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News of the week is General Catalyst’s deeper forray into Europe by merging its European ops with the German VC La Famiglia. It is not the first time an American VC does that - as recent as last year Motive Partners acquired embedded capital, also from Germany. But it makes for an interesting strategic play - a few quick notes:

• The video is better than the PR words, if you want to read the tea leaves. Key words: resilience = survival, ambition = conquering.

• Americans are long on Europe. It’s a trend that’s been compounding lately, based on a combination of at least a few factors:

  • sizeable yet fragmented market that has potential to produce pockets of value. Fragmentation is particularly interesting because the local knowledge still makes for a lot of information asymmetry in multiple segments which in turn can lead to a higher probability of finding diamonds in the roughs.

  • great talent - yes, American universities are top in the world, but the overall average education in Europe is much better than the averages in the US are and that makes for a good pool of talent.

  • the startup world on the continent is on the rise. 20 years ago when I did my first tech startup it was an exotic thing, 10 years ago when I moved to Sweden and did a startup, they’d look at me like I was a crazy person because i didn’t have a job with a safety net. That’s changed now little by little, the startup trend is upward and frankly that’s the only way for progress for a continent with a lot of socio-economic problems. Macron is a good example for getting it, and a visionary compared to its peers in this respect.

  • a good lifestyle - Europe is a good place to live and to do business in, in spite of all the idiots leading it and, again, of the fragmented legislation and multi-culturality that can make for unexpected expensive overheads.

• The deal also signals the inability to hire local talent on the fly - establishing a VC business in a new market is very costly and time consuming, we have talked about this in detail.

• A great knowledge transfer effect. In spite of the local ego, Europeans on average are not good at this because it’s an old money establishment - consultants managing wealth produced by family-run organisations. The Americans have better practices, experience and tradition in being both professional investors and company builders, Europeans are still at the ABC.

• Alas, even though it’s costly, this acquisition gives the Americans instant access to the local market share, resources and intel - you gotta give some to get some, and compared to Europeans, Americans are very pragmatic at understanding this kind of strategic opportunities.

• It’s also a double-down strategic move compared to what other American big boys are doing in Europe - GC opened its office in London in 2021 at about the same time with Sequoia and Lightspeed. Since 2021:

  • GC did about 50 deals 

  • Lightspeed did about 40 deals

  • Sequoia did about 60 deals

• Fwiw, Sequoia also runs an accelerator program and has a bunch of scouts on the payroll. Now GC got itself a fully-fledged seed operation with later stage ambitions, which later stage has a solid American counterpart for leading the way to liquidity - no sane investor with unicorn ambitions would expect its exits to come from Europe.

• Size matters in this business. Strength too.

Top intel

Up and coming

• Startups raising consecutive series - 2023

• Overpriced Euro seed deals - link

Verticals

• AI deals in Q3 - link

• Payment orchestration SAAS - link

• Heat pumps startups - link

• Fashion startups - link

Investors cheat sheets

• Who invested in AI - link

• Investors who slowed down this year - link

• Most active investors in Europe - link

• American investors in Europe - who are they 

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

Deal highlights from this week 

🇩🇰 ​Riact​, building a real-time development platform for creators and users of flexible robot applications, raised seed from Butterfly Ventures, Navigare Ventures and Mølgaard Capital.

🇬🇧 ​Captur AI​, developing an AI image data platform providing image quality detection and workflow specific detection solutions, raised $2.7 million seed in a round led by Sure Valley Ventures.

🇬🇷 ​Lambda Automata​, developing autonomous systems tailored for addressing national security challenges in the EU and its allies, announced a $6 million seed round led by Air Street Capital, joined by Marathon Venture Capital and HCVC.

🇮🇹 ​Aindo​, specializing in applying AI and Machine Learning to areas such as banking, biomedicine, telematics and life-cycle analysis, raised $6.4 million Series A funding round led by United Ventures, joined by Vertis SGR.

🇸🇪 ​Aira​, manufacturing and selling consumer heat pumps, announced raising $90 million in an equity round co-led by Kinnevik and Creades.

​👇️ 👇️ 👇️ 

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!

Lateral thinking

🤓 A very down-to-earth big picture analysis of the VC business. link 

🤘 Jyri Engeström on differences between Valley and non-Valley entrepreneurs.

💲 Marc Andreessen put out another manifesto - which is just marketing materials, supporting bullish evidence for his portfolio companies. He did the same last year with crypto, which he called web3.

