Hey there,

Happy Easter and welcome to a new edition of Sunday CET.

Lately, it feels like I’m having more conversations at the crossroads of economics, politics, and venture than ever before. The pace of change is dizzying, the stakes are real, and no one’s quite sure what the next curveball will be.

This week - zooming out to look at the macro pressures, how European investors are reacting, and how elite universities like Harvard are not good news for the ecosystem. Then we zoom in on Lyft’s unexpected but telling move into Europe at the margins. Plus, a few sharp deal signals, standout growth metrics, and cultural pulse-checks from across the ecosystem. Whether you’re zigging or zagging, there’s a lot to unpack.

Let me know what you make of it. Enjoy,
Dragos

Market talk

Current situation

I haven’t had so many discussions at the intersection of economics, finance and politics in my life - everything is fluid and moves at a super high pace, with quick and meaningful implications.

• as an anecdote, while the Europeans seem to be more involved and follow closely the nitty gritty implications of the daily events, the Americans are more detached from the day to day politics unless it affects them directly, and prefer to be more focused on their own game while waiting for data points to connect into realities. It is also true that compared to Americans, Europeans are much more invested in the geopolitics since i) Russia is at war directly with Europe and ii) the European memories of the Russian aggression from 80 years ago are still vivid - after all, those wounds are just a generation away, most people have parents or grandparents who fought in WWII and this makes the Russian threat more palpable for Europeans than for the Americans.

• business wise, the latest wave of tariffs is shaking the global tech and VC landscape across multiple dimensions. With some notable exceptions (defence, infra, telecom), the usual go-to verticals for VCs are deeply affected - fintech, hardware, SAAS, and climate tech are dealing with increased costs, disrupted supply chains, and the need to reassess their market strategies. While the appetite is low, the smart investors are looking to zig while everybody else is zagging, and if you put the noise aside, there’s all sorts of pockets of values at vertical intersections - every week I examine closely some of those.

• yes, there’s still plenty of powder in the street, but the path to scaling and liquidity has narrowed, particularly for investors in the ending cycles with their funds - i.e. fewer exits, IPO market murkier etc. On the startups side, with some notable exceptions, folks are struggling - this situation has triggered a broader call for stronger financial discipline and strategic foresight among founders.

• in Europe, there’s still a handful of VCs doing early stage but the market remains gripped by radical uncertainty, with tariffs seen as just one element in a web of macro shocks affecting investor confidence. The IPO freeze could extend well into 2026, delaying returns and creating pressure on liquidity for LPs. Add to it Trump targeting Harvard or elite academic institutions more broadly - university endowments (like Harvard’s $50B+) are major LPs in venture funds and this new front can shrink the capital base for VCs even more.

Market entry on the cheap

Lyft buys Mercedes and BMW out of Freenow for 200 million, and marks its entrance into the European market.

• it was long bound to happen, as growth stalled, sole focus on the American market, and Lyft’s share having been consistently trading below its 2019 IPO price.

• in the US, Lyft competes as a cheaper version of Uber, a positioning which will probably be mirrored into the European market. Note that Bolt competes the same against Uber in Europe, while the local market is more complicated than the US, as the public transport is really good, making for viable market substitute and a lower frequency consumer usage on average.

• Bolt’s PR already says they’re one of the last major European alternatives to American platforms - fitting narrative now that Americans are at an all time low popularity in Europe. Doubt it’s going to stick though.

• Freenow is the re-incarnation of the British Hailo, seeded by Atomico back in 2011, followed by Accel which led series A, up-marked a few months later by USV with the B in 2012. It performed underwhelmingly though, was flipped in 2016 to mytaxi, Daimler’s ambition to do ridesharing at the time, re-branded into Freenow in 2019, part of a larger $1B German plan to build on the ridesharing trend that was popular at the time, and which includes a marketplace with access to bikes, scooters, EV chargers, and cars on demand.

• current situation has the German business available in nine countries and more than 150 cities in Europe, breakeven, 13% yoy profitable growth - probably producing some 2-300 million in turnover. Also notably, they make most of the money by aggregating traditional taxi brands in app, as opposed to running a marketplace of drivers, which is the bread and butter for the market leaders Uber and Bolt.

• Uber produces some 10B out of Europe, and Bolt is at 2B, both at superior growth yoy rates - this makes Freenow a very marginal market play. Which it is, and 200 mill is a low risk approach for the Americans - it most definitely looked at Bolt, which is already eyeing an IPO, but the 8B-ish price tag they’re reportedly looking for is a bit more than Lyft can chew. Lyft turns over 5.8B a year, up 31% in 2024.

• still, Freenow is better than nothing, a good foot in the door for the Americans testing the waters for building more in Europe, which remains a hyper competitive environment defined by a lot of VCs money still looking for returns - they have heavily subsidised the ecosystem development in the past decade. While it is a cheap entry point, it is interesting to follow Lyft’s further execution for grabbing market share, and which segments the Americans will push for growth in a turbulent and uncertain market (fwiw, Lyft already runs Santander’s on-demand bike op in London). Or, why not, more M&A. Alas that also depends on the people further leading the business - for now, the existing management will continue operating as it does today.

