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Just when you thought that after Covid and Ukraine’s being invaded nothing worse can happen, we have the Middle East tragic situation. It’s really bad, topping a sequence of events that can become a trajectory to God-knows-what momentum, and doubt that it’s just a coincidence - there’s no randomness if you look at the big picture, things happen for a reason and my guess is we’re in for some very weird and painful years ahead for humanity. Maybe I am just in a bad mood (it’s a warm rainy weekend in Basel) but I am not optimistic about what’s to come.

Before we get to business - I will be in London again next week, followed by three weeks in New York, you know the drill, ping me for coffee, drinks, biz, ideas etc.

Dragos

Top intel

As we’re closing the Q3 books, I had a quick look at the investment deals made with startups doing interesting stuff in the AI space - what was hype and what’s interesting in Europe this summer? Fwiw, over at Nordic9 we have tracked almost 250 fundraising deals with European startups using AI for Q3.

The AI hype is real, the number is twice as many as we have tracked for the last year's quarter - yes, we've been tracking AI-enabled tech startups ever since we started N9. 2021 was notably peak AI in Europe, with the number of deals about the same to what we have tracked for the entire this year. Also, this year seemingly was the most productive AI backing Q3, double compared to last summer - 2022 saw record deals in Euro startup funding in general. Here's what we've got in our databases:

• (Jan-Sep) 2023: 659 deals | Q3: 229 deals

• 2022: 600 deals | Q3: 113 deals

• 2021: 667 deals | Q3: 163 deals

• 2020: 443 deals | Q3: 114 deals

Screening through - later stage, Helsing stands out with its 230 million series B, making it the most expensive AI-enabled, up and coming asset from the old continent, alongside a bunch of other vertical startups applying AI to their stack (health, insurance, carbon tracking)

Early stage, besides YC funding quite a few startups, some intriguing names include Context in the UK, Flower in Germany, Orquesta in the Netherlands, Focoos in Italy, Semanttic in Sweden, Biomia in Denmark or Command in France.

Also worth noting, some of more active dealers from the Q3 were from the Nordics (Sondo, Skyfall, Inventure), Insight is back after a quiet first part of the year and Blueyard does more than crypto nowadays.

All this from a handy cheat list covering the interesting Euro AI startup fundraising and their investors from Q3 available here for our Nordic 9 customers.

Startups cheat sheets

• Startups raising two series within a year - 2023

• Who invested in AI in H1 2023? link

• Overpriced Euro seed deals H1 2023 - link

• Fintech deals 2023 - who and what

Investors cheat sheets

• Investors who slowed down Europe funding in 2023 - link

• Most active investors in Europe 2023 - link

• American investors in Europe - who are they 

• What non-locals invested in in Europe in 2023 - link

Deal highlights from this week

🇦🇹 Infrared City​, developing a simulation platform for intelligent and resilient climate-aware design based on AI, raised $1 million in a pre-seed round led by xista science ventures, with participation from 2bX, Heartfelt, Antler, and P3A Ventures. (press release)

• Founded by Angelos, Spanish in Vienna, turned founder after heading the City Intelligence Lab for four years.

• This is the second AEC SAAS startup that was pre-seeded in Europe within a week (after Rayon) looking to disrupt a huge yet still conservative industry - if you have architect friends just have a beer with them and ask about their work (I did).

• Infrared City uses a bit of machine learning as well, with a combination of open data and their own, on top of which they built the algo for running masterplan climate simulation predictions.

• The product is not commercially available yet but already in use in real world urban design projects, taught in high ranking universities and integrated into other software solutions.

• That made for a hefty yet hard to raise (8/10) pre-seed round.

• Why it was hard + what investors didn’t get about the startup + more here.

🇳🇱 ​Tidalflow​, developing a plugin lifecycle platform providing software firms the opportunity to develop, test, monitor and monetise an instance of their product to be compatible with LLMs, raised $1.7 million in a pre-seed round co-led by Gradient Ventures and Dig Ventures, joined by Antler. (press release)

• Speaking of Euro startups doing interesting stuff in the AI space, this is one of them - incubated at Antler over the summer, raised a big pre-seed round right after from tier 1 VCs.

