VC segments

Howdy,

Welcome to a new edition of Sunday CET, people - hope you’re enjoying some nice autumn days!

We’ve got so many interesting stories in Europe this week, this edition is packed already - hit reply with thoughts and comments, comme d'habitude.

Best,
Dragos

Presented by Notion

Get Free Notion and Unlimited AI

This edition is powered by Notion.

Thousands of startups use Notion as a connected workspace to create and share docs, take notes, manage projects, and organize knowledge—all in one place.

We’re offering 6 months of new Plus plans, including unlimited Notion AI so you can try it all for free!

Redemption Instructions

To redeem the Notion for Startups offer:

1. Submit an application using our custom link: https://ntn.so/sundaycet and select SundayCET on the partner list.

2. Include our partner key, STARTUP4110P25438.

Market talk

🇪🇺 This week:

• founders pull out of YC due to strategic differences. Expensive seed deal going straight out to 2024’s largest five in EU. Many ‘incrementally better’ AI startups decently valued by tier 1 investors. Some 20M-ish series As as well. A few promotions-from-within in select VC houses. Powda’ - lotsa powda and mo’ startups getting into YC as we speak.

• those are just some intel flavours to be emailed to our customers on Monday AM → it’s the best European VC coverage you will find - don’t be a stubborn outsider, just sign up already, it’s less than a business dinner and you can expense it anyways.

🇪🇺 I’ve had a bit of a look at the financial statements of a select number of VC funds for 2023 - i.e. yearly turnover, expenses, GP payroll.

• if you put the carry aside, which is a ten year outcome impossible to budget, VC companies are fairly small ops, with revenues (aka management fees) of tier one investors similar to what a startup would probably need to produce for being able to raise series B/C rounds - I am over simplifying, but tbh long tail VC makes rarely over a decent series A traction level.

• I put the numbers to compare and contrast in a cheat sheet, which you can also access if you subscribe to the above-mentioned intel package 😃 - you can become a N9 subscriber from here.

🇪🇺 Here’s a good question: does Europe have too many 400 million VC funds?

• we’ve got nine 400M+ funds out of a list of about twenty names with 200M+ funds (forty-ish if we include multistage with undisclosed stage split) saying they’d invest in early stage startups in Europe - pre-seed and seed, that is.

• the 200M limit has been traditionally at the higher end of the seed market which 10-15 years ago had just a handful of VCs - the upper end is usually European funds with international ambitions, rather than plays focused on a local market.

• on one hand, there’s never too many market players and competition is good and healthy, right? The bar has increased with the market demand and money availability, and higher amounts were raised based on previous performance records. On the other, the larger funds are usually segmenting their product for specific profile interests, with sub-funds and plays targeted at specific subsets of the market.

• the quick handy example of product segmentation is 20vc’s 400M announced this week, saying to specifically address two markets: seed (125m) and series A (275m) - both 125 and 275 are still above the long tail VC in Europe.

• the seed includes a smart marketing program (also segmented in three by product, GTM and growth) where it onboarded qualified sales people paid to have early conviction - they’re the eyes and the ears at the edge of the market. Series A is positioned as lead only, meaning comfortability of paying a premium for better seed graduates. That’s all declarative, of course, everything is fluid as tactics are adapted usually on what the market gives you, particularly when you have a lot of inbound, which Harry’s podcasts is generating aplenty and gives him a happy passive picking position.

• that’s pure strategy - on point, I have no idea if if it’s too many funds or not, the market decides that, but it’s certain that the European startup ecosystem has now evolved since it’s both larger and more sophisticated and this requires stronger differentiators than in the past cycles, money as the only leverage is working only with B projects or un-experienced founders. Having a larger pool of money allows for many smart fixes, such as better market coverage or hedge plays or accelerators or superior tech, as well as support expenses for clear positioning and hiring good people, which can make or break a smaller VC shop. The more the market evolves, the more those little edges money can buy, now apparently small and insignificant, will become stronger differentiators and moats in the long run. And yes, the market in 5-10 years will be much more competitive and sophisticated than today, just as tier one funds and their performance are different than what they were 5-10 years ago.

🇸🇪 Aira, the heat pumps manufacturer, announced a series B extension, its second in less than a year, and the question on everybody’s mind is ‘will the Swedes f-it up like they did with Northvolt?’

• that’s because Aira has the same initial backers as Northvolt (Altor/Harald Mix), and Northvolt’s downfall was big and noisy, not only with pride hurt, but also with a lot of money wasted away because of incompetence.

• notably, the Swedish government didn’t intervene for saving it - it’s a private company and not strategic anyways, why should it?

• also worth noting, this week the above Harald Mix went out publicly shifting the discussion from Northvolt being an opportunity poorly executed, to the lack of governmental intervention for backing it up. Which makes sense to a minimal degree, if we’re wearing politicians hats, since the market is flooded by Chinese products competing on costs and subsidised by their governments, and this includes the EV batteries Northvolt is in business for.

