Hello Sifted reader,

In the past few years it’s been a little bit too easy to raise money, VCs like to say. Any old startup could raise funding and look like they were doing a good job. The downturn is now testing those businesses’ mettle — and only the strongest ones will survive.

But it’s also testing their investors.

Earlier this month Seedcamp, which has given its investors top-decile returns, raised its sixth fund. Most of its backers were more than happy to reinvest — 80% of them, to be exact.

Not all VCs — even those several funds in — have been so savvy, one smug Seedcamp backer told me over drinks last week. They’re stuck with portfolio companies worth a whole lot less than they were two years ago, and facing a hard sell when they next go to LPs asking for more money before they’ve returned much (or any). Hence we’ve seen a few funds shopping secondary stakes around so they can rustle up some cash to give back to LPs.

LPs also have less capital to deploy. Some who deployed too aggressively in recent years are saying they can’t make another commitment until 2024, one top-tier fund partner who has just started fundraising told Sifted recently. They need VCs to deliver returns to recycle into the ecosystem — and aren’t letting them forget it. 45% of VCs responding to a recent survey said their LPs were pressuring them to find exits.

This is, of course, not fantastic for startups. Founders are taking calls with VCs who don’t actually have capital to invest. One later-stage investor told Sifted last week that they hadn’t done a new deal since last June. Startups relying on their early-stage VCs to follow on in subsequent rounds might realise the coffers are empty. And everything is just taking longer (unless, of course, you’re in generative AI).

This testing time will likely make better money managers out of Europe’s venture ecosystem. But when the tide comes back in, there won’t be so many in the water.

— Amy Lewin, editor

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🥳 Klarna 'on track' to return to monthly profitability this year. The buy now, pay later giant has halved quarterly losses — and says it will get back in the black later this year.

🧬 UK life sciences to get £650m. The UK government announced a number of funding packages for the sector, including:

£48m for scientific innovation to prepare for any future health emergencies;
£121m to speed up clinical trials and bring new medicines to market quicker;
£154m from UK Research and Innovation to upgrade the capabilities of the UK Biobank, a biomedical database containing in-depth genetic information of ~500k UK citizens;
£250m to incentivise pension schemes to invest in the UK's most promising science and tech firms.

Chart showing the total amount of VC funding into Germany between 2018 and 2023 year to date, plus the average round size for pre-Series A to Series C+.

🇩🇪 In search of the new wunderkinds. Funding into Germany might have dropped in 2022, but there's still plenty going on in the country's tech ecosystem. It has as many active investors as France — and double the likes of Denmark, the Netherlands or Sweden — and funding crept up in Q1 of this year. Sifted's latest briefing digs into the data behind the German startup ecosystem — including the most active investors and the hottest sectors. We've also ranked 100 German startups and scaleups you need to watch out for this year.

🍳 "We're technically IPO-ready". Lithuanian secondhand clothing marketplace Vinted is the country's biggest tech success, and CEO Thomas Plantenga sat down with Sifted's Zosia Wanat to chat sustainability, acquisitions and whether going public is the right next step.

🦾 An OpenAI alum is building a robot butler for your home. It'll do your dishes, wash your floors and even prepare you a meal for when you get home from work. Is this the start of the Jetsons-style future we've dreamed of? Maybe — but it won't come cheap.

🇬🇧 The 10 fastest growing startups in the UK.

FT Live | Investing in Space Summit
From changing investment attitudes to supporting sustainability initiatives on earth, connect with leading space executives on June 5-6. Use code SIFTED for 20% off. And to dig deeper into outer space, check out Sifted's spacetech report.

Sifted Talks | How VCs are measuring success in the downturn

Investors can no longer justify deals based on hype, risk and growth at all costs — so how are VCs measuring success in the downturn? Hear from Speedinvest, Cherry Ventures, Affinity and Balderton on June 7.

Sifted Talks | Don’t gamble with your startup’s data

As your customer database grows, so does the threat of cyberattacks. But where to begin with securing your business? On June 14 this Sifted Talks will explore how to keep your data safe in 2023 and beyond. RSVP here.

💰 Series A+

UrbanChain, a UK-based digital energy exchange market, has raised £5.3m from Eurazeo.

💰 Pre-seed and seed

Vensum, a Finnish climate tech startup helping green energy infrastructure providers to convert power more efficiently, has raised a €3.8m seed round.
Signaloid, a Cambridge-based real-world data tracking platform for businesses, has raised £3m.

💰 Undisclosed

Newtwen, an Italian startup building digital twins for the automative industry, has raised €7m.
Trade Ledger, a London-based startup providing data analytics for lenders, has raised £3m.
Shopstory, an Austrian platform that helps online shops automate processes, has raised €1m.

💸 How to raise a Series B — Sifted answers when to raise, how much to target and what needs to be in your pitch deck.

💰 How to spend your Series B funding.

🤝 When do startups need to hire in C-suite experts? How to time it right, hire the right people and onboard seamlessly.

👉 How to hire an external CEO as an early-stage startup. Sifted speaks to founders who've been there and done it to find out what to look for, where to look and how to tell the team.