Hello from a grey and drizzly London morning, typical for November I am told.

Welcome to the new people on the list! This weekend the entire tech startup community from Silicon Valley was glued to social media trying to figure out what the heck happens at OpenAI. We’ll have a look at it in this edition, alongside Euro intel and other startups and investors stories.

Enjoy,
Dragos

Top intel

Deal highlights from this week 

🇫🇷 ​Jimini​, developing an AI tool used to assist lawyers with time-consuming and repetitive tasks, raised $2 million seed led by Polytechnique Ventures and joined by J12 Ventures, Galion, Evolem, Zebox Ventures and Better Angle.

🇫🇷 ​Ida​, doing AI-based inventory SAAS for retailers, raised a $2.9 million seed round from Frst, Daphni, Motier Ventures and Kima Ventures.

🇧🇪 ​Vaultspeed​, doing SAAS used as data warehouse automation solutions, raised $16 million in Series A round led by Octopus Ventures, joined by Fortino Capital, PMV, and BNP Paribas Fortis Private Equity.

🇳🇱 ​Silverflow​, operating a cloud-based processing platform that provides payment-providers with access to card networks, raised a $16 million round with Global Paytech Ventures, Picus Capital, Coatue, Crane Venture Partners, Inkef, and angel investors.

More deals on tomorrow’s intel, together with:

• VCs hiring in Europe (I know, right?)

• Late stage deals by tier 1 dealers

• Investors aggregating open banking assets

• European AI raising seed right outta San Francisco

• … and much more

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Cheat sheets

• Angel deals in Q3 - link

• AI deals in Q3 - link

• Investors not doing business this year - link

• Startups that raised two rounds this year - link

• Overpriced Euro seed deals - link

• Startup radar - link (free 24h)

Signals

📉 Online delivery

• Delivery Hero’s Q3 market numbers - GMV: €11.4 billion, revenue €2.7 billion.

• This summer Getir raised at a post-money valuation of $2.5 billion. It also bought for scraps a New York-based op this month.

• Oda and Mathem merged to create a more cost efficient op. Both struggling at breakeven, still a Nordic business with Nordic only investors - fwiw, none of them was able to build business outside Norway/Sweden (Oda tried unsuccessfully Finland and Germany)

• I still believe that Wolt’s €7 billion price tag was a bargain and what’s happening now in the market is just a moving picture that doesn’t reflect the long term value creation process. Fundamentals matter, Wolt is doing things the right way, and besides, Doordash’s Q3 numbers are also good, but sadly don’t evidence the Euro ops.

• Also interesting to note, Delivery Hero bought 8% of Gorillas at $3 billion, which Gorilla was acquired by Getir for $1.2 billion a year ago.

• Other local plays that keep trying to contribute with different variations are still getting investors checks - 1, 2.

📉 Wise’s numbers for the half-year ended on Sept. 30, in the meantime:

• pre-tax profit: £194.3 million, 3X yoy.

• revenue £498.2 million, up 25% in the full-year, and including interest, it's up 58%.

• the customer base up 30% YoY too - 30% European, 20% UK, 50% US and the rest

• It also said that it was pausing new business account signups in Europe due to high demand combined with higher compliance requirements (i.e. Russians trying to sneak in payments via the system).

• Long Wise, it’s one of the good European cookies, doing things fundamentally right AND delivering 40% growth revenue + EBITDA while all banks trade 70% below book value.

Market talk

🇪🇺 Oh Europe - On one hand, European startups and investors altogether have a liquidity problem. On the other politicians are doing this kind of stuff - it’s like regulators are operating in a vacuum, without being aware of the economic realities.

Markets are what they are, LSE doesn’t even make money out of IPO events anymore - if M&A is also not working out, where is the closing liquidity loop for all those investors funding the presumable innovation nurtured in Europe? Without it, there’s not a real functional market - will they all take their startups and move to the States, like gold diggers did a hundred years ago?

It is a rhetorical question without clear answers in the short term, and a structural problem against all the efforts Europeans are doing in order to be tech relevant in the world. It seems like an atitude problem - part of it comes from an inherited inertia of a continent where big business was made, and still is to some certain extent, by family-owned groups and circles used to influence a favourable environment via politicians. A very top down approach, meaning that the free market is still a concept that needs to be grasped on this side of the Atlantic.

Moreover, also probably because of the historic legacy, Europe seems all ego and little substance when it comes to dealing with serious tech business - I mean, even the Brits finally got it and pivoted hard last minute by green lighting the Microsoft/Activision merger, just to show they mean business with Silicon Valley. The EU in the meantime is led by politicians happy that Elon liked them on Twitter.