• Tidalflow does a smarter LLM wrapper sold as an utility SAAS and betting on the ecosystem’s growth, as opposed to the ever-popping startups building yet another library, with a specific play in the value chain that can produce significant economic rents if they execute correctly - it is an exciting strategy path.

• That is to say - it is not only their insight interesting per se, but also the business upside potential, since on top of a typical SAAS play they can monetise by creating an App Store-like marketplace for the plugins they accommodate for testing.

• Still early on but great VC catch - the TC coverage makes for a good try to explain what’s behind their generic PR.

🇬🇧 Lopay​, provider of a point-of-service payment app and terminal to SMBs, raised a $7.4 million seed round from Backed VC, Portag3, and The Venture Collective. (Sky News)

🇨🇭​Lakera​, developing a tool that helps companies find performance vulnerabilities in computer vision systems, and then uses cutting-edge algorithms to reduce failure rates, raised $10 million seed with Redalpine, Fly Ventures and Inovia. (Techcrunch)​

🇸🇪 ​Humly​, operating a digital marketplace in the supply teaching industry, raised $13 million in a growth round backed by Alfvén & Didrikson and Viking Venture. (press release)

👇️ 👇️ 👇️ 

We cover (much) more early stage intel from the European long tail every week over at Monday CET. Sign up now, you can try it for free!

State of the AI

The 2023 State of the AI report is out - obligatory reading.

Other stories

🇩🇪 Atlassian acquired the video messaging platform Loom for $975 million.

• that is 25 million shy of an unicorn exit, btw, for unicorn propagandists out there 😃 

• this is interesting for many reasons, with the European angle of Point Nine Capital being an investor in the $3.2 million seed round co-led with General Catalyst in 2017.

• the Germans live up to being consistently one of the better investors from Europe over the years - Loom was solely an American business that raised over $200 million from Sequoia, Kleiner Perkins, Andreessen Horowitz.

• Also notable, the deal was done at a big discount to Loom's series C round in May 2021, closed at $1.53 billion post money. That was just paper money, of course, now times are bad for VCs and cash is king (Atlassian pays with cash on hand btw), liquidity events are a rarity and definitely make VCs happy and LPs even happier.

• And this is a good cash return btw, in spite of an-almost-unicorn valuation that’s subpar for VCs ambitions, less so for series C investors such as Andreessen, which just got their money back. However, the exit multiples estimates are way below the exuberant 100x sales multiples paid for by some VCs during ZIRP.

  • Seed 1: 64x ($40M on $622K)

  • Seed 2: 25x ($78M on $3.1M) -

  • Series A: 12.5x ($134M on $10.7M)

  • Series B: 4.5x ($125M on $28.1M)

  • Series B+: 2.3x ($55M on $23.5M)

  • Series C: 1.0x* ($130M on $130M)

  • founders cashed in $300M

🇬🇧 Microsoft’s $69 billion acquisition of Activision Blizzard was just approved by the UK competition watchdog.

• It looks like a curious compromise done by the Brits, who just a few months ago were all feisty and protective of the British customers and local competition. All that is gone now.

• Here’s what I wrote when the Brits denied the deal 6 months ago:

  The deal appears to have become more political than market-related and the current outcome will deter the whole activity of the tech M&A market, already weak and illiquid - there’s no reason to build business and relations in London if the market is bad for business, the logical step is to flee to the US. 

• Political indeed - is this turn around just a typical saving-face British kind of pivot maybe because the EU (and everybody else) already green-lit the deal?

• Is this maybe aligned to the British desperation aggressive PR of playing nice with American tech because, well, they’re all alone with no allies in the world, they need the Americans badly and keep burning bridges on doing business with the EU even almost 4 years after Brexit?

• Is this something Rishi Sunak agreed to have fixed behind closed doors on his Silicon Valley tour from spring?

• It’s all weekend fun speculation on my side, of course, it can be good faith as well and it doesn’t really matter at the end of the day, kudos to Microsoft’s team for pulling it through and getting approval from 16 different governments.

Related Since Satya Nadella became CEO at Microsoft in 2014:

• Microsoft did 326 M&A deals worth over $170 billion in total

• Apple did 17 M&A deals worth $6B in total, plus 50 very small deals each worth a few million.

🇷🇺 Target Global was sued mainly because they’re Russians - well, everybody in the market knows about Target Global being run by Russians who started with Russian oligarch money, but I would have expected that by now all the legal loopholes to be closed and both the back and the front office to look clean and respectable. Here’s a 2022 review of the Russian investors in Europe and how they started.

