should be given away for free? And who are you to tell a private company how to do their business? Meta is a private company, with expenses and revenues aligned to a business model, that should follow the laws, like any other business entity. But whatever happened to the idea that a private company has a right to make money?

• that’s how capitalism works - I wouldn’t honestly be surprised if this came from a guy like Putin, but not from a Western country where, in theory at least, capitalism prevails and companies create value in order to extract value in a free market.

• btw, it is well known that Russians bribed up and front many people from the European business and political communities, including Austria - but seriously, if there is a group of Austrians disliking using Meta products freely so much, why on Earth are its members using Facebook or Instagram to start with? Isn’t it easier to stop using rather than complain about life being unfair?

• PS. I can’t believe I defend Facebook - I, myself, don’t like its values and the way company does business, and therefore I simply deleted my Facebook account 10 years ago.

👁️‍🗨️ The TikTok situation has become a political game in the US

• first of all, make no mistake, TikTok is used as a surveillance tool, both internally in China, where the society is governed on a different set of rules than in Western democracies, and in many other countries, US and Europe.

• putting that aside, it is a fascinating story that requires following a lot of subplots in order to understand all the background ties - one way to look at it is that TikTok has become a way for Trump to buy his way out of expensive legal financial obligations that put obstacles to his presidency run.

• it’s some sort of a quid pro quo deal as one of Tiktok’s main private investors is American (Jeff Yass of Susquehanna) and, as a coincidence, happens to be one of the biggest Trump’s party donor - Yass has a sizeable Chinese portfolio which is under American governmental scrutiny. And so his interest is to be in the cards of purchasing Tiktok’s US ops as the US government formally forces that Tiktok’s mother company - ByteDance - to sell or shut down TikTok’s American operations. The US decision has stalled for years and as a coincidence only was accelerated by the Republicans (Trump’s party) as the presidential elections are knocking on the door. In return, Susquehanna sponsored the SPV that took Trump’s Truth Social public as a mean to bring in some liquidity to a cash-starved Trump.

• not that easy though - ByteDance says it would rather shut down TikTok's US operations than part ways with its algorithms.

• it’s a way-way more complicated story than that, of course - also worth noting, in ByteDance’s board sits Philippe Laffont, a French guy who is also a prominent investor as he is the founder of Coatue, alongside Bill Ford of General Atlantic, Arthur Dantchik of Susquehanna (all investors in the company).

• TikTok is also seeing growing scrutiny in Europe, where, unlike in the US, the EU prefers to fine the s** out of it for the moment, while also doing investigations on multiple fronts.

🇪🇸 Puig, owner of perfume and fashion brands as Rabanne, Jean Paul Gaultier and Carolina Herrera, is going public at a €13.9 billion valuation, in Spain's largest IPO for almost a decade.

• €4.3 billion in sales last year - founded in 2014, ever since it was a family run business.

🇫🇷 Dirk Lievens, Goldman Sachs’ head of dealmaking for financial institutions in Europe, has relocated to Paris and is planning to double headcount for his team there.

• a skeleton staff remains in London to serve just the UK and Middle Eastern banks.

• US banks have massively increased staffing in Paris post Brexit, as they now look at ways to redeploy excess cash generated during high-rate periods.

🇫🇷 Quelle horreur - foreign-born CEOs are running some of the country’s most-strategic companies, something that would have been unthinkable just a few decades ago.

🇬🇧 The Body Shop liquidated its Swedish ops as it entered into bankruptcy, along other local markets such as Denmark or USA.

🇫🇷 The French enacted a law to protect SMEs against big retails chains, forbidding discounts of more than 34%, which marks the end of sales such as "buy one, get one free".

🇦🇹 Raiffeisen Bank recently posted dozens of advertisements for Russia-based jobs indicating ambitious plans to grow in the country, in apparent contradiction to its official pledge to exit the market.

• the EU has been trying to have the Austrians close Russian ops ever since to the Ukraine invasion, to no success. It took the US state department for Raiffeisen to take seriously into consideration a Russian exit - they said they would.

• all this just adding to the plenty of evidence that Putin’s eyeing Europe is just an inside job.

🇬🇧 KPMG cancels foreign graduate job offers after UK tightens visa rules.

• that’s due to the government’s decision to raise the minimum salary required to sponsor a skilled worker visa in the UK at £38,700.

• KPMG and the likes usually pay first year graduates between £25k and 35k.

Data and anecdotes

☕ There’s a significant uptick in European operators and founders moving to SF.

• fun fact - quite a few of the startup founders I have invited to come over our dinner in London this week couldn’t make it because they were with business in the US.

💪 One of the better European startup entrepreneurs is from Romania.

🧛 The largest VC firms added 134 investors and had 158 leave, a net negative of 25 people, in 2023. This year to date, that number stands at +46.

💲 The median employee at Meta earned over $379,000 in 2023, on par with rivals like Google and Amazon.

💪 Sam Altman and others are investing $20 million in a startup tackling AI's energy problem.

🤑 Demand for AI stock (i.e. OpenAI and Anthropic) has risen so much in the private market that some fund managers have launched SPVs to invest in other SPVs that bought stakes in leading startups.

🤯 21st century corporate espionage → Amazon secretly sells $1 million in products per year on eBay, Shopify, and Walmart to obtain pricing and logistics info on the competition.

Mo’ Sundaying 

🇫🇷 The Summer Olympics are the opportunity of a century in Paris 2024.

🇩🇰 The descendants of the Danish butter magnate Lars Emil Bruun waited exactly 100 years to claim their now $72 million inheritance. Not by choice - it is clause in the will.

✈️ Wizz Air started charging yearly subscriptions for selected flights to Italy, Poland and Albania i.e 130 euro/month for a round trip to Italy.

👓 Meta announced a bunch of iterations to their Ray-Ban glasses.

🇳🇴 Norwegian startup folks made a “Don't come to Norway” meme song.

🇸🇪 Sweden is getting ready for war that’s to come in Europe.

• “Which war - asked me this morning my hotel receptionist, living in Paris but born and raised in Chisinau, Moldova - the one that we’ve already been in for two years? Europeans (French) are still preoccupied with sitting on their assess and getting angry with immigrants spending their social free money while taking advantage of a flawed social system, instead of realising that Putin has already changed their comfortable societies in a nightmare. He won already the war Europeans are yet to start preparing for.”

• She is not wrong, is she?

🏀 Amazon Prime Video and the NBA have outlined a deal that would make the streaming service one of the main hubs for NBA games starting with the 2025–2026 season through the next nine years.

🖖🏻 Pearl Jam released a new album last week, love it.

That’s all folks, have a wonderful week!

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Created every Sunday by @drnovac of Nordic 9 with weekly notes and observations from the European startup ecosystem.

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