🥕 What does it take to raise capital, in SAAS, in 2023 - the funding napkin.

💊 Second time founder anxiety.

📈 If you’re into energy business this is a good report:

• Global electricity use needs to triple in 10 years. 20% growth per year.

• The electrical grid needs to add or refurbish 50 million miles of lines. Equal to the existing global grid today.

Other stories

🇳🇴 Adevinta has in the works Europe’s largest direct lending deal at €4.5 billion for a take-private bid - in case you missed it, last month the Norwegians received a takeover proposal from a consortium led by Permira and Blackstone at a $11 billion valuation.

🇸🇪 An interesting move, given the IPO markets dysfunction:

• EQT Group is drawing up plans to hold private stock sales for its portfolio companies because public markets have proven unreliable to exit investments.

• EQT chief executive Christian Sinding said private auctions among its 1,100 limited partners could provide a novel way for its backers to monetise their illiquid holdings without the need to sell shares in initial public offerings.

🇪🇺 The EU forcing Google to offer Android users a choice in search engines has given a big boost to Russia-based Yandex, which is spreading Kremlin propaganda about the invasion of Ukraine.

• Yandex is domiciled in the Netherlands and was traded on the Nasdaq until its shares were frozen after the invasion. Its attempts to remain free of government influence became untenable amid the Kremlin’s crackdown on online information after the invasion

🇪🇺 Is this a political pivot or a loophole - Amazon and Twitter may not have to pay enforcement fees related to the EU’s Digital Services Act, since they recorded losses in the European market.

• The EU has adjusted the charges to ensure that companies don’t pay a fee above 0.05% of their profit in 2022, meaning that companies that reported a loss don’t have to pay even if they have a large user base or represent a greater regulatory burden.

• This methodology results in Twitter and Amazon not contributing a penny, while Alphabet and Meta together would pay about €31 million - almost three-quarters of the total.

🇪🇺 A new day, a new challenge - the European Union is planning to regulate generative AI using a three-tiered approach that categorizes AI into three foundational models.

• The first category would include all foundation models.

• A second tier of “very capable” systems would be distinguished by the amount of computing power employed to train their large language models — the algorithms that use massive data sets to develop AI capabilities. Those models could “go beyond the current state of the art and may not yet be fully understood,” according to the proposal.

• Finally, a third category known as general purpose AI systems at scale would include the most popular AI tools and would be measured by the total number of users.

🇬🇧 Mustafa Suleyman (co-founder of Inflection and DeepMind) and ex-Google CEO Eric Schmidt wrote an op-ed in FT saying that there needs to be an AI equivalent of the Intergovernmental Panel on Climate Change to assess risks and collect data.

😀 Lawyers working hard for their fees - at the Google antitrust trial, an executive argued that its massive success in search derives from innovation by its employees, not monopoly status.

🇨🇳 Timmie working on fixing the China sales issue as he engaged in win-win development with government reps - Tim Cook won support from China’s commerce minister Wang Wentao after a meeting in Beijing, amid slow iPhone sales and fear that Apple product use by government employees could be limited in the country. It’s just talks until it’s on the paper.

💪🏼 Universal Music Group sued Anthropic for distributing song lyrics, alleging that its Claude chatbot unlawfully copies and disseminates copyrighted works including song lyrics.

• Meanwhile, YouTube is reportedly developing an AI tool for creators that will let them use the voice of famous musicians, and is seeking permission from music companies to let them release it.

🇷🇺 Russian oligarch facing adversity now that money is not enough to buy respectability in London:

• Russian billionaire Mikhail Fridman, who quit London this month after complaining that it was impossible to live in the UK under sanctions, is still fighting authorities in court.

• Lawyers for the sanctioned tycoon said that government officials have refused additional licenses for management payments for his London mansion and funds for a staff driver that would have left Fridman reliant on public transport to travel.

• Fridman moved to Israel earlier in October just before the attack by Hamas militants on the country and was then forced to flee to Moscow. His lawyers said Tuesday that he does intend to return to the UK.

👁️‍🗨️ PwC succession twist followed debate on management style.

🎓 Companies are dialing back or delaying hiring of MBAs as tech giants made big job cuts, consulting firms put start dates on hold and deal making slowed in finance.

🏭 The San Francisco city plans to spend $4 million to rehab its image. Will it work?

🤘 Nick Cave letter to MTV circa 1996 - my muse is not a horse.

💔 Questioning war.

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