Btw, the UK will refrain from regulating AI in the short term. Will the EU follow path and try to listen more, or will it remain the bull in the china shop?

Here’s an idle thought over my morning coffee - when boasting how much overhead European regulators put onto tech market contributors, perhaps it would be useful if the EU also lists its own contributions to the market i.e. new hardware, software, protocols and services. Because here’s the hard truth - in spite of the $$ it put on the table, which has increased considerably in the last decade, net-net, the EU has little to show for it, is hardly a value creator in the market and it doesn’t really seem aware of it. The value is validated by the market, and Europe doesn’t really have a viable one, nor seems interested in creating the premises for one.

🇪🇺 Latest on EU’s trying to get a grip on the market:

• Apple dealt blow at top EU court over €14.3 billion tax bill in Ireland.

• Italy's Finance Police seized $835 million in funds from Airbnb for failing to pay withholding taxes on almost $4 billion in bookings.

🇩🇪 Germany’s doing a good thing as it’s passed new legislation reforming stock options schemes this week and correcting an European-wide anomaly of employees getting punished for joining a startup.

• ICYMI - in Europe most accounting systems force employees pay every year for unrealized gains from stock options granted by their employers as part of a compensation package.

• Under the new rules, taxes on employees' stock options will be deferred until the point of sale.

• The threshold for companies that can take advantage of the new law will be raised so that firms with up to 1,000 employees and a maximum of €100 million of annual revenue can distribute shares to staff.

• Gotta acknowledge Index Venture’s work and Martin Mignot, which have been pushing for these changes across Europe for years. Hopefully for the startup ecosystem, Germany will be followed by other countries.

🇫🇷 The boss of Renault has urged European investors to back its new electric vehicle arm set to float next year.

• Tesla would not be there without the support of the US financial market. Many Chinese [carmakers] would not be there without the support of the government or the financial markets.

• My job is to defend European industry… If you don’t like that, go to China or the US.

🇷🇴 How an Eastern European solo GP venture fund raised $20 million 

• Good story reflecting that building a business and raising money for it is super hard, even though the said business is a VC shop - don’t understimate Eastern Europeans, they’re scrappy, hungry and ambitious.

🗣️ Word on the street - link

• We are seeing a massive realignment of the tech venture market. Happened multiple times before, and the VCs that will survive are the ones with branding, connections, aligned LPs - which is to say that most will not.

👁️‍🗨️ A look at the current CFOs at the top 10 most valuable private technology companies and if this could signal an IPO in 2024.

🇪🇺 Long/Short on EU - large majority of Chinese people think the EU will fall apart in the next 20 years. They’re not alone.

The Open AI situation

If you stayed away from the news this weekend, late Friday evening (noon on the West coast) it was announced that Sam Altman, OpenAI’s CEO, was fired by its board. Some quick pointers:

• Shortly after, the board president Greg Brockman resigned - he was an initial co-founder running the show full time, while other co founders such as Sam Altman and Elon Musk were keeping their day jobs.

• By Friday evening, more senior employees resigned as well.

• It looks like a coup whereas the business guys were overthrown by the tech founders led by chief scientist Ilya Sutskever, also a (late) co founder recruited by Elon Musk at the cost of Musk's friendship with Larry Page of Google.

• Ilya’s beef is with the direction of the company - more tech-focused aligned to the mission of creating safe AI (see a thinking sample here) vs rapid business development. One shouldn’t exclude the other but it seems like the kind of situation where ego trumps rationale leading to unexpected consequences - nor Sam Altman neither other folks did see this coming.

• Story goes that the straw that broke the camel’s back was that post dev day from last week the usage numbers have spiked and they had to pause new subs meaning the need of more resources i.e servers for the research team. The need for more capital means either raising external investments or a different business model charging in advance users via credits → the OpenAI customers received an email with this model change right after it was announced that Sam was fired, so probably Sam wanted to raise while Ilya wanted to finance it from customers. Sam was fired over it.

• That may or may be not true, just like the background gossip that Ilya was actually jealous of Sam being in the spotlight more than he was - Ilya is the engineer who conceived a historic piece of technology everybody talks about, it’s easy to see his ego being hurt by not being the name associated to his baby. That was Sam’s.

• Beyond that, it is hard to understand how the community reacts to this kind of behaviour. My guess is that Ilya will not have many friends moving forward.

• Also, none of the investors were announced prior to that. They include Microsoft, Khosla Ventures, a16z, Founders Fund, Sequoia, Thrive Cap… big guns. All of them in the dark.