• however, it’s a false narrative - the market is full of all sorts of cheap Chinese crap and, in the end, the customers decide with the wallet who makes the market, not the government. That’s how it works in capitalism.

• and this brings me to a larger context, which I believe structurally is the weakest point of Europe trying at all levels to build business at par to what’s best in the world - altering the dynamics of a healthy market instead of creating the premises of a competitive one. Competitiveness is why the American is the best in the world and this should be the European agenda out and about.

• the market has spoken for Northvolt - for various reasons, a private business hasn’t worked out. It’s not a bad thing, on the contrary - lessons have been learnt, we move on and try again, this is what entrepreneurship is all about and how innovation is created, we should encourage it even if it is un-successful.

• the European economy is not competitive for many reasons and an important one is that, most of the time, we have governmental intervention affecting the the market supply and demand equilibrium i.e. subsidies, over regulation, over taxation etc. and this creates false local market leaders incapable to compete on international levels - that’s not to say that governmental intervention is never needed, but you get the point, I guess.

• and that includes the startup world, sadly - also look at the current Lilium’s conundrum, another European starlight which raised 1.5 billion of VC money went bad, and now begs for governmental money in order to be saved. Which, let’s be clear, it is not a saving per se, but a death postponement since the problem is a bad business not working out and in need of a fix - if they had not been able to figure a way out until now, on the 11th hour, it is already too late, otherwise the VCs or banks would have stepped in (if the money men won’t touch you, that means your assets are toxic i.e ROIs are not there).

• back to Aira’s case, they’re seemingly solid based on their PR, claiming 100M worth of ARR bookings and already active in three markets. Alas Northvolt’s PR was solid too.

🇪🇺 Speaking of EU and startups, there’s a petition circulating around asking the EU heads to consider the creation of a standardized pan-european ‘EU Inc' corporate structure.

• I won’t get into the whys, go ahead and sign it if you care about startups in Europe. Andreas, who is behind it, is a good man and has great intentions, and he did this because he was told by the EU people that a petition with many people signing up is a way for the heads to consider it.

• but isn’t this a bit telling about how f-ed is the whole EU decision making, if they need a petition to acknowledge you, understand the importance of a matter and take action as a result? One would think that this should rather emerge top-head, not bottom-up in a context where people know what they’re doing.

• however, you gotta understand the other side of the story too - a quick reality check with EU people will tell you they don’t have enough evidence that doing something for startups - anything - will make a significant impact on their overall KPIs. We’re talking about hard cold evidence, which frankly I don’t see EU Inc to provide btw - if successful, it will be implemented in 4-5 years and there’s no direct correlation to exactly creating unicorns in the following 5-10 years, presumably a compelling, number-based argument for the EU for acting now with results in 15 years. And they’ll be quick to point that just because people want it doesn’t mean it should be done.

• the cold fact is that the startups world is really marginal in the big picture, and politicians either don’t really care or want to get involved in it - unless it gets them elected every four years or the chance to play VC with EU money, that is.

• startups are outliers and will be in a long time - that’s by default, right? Particularly in very unstable times such as today, where everybody is bracing for Trump getting re-elected and taking us to the next level of an ongoing world war where China and Russia amp up every day against the civilised world. Making startup-related decisions is a footnote addendum in the grand scheme of things, and pushing the change agenda requires good leaders with strong future vision, which Europe, sadly, doesn’t really have.

• and listen, not doing anything about encouraging startups to grow can actually be a good case scenario - since the macro requires more taxes to be collected on the governmental budgets, there’s also perverse cases of startups being affected majorly by governmental decisions in Europe, see the exit tax example in Norway, or the capital gains tax in the UK and so on.

Also notable

⚠️ We’re doing the dinner again next month!

• November 12, London.

• the gist - invite-only event with the objective of matching ambitious founders with open-minded investors, and having them build future business relationships.

• intimate event, in an informal setting over a dinner table (think salon), on the premise that people do business by getting to know each other in a relaxed manner as opposed to going to ‘fast food’ pitching gigs.

• I already have a long list of folks interested - please let me know if would like to be considered.

🇸🇪 Spotify starts rolling out music videos in beta for Premium subscribers in 85 additional markets, after introducing the feature in 12 markets earlier in 2024.

• ads money! YT is unusable without a premium account, Amazon did the same with its Prime inventory, Apple will probably do the same, Tiktok is there too etc

• once Spotify establishes a video platform with decent monetisable inventory it can also go further into streaming events live concerts, or even movies etc and sell ads against views.

🇫🇷 Over in France, Ubisoft employees are on strike over the announcement of a hybrid work model, which mandates employees to be in the office at least three days a week.

• all this while the value of Ubisoft shares has collapsed by more than 40% since the beginning of the year, touching their lowest level in 10 years in September.