🇩🇰 Christian Lanng, Tradeshift’s co-founder and (now former) CEO, was fired last month as he is being accused of sexual assault by the company.

• He denied the accusations and he’s likely to do more than PR about it, but sadly this looks bad.

• Lanng also started a new thing this year, AI stuff, that already got pre-seed funding from Moonfire and E14.

🇪🇺 More on the current situation:

• Are you able to preserve your value creation potential?

• Buyers want to consolidate their SAAS vendors, not enter into new relationships.

• Newly-landed American investor in the UK is bullish on the local market.

• Dealroom put out their findings about what they see in Europe, painting a rosy picture that in reality is a depressed market where everybody struggles. It reminded me of a Radio Erevan joke: everything is fantastic but we are back to the 2019 levels.

• The EIF, on the other hand, is more sobering via a VC survey that says the European VCs’ market sentiment is at record low. (sample size: 472 investors, mostly early stage)

• Blackstone had 62,000 people apply for 167 analyst jobs.

• JP Morgan wants to fill the void left by SVB in Silicon Valley.

• OpenAI CEO Sam Altman told staff this week that OpenAI is generating more than $100 million per month in revenue, a 30% uptick from the figures it was seeing this summer.

• Stanford University’s $40.9 billion investment fund returned 4.4% during the 12 months ending June 30, topping results at other elite colleges despite headwinds from venture capital and private equity.

• AI is expensive - Microsoft is losing between $20 and $80 per user per month on its GitHub Copilot AI assistant for programmers because of the servers and pricey chips required to power the service.

• Investing in energy is not a bad bet:

  In less than ten years each American will have a dozen or more AI agents constantly running around the net with AI that is 10x more powerful. Huge increase in per capita consumption of electricity. Add the consumption of electricity by EV's and we will get a surprising nexus that will make household electricity consumption estimate obsolete.

Sundaying

🇪🇺 In other politicians-playing-with-tech-bois news, monsieur Thierry Breton poked Elon Musk, accusing Twitter of being a platform encouraging the Israel-Hamas war disinformation.

• He even went as far as announcing that he will start using Twitter’s competition.

• Appearances and jokes aside, Breton also used the formal way and he is right to do so as there is some serious substance there, Musk altered Twitter’s algo and the platform has deteriorated in many ways since he’s in charge, and a higher level of manipulation is one of the consequences.

🇩🇪 German fusion startup Marvel Fusion has chosen to build its laser fusion facility in the US because it was a disadvantage to be based in Germany.

🇪🇺 The European laissez-faire at its best*:

A majority of Europeans want government restrictions on artificial intelligence to mitigate the impacts of the technology on job security - they want governments to introduce rules to safeguard jobs from the rising level of automation being brought about by AI.

*sample size: 3000 Europeans, so it might as well be not substantiated at all.

🇬🇧 Here’s what you need to do for a £75k pay for working in AI in the UK government:

• maintain the UK’s role as a global leader on AI

• provide AI thought leadership on international AI landscape

• ensure the domestic UK AI policy is aligned to the international agenda

• influence and manage engagement with the US, EU, G7, OECD on AI

I can think of a few folks posing like this by posting daily on Linkedin for free. There’s a catch in the ad though - the candidate needs to have at least 10 years AI experience. For £75k.

On a serious note, here’s how the money works for top jobs in AI:

💔 Booking com's chief marketing officer Arjan Dijk characterized company's relationship with Google as a benevolent dictatorship.

🇸🇪 The Swedish way: 15 months after a $6 billion acquisition write off half of the goodwill.

💲 The Eurostar train will finally have competition from 2025 - today a Paris-London trip costs 2-3X than taking an airplane, which is ridiculous.

🥕 You think only Europe and the UK are in a bad political and economic shape? The US looks even worse.

Related POV: no one cares what Europe thinks.

💊 Some tech workers, where many roles are mentally demanding and physically sedentary, have turned to a broad class of oral and injectable drugs, treatments, and supplements to improve their health and appearance.

 📈 100 top people in AI.

👁️‍🗨️ Motivational: if we die, we die.

🤘 Let’s end on a positive note with a 20 years old evergreen: the end of the world.

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