• None was in the board anyways since the OpenAI structure is run by a non-profit company, see the chart below.

• For a company of this magnitude, it is a rather odd and unexpected development, albeit technical founder vs business founder conflicts are among the more frequent ones in the startup world, usually leading to break ups.

• However, in the big picture, Sam Altman managed to go from 0 to 100M MAUs in just two months (a record!), and has created a super valuable ecosystem over night and accordingly tremendous shareholder value - he was actually in discussions to raise more money at 90 billion valuation, one of the more valuable startups Silicon Valley has produced in a long, long time.

• Also notably, from the outside Sam looks like an outstanding person, a rare breed of a startup guy able to comprehend and execute to the detail strategy technology AND technology strategy. There’s not too many people in the world capable do this at high level - both the tech development of Open AI and its go to market execution are textbook examples that I am quite sure will be taught in business school.

• Which begs the question what will happen next? The above mentioned big guns will not easily let go such a golden egg in the hands of someone who is a wild card, and will probably try to reset the board’s position, which as is doesn’t optimize for the shareholders value creation process, the tenet of capitalism and Silicon Valley for that matter. Not sure what they legally can do, logic says that they will try to oust the existing board/management and replace with a professional one. Or maybe bring Sam back - talking some sense to the board is actually what I would bet investors will first try to do.

  Later edit: It looks like Ilya already realised his ego was too big after all.

• Also food for thought - if Sam doesn’t return, what’s his next move? A new startup competing with OpenAI? Other startup? A fund, maybe - he is said to have been helping his brother raise one these days. Maybe run for president?

• I guess we will see it in the next few days - everything is in flux and the stakes are super high.

• It is also an interesting precedent for the Silicon Valley world as, from what I gather, the entire investors community is surprised by this development, to say the least - strong-principled ethics towards tech purity are in conflict with the fundamentals of a business creation process.

• One final note, Altman’s demise is also interesting as it kind of levels the strategy field in the world of LLM development - tech folks usually forget this, it’s not the best tech that wins the market, but the best strategy and Sam and his business execution put OpenAI in a dominant position that gave little room to manouver to other VC-backed developers. Unless he returns, this is weakening considerably the position and road ahead for OpenAI - an unexpected situation that the others could probably take advantage of, including open source players, whose works is already validated by lobby-backed regulation efforts. And that includes Mistral from France too, along its American investors.

Mo’ Sundaying

🇫🇷 Is France the next open-source AI capital? + Mistral AI’s position on the AI Act. TL;DR - what EU is trying to do ain’t looking good.

🤔 Thrasio, the Amazon FBA aggregator that was valued at $10 billion just two years ago, went bankrupt - here’s why.

👀 IRL's co-founders sue SoftBank and two VCs, accusing them of deliberately destroying the Gen Z app and creating an "outrageous lie" over inflated user counts.

🤘 Coatue’s literature joining the libraries produced by countless other investors trying to figure out what AI is.

🖖🏻 Microsoft rebrands Bing Chat to Copilot, to better compete with ChatGPT.

🥕 Google pays Apple a 36% cut of search ad revenue that comes from Safari - distribution costs.

🇬🇧 Can Barclays move beyond scandal and stagnation?

🤔 Lab-grown meat is up to 25 times worse for the environment than beef.

💲 Generative AI still represents less than 1% of cloud spend by surveyed enterprises, including just an 8% increase in 2023 - that’s from a sample of 450 enterprise executives across the U.S. and Europe

🇸🇪 A week ago, Swedish unions went on strike with the intention of blocking Tesla cars entering Sweden.

• Didn’t work - this week, Tesla cars have been unloaded in Denmark and then driven across the Öresund Bridge to Sweden with non-Swedish carriers. 

• The Swedish unions are now trying to persuade the Danish unions to block the transports.

• Looks like it’s a long shot as neither employees nor employer wants a collective agreement in this case, which is enforced by the Saltsjöbadsandan, a Swedish labour market treaty that hasn’t been changed since 1976.

🤘 The number of ultra expensive restaurants in London is growing: there are now 54 venues in London where diners can expect to spend £150 a head to eat, up by almost half in a year.

🇫🇷 The new Renault Twingo looks tres cool - $17k, available in 2026.

🇯🇵 Uniqlo founder wants to stir Japan's economy:

• Japan is not an advanced nation at all, because we have been in a dormant state for 30 years. In Beijing and Shanghai, people are getting two and three times the compensation of equivalent positions in Japan.

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