• for context, Amazon, which is in a similar return-to-work policy implementation, told its employees to either return to the office or quit. That’s how capitalism works, n'est-ce pas?

🇬🇧 XTX handles $250 billion worth of trades every day.

• done by a Russian PHD who moved to London - XTX is now one of the most profitable private British companies, and the founder one of the UK’s richest people, retaining about 75% ownership.

• XTX is also an active investor in the Euro startup market, btw.

 🇫🇷 Publicis paid about $500 million each for an influencer marketing agency and a commerce marketing company in the past three month - made €3.42 billion in sales in Q3.

🇬🇧 The Brits held the Investment Summit this week, announcing a record-breaking £63 billion in money commitments to the UK’s economy.

• a quarter of it was secured pre-elections in July though.

🇯🇵 Tokyo Metro is scheduled next week for Japan's biggest IPO since 2018, with the government, which owns 50%, cashing out $2.3 billion.

• the company, whose origins date back to 1920, operates nine lines, 180 stations, and carry more than 6.5 million passengers a day

✍️ Quickies:

• Glovo’s next growth direction is to become a social network (really).

• Uber segments more the market with a premium product and looked to buy Expedia for speeding up its way to building a super app (fwiw Dara was Expedia’s CEO for twelve years - he’s still on the board and has some equity)

• Wolt wants more market share and acquires the delivery arm from the largest Romanian ecommerce operator.

• Bolt complains that Swedes treat it unfairly with scooter allocations in Stockholm.

• ASML’s stock dropped 16% last Tuesday, losing €49.2 billion from its market capitalization in a single day.

• Omead Afshar will be Tesla’s big dog in Europe (and US) - he was Elon’s assistant prior to.

• 4.5% of corporate tax in France is paid by Bernard Arnault's group LVMH.

Closing notes 

🇪🇺 European experts dixit: based only on the car’s visual appearance, there are several aspects of this vehicle (Tesla Cybertruck) that look like they may be a threat to pedestrians.

🇪🇸 Interesting read on the bad real estate market in Barcelona.

🇬🇧 Wimbledon tennis tournament replaces line judges with technology.

🇵🇱 Poland overtakes Russia in value of exports for first time.

🤙 Chat GPT says European barbershops in Europe are primarily Albanian cocaine gangs in UK and Turkish and Kurdish in France - does anybody on this list already not know that they’re a front?

🇸🇪 Because Swedes discriminate against hiring non-Swedes, a guy had to change his name with a Swedish-like one and created a job site for anon hirings.

💲 Not enough budget money? Let’s do jet set tax on Europe’s frequent flyers.

🇨🇳 It’s not only the Europeans increasing taxes for the ultra rich - the Chinese are doing it too.

🏗️ The Neom giga-project in Saudi Arabia is currently using one fifth of all the steel produced in the world - the futuristic city will be the world’s largest customer for construction materials for several decades.

🇺🇸 The FTC has announced the click-to-cancel rule that will require companies to let you cancel any product as easily as you registered - this is a big deal, if you have ever tried to cancel a sub in US.

🇺🇸 Since 1984, rising stock prices in the three months before election day have led to incumbent parties keeping the White House, excluding a blip in 2020’s pandemic-bruised market. The S&P 500 is up 12% since August 5.

♾️ The list of speakers from last week’s European Defense Tech Summit in Madrid.

🙈 On average, pre-owned EVs now sell for 11.4% less than conventionally powered models - EVs ain’t cars for budget-conscious buyers

₿ Andreessen Horowitz released its annual state of crypto report.

🛡️ The Brits put out a global strategic trends report on defence and security.

🇮🇪 John Collison on Matt Levine’s podcast is pretty good.

✈️ Cargo airships are going to be big.

🥸 Nobel Prize goes to 3 economists who study the roots of national prosperity from former European colonies.

😎 Al Pacino, 84: I had $50 million and then I had nothing - he did use to pay for 16 cars and 23 cellphones.

That’s all folks, have a wonderful week!

Presented by Notion

Get Free Notion and Unlimited AI

Thousands of startups use Notion as a connected workspace to create and share docs, take notes, manage projects, and organize knowledge—all in one place.

We’re offering 6 months of new Plus plans, including unlimited Notion AI so you can try it all for free!

Redemption Instructions

To redeem the Notion for Startups offer:

1. Submit an application using our custom link: https://ntn.so/sundaycet and select SundayCET on the partner list.

2. Include our partner key, STARTUP4110P25438.

Did you find this email useful?

Great, will forward • Good • Meh

Thanks for reading! Please send me feedback by hitting reply.

To support my work, upgrade to one of the subscription options.

If this email was forwarded to you, please subscribe, it’s free!

Created every Sunday by @drnovac of Nordic 9 with weekly notes and observations from the European startup ecosystem.

You have received this email as you signed up at Sunday CET or are a Nordic 9 registered user.4