Hello-hello,
Happy New Year! Back from the off time, full of energy and many plans ahead, hope everyone is rested and healthy, and at least as positive as I am for what’s to come in 2024.
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Top intel
Deal highlights from this week
🇩🇰 Tempty Foods, producing the next generation alternatives to tofu and meat based on mycoprotein, raised pre-seed funding from angel investors in Copenhagen.
🇬🇧 Robin AI, developer of an AI tool used as a Microsoft Word add-in enabling users to search contract repositories, raised $26 million series B led by Temasek, joined by Quantum Light, Plural Platform and AFG Partners.
🇫🇷 Nabla, developing smart software tools using AI to help doctors and medical staff with preventive and holistic care, raised $24 million series B led by Cathay Innovation, joined by Zebox Ventures.
More early stage deals on tomorrow’s intel, including:
🇬🇧 AI for industrial R&D design
🇦🇹 marketplace for material procurement and logistics services for construction companies
🇸🇪 data energy centers operator
and
American investors leaving from London
new funds and new gigs for investors
VC shops getting acquired, others closing down
and more.
Subscribe now to get it in your inbox tomorrow AM.
Market talk
🇬🇧 HSBC is giving it another go at trying to compete at the edge and launched Zing, an FX payment transfer app designed to rival the likes of Revolut and Wise.
keep in mind that HSBC is a big traditional established bank, not famous for providing innovative products or being loved by customers. It’s just a big boring bank as greedy as the industry standards allow it to in order to build value for their shareholders.
however, it is worth remembering that HSBC also bought SVB UK for £1, after a lot of drama, last year. Together with Zing, that’s yet another strategic move in a strategic segment in a super fragmented European market that badly needs tailored banking for startups.
those plays show ambition and a paint of fresh thinking - HSBC threw a lot of money at Zing, including for hiring senior people poached from the likes of Revolut, Wise and Monzo.
the service is available for everybody, including non-HSBC customers. Running multiple money transfer services can present complicated costs for average joes - they do have more than a bank account though, subject to where money’s coming from and where they spend it. That is why you need to address a very specific user behavior in order to convert new customers, more complicated than your average GTM consumer marketing.
conventional wisdom says startups should go after a small market and then gradually expand, which I doubt it’s going to be HSBC’s approach - on that note, is Zing looking to steal users from itself (HSBC), the competition or to onboard new ones? The product already has a wallet and related banking features with an EMI license, probably going towards building a super app, where the whole market is going.
fwiw there’s more than 600 companies operating as EMIs and providing all sorts of wallet app services in Europe these days. The market is wide open, accommodating multiple plays since it is in its first innovation innings, it is immense and very fragmented - in an Europe of 400 million+ banking souls, Revolut has some 24 million customers and Wise 16 million. Plenty of business to be made without getting at each others throat - besides, the money management job is still mainly done by banks operating under 20st century business assumptions, charging obscene margins from lockedin clients, with most of their fees hidden.
HSBC, for example, charges their own customers 3.7% in hidden FX markups for "free" Euro transfers - fees that can get as high as 700% than the ones from competition. You read that right - why would you work with and trust a company that treats customers this way? Lock-in reasons and a safety feeling of a bank too big to fail that justifies paying up for being ripped off. All traditional banks behave the same.
ironically, those are also the main attributes Zing is claiming about itself - security and no hidden fees - ‘we’re everything HSBC is not’ kind of thing. That’s good marketing though.
it is also a very hairy, regulated space, which makes for expensive barriers to entry and big operating overheads translating onto clients sometimes - I am seeing this kind of bad cases for a best in class provider quite often now.
🤔 Gil sez:
We're entering a very tough era for tech entrepreneurship, company building and venture capital.
Here’s a contrarian take, which will probably upset Gil, again.
No, we’re not - we are living in a golden era full of opportunities, the premises for tech entrepreneurship and startups building have never been better. The markets are as fragmented as ever with a lot of disruptive plays, there’s many industries still stuck in past centuries (see banks above) as well as blue oceans to explore, the technology is much cheaper making for lower barrier entries, there’s more senior people in their 30s and 40s switching from a lazy corporate lifestyle to the startup world, and a big independence wave from the tech-savvy kids in their 20s. Yes, the money is not as cheap today and the macro is not ideal, but also the costs for taking risks are smaller than 5-10-15 years ago - and they keep going down. The basics are simple - been in this world for 20 years now and have never seen such a high level of energy, positivity and can do attitudes.