Signals

Interesting deals

🇬🇧 ​Emerald (preventative health membership) - 800k
🇹🇷 Boby ai (personalised music using AI) - 1.3M
🇨🇭 TheStage AI (AI used to automate inference optimization) - 4.5M

Trends

• Synthesia does 100M ARR, gets Adobe in the captable.

• Lovable reached 40M ARR in 5 months.

• British founders grow frustrated over dearth of funding, ‘the problem is getting worse’.

• Big tech as leverage: The European Union reportedly delayed levying sanctions against Apple and Meta while it tries to secure a trade deal with the USA.

• Dixit: In France, research is a priority, innovation is a culture, and science is a boundless horizon. Researchers from around the world, choose France, choose Europe - Macron is on top of his game, surprised no other European country doing more speculating the US losing the momentum. Other than Eloni Meloni that is.

• EU bans the bots: the EU Commission bars AI agents from joining online meetings.

• Euro academia and startups: no bueno. We [Euro startup] tried to collaborate with a top European university and they asked for bi-directional transfer of intellectual property rights. We moved on and now work with American universities.

🔒 More for Pros

• (two) VC break-ups

• Chinese VCs keep dealing in Europe

• (two) new funds for defence and deeptech in the Nordics

That’s from our European market coverage from tomorrow - sign up to get it in the inbox, it’s a must-read.

Cheat sheets

• notable series B deals from H2 2024

• notable series A deals from H2 2024

• overpriced seed deals from H2 2024

• seed bets made by multistage funds in 2024

Other observations

Big tech notes:

• Meta's argument to the FTC is ‘we're indistinguishable from any other app’ - all slides here.
  To follow: will the lobby money for the Trump’s administration help with Meta’s legal problems?

• Google is an online advertising monopoly, judge rules - the third such decision in 2 years.
  To follow: Regulators on one side and ChatGPT’s competition on the other, that’s how monopolists are dismantled.

• OpenAI is building a social network.
  To follow: will it raise the garbage levels set up by Linkedin and Facebook in the name of engagement?

• OpenAI announced acquiring Windsurf for $3 billion - prior to this it had tried to buy competing Cursor, where it’s also a shareholder, but walked away from a 10B price tag.
  To follow: LLM operators going up the AI agents value chain will push for further commodify-ing the upper layers, which are heavily invested by VC money. Will the regulators have a say in that?

• OpenAI generated $3.7 billion in revenue last year, up from $1 billion in 2023. $2.8 billion of it came from ChatGPT subscriptions, with the rest coming from selling the API access.
  To follow: that’s at a stark contrast with Google’s freemium model, of providing the search engine for free while selling the users data against advertisements. That’s also at odds with the likes of smaller players such as European Mistral, which sells mainly API customisations and man/hour implementation projects.

Opinions:

• Patrick Collison: the pros and cons of Europe and the US in everyday life

• Martin Casado: economics and moats of open source AI.

• Peter Thiel: on DOGE, Trump, China

• Neil Mehta: on what makes him (and Greenoaks) good at investing.

Bit sizes

• Knowledgeable AI about European investments.

• Breakout hardware startups for European sovereignty.

• R&D gaps holding back science and the bridge-scale fundamental development efforts

• Techstars increases startup funding to $220,000, split in two tranches, like YC.

POVs

• (1) The White House is doing too many things at the same time (tariffs, Ukraine, deportations, Yemen, hosting sports teams, and much more) while China is singularly focussed on the tarrifs issue, which they have been studying and preparing for, for close to a decade.

• (2) Thousands, and then millions, of American small businesses, including many iconic brands, will go bankrupt this year if the tariff policies on China don’t change.

Sunday closers

🇺🇸 History repeating:

• In the 1930s, the US imposed protectionist tariffs, notably the Smoot-Hawley Tariff Act of 1930, to protect American jobs and industries during the Great Depression.

• These tariffs aimed to make imported goods more expensive, encouraging the purchase of US-made products. However, they negatively impacted countries like China, which exported goods to the US.

• In retaliation, China and others raised tariffs on US goods, worsening global trade and deepening the Depression worldwide, including in China.

• Ironically, the tariffs intended to aid the US economy ended up backfiring - global trade collapsed, and the Depression deepened worldwide, including in China.

• WWII followed a few years after.

👀 Coachella is selling tickets on BNPL scheme basis - $50 upfront with 3 months to pay the rest of $600 ticket price against a $41 service fee, which is ~8% of the ticket price.

• with BNPL you sell the credit at an interest rate, in this case the ticketing company is just charging a fixed promotion fee passed along the payment to Coachella as the buyer completes the payment plan.

• music festivals have become the main revenue drivers for artists, which sell experiences and use music as free promo on Spotify and YT. Consumers buy it bundled - good festivals are quite expensive and this is a seemingly better way to market to a young audience, which is more comfortable to the BNPL model.

• it worked out - more than 60% of the 100,000 festival attendees used the option.

🛬 China canceled its jet purchases from the US. United is slashing 4% of flights, will continue trimming & retire aircraft early. Delta and Frontier Airlines also said they won't take any new craft this year.

🇺🇸 How generative AI is being used by the US military to gather and interpret intel.

🤡 Silicon Valley got Trump completely wrong. Did it?

🇫🇷 Uber-like ridesharing app Monite is gaining popularity with Israeli tourists in France amid rising antisemitism.

🇫🇷 A visit to Costco in France.

That’s all folks, have a wonderful week!

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