The startups eligible to raise VC in order to grow fast for returning 10-100X to investors are riding the same growing wave. But the money competing for this small subset is much more than ever and this is where Gil has a point - it is tougher on the other side of the market, where money managers chase tech startups with the potential of growing to $1bn+ valuations in a 5-8 years span. It’s become a maturing sector with declining returns - it’s not only the bad side of the cycle, but also there’s more investors than ever in a hyper competitive environment, where it can be more difficult to build and exploit information asymmetries for sourcing, and making a difference post-acquisition. It is yet another industry facing major challenges ahead, which can be problems or opportunities - we have talked about this last month.
The problem of investors becoming antsy and overly reactive because of an adverse capital market shouldn’t become the problem of startups executing against a business plan - that happens only if they have made the said business plan dependent on the VCs. Good CEOs don’t do that - startup people who actually did, have learnt first hand many ZIRP lessons because of it: fundamentals are important and there’s no shortcuts for creating meaningful business, including VC funding which is rather a way to buy time if you’re doing the right things. You need patience, time and discipline, it’s like when you’re trying to live a healthy life - it will not work without good habits, consistency and good values, no matter what various advisors or internet gurus will tell you. Investors money is just a mean to an end and in excess it can be like sugar - if you don’t control its consumption, it will fuck you up.
And I am positive and excited as I see it first hand - there’s more and more mature founders understanding that building a solid and sustainable business cannot be done over night and via shortcuts - it takes time, endless iterations and failures. And building healthy ops translates on being picky on financing options too - it’s not only VCs having the leverage to choose just because they have the dough, but also founders having higher standards about their money partner.
Also notable
🇫🇷 Carrefour pulled Pepsi products in four EU countries over price hike - stores in France, Italy, Spain and Belgium will no longer stock PepsiCo drinks, Lay’s and Doritos crisps and Quaker cereals.
🇸🇪 IKEA is ramping up its urban concept stores efforts aiming to create a smaller version of its giant suburban stores for downtown consumers.
The Swedes have to date 373 big-box stores and has opened 26 city stores in San Francisco, Paris, Stockholm and Copenhagen.
🇸🇪 Tesla Model Y becomes Sweden’s best-selling car despite ongoing strike - everything is in limbo still, the strike rallied 12 other unions in the Nordics prepared for a long term conflict.
🇩🇰 Novo Nordisk to open AI research hub in King’s Cross, London. They join the Brits from GSK who did exactly the same 4 years ago.
🗣️ Here’s a new and unexpected revenue driver for media publishers:
OpenAI is reportedly offering news publishers between $1 million and $5 million annually to license news articles for training.
the very reasons for which Google accepted to pay money to media companies - it’s been doing this for decades in order to train its advertising tech, claiming ‘free content distribution’ in exchange.
question is what will happen when the media outlets will start infusing their assets with AI-generated content - that’s already happening here and there and content written by a human will become a high-priced product in the next decade or so.
💲 TikTok’s cut from merchants selling via its platform is 8% now, up from 2% plus 30 cents per transaction fee.
TikTok is expected to grow the size of its US e-commerce business tenfold to as much as $17.5 billion in 2024. That’s not chump money for a social network.
🇭🇰 Hong Kong used to be cool, not it is not - the new IPO listings in the city dropped to the lowest total in more than 20 years in 2023.
🤓 Microsoft is muscling its distribution power - new PCs and laptops from Microsoft partners will have a Copilot key, the first big change to the Windows keyboard layout in almost 30 years.
Mo’ Sundaying
🤔 Shot: Investors have (1) a ton of cash from their investors to buy new companies and (2) a desperate need to sell their existing companies and return cash to their investors.
Chaser: Investors buy from themselves via a continuation fund.
🎅 LPs are increasingly questioning how fund managers account for the valuations of the companies they have already backed, especially when those marks appear high.
🐓 How to be a better VC in 2024.
✍🏻 The state of newsletters in 2023.
🚀 If you're working on tech for drug discovery, you need to own the molecule to make the big bucks.
🇪🇺 Europe loves entrepreneurs, part 23272: did you know that bankrupt founders are not allowed to start a new business in Luxembourg?
🇺🇸 The American way of doing business - owner who sold a business, puts aside $35 million as a bonus for employees. You will never see this kind of thing in Europe.
🤭 Also a very American thing - lawsuit against Snap brought by the family members of children who overdosed on drugs allegedly bought through Snapchat.
🧑🎨 How artists are sabotaging AI to take revenge on image generators - data poisoning.
🇩🇰 The reality of the Danish fairytale.
👁️🗨️ Some dudes have calculated that the economic cost of deliberate internet shutdowns in 2023 is $9.01 billion.
that is - the total economic impact of every major deliberate internet outage and social media shutdown around the world in 2023.
💪 Arnold put out a workout guide. Yes, that Arnold.
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