Good morning Sifted reader,

Downrounds are a-coming. Over the past year, the quarterly share of downrounds in European VC has gone up and up, and it’s now sitting at 26.2% of deals done, according to PitchBook.

That’s even worse than Q2 and Q3 of 2020, when pandemic woes hit hardest. We have to go all the way back to Q4 2014 to find a quarter worse than this.

These numbers are unlikely to paint the full picture either — as many companies choose not to announce downrounds.

Navina Rajan, coauthor of the PitchBook report, says it ain’t likely to get better anytime soon, given the uncertain interest rate outlook and the delay in disclosing downrounds. “It’s unlikely we’ve reached the bottom,” she says.

A stacked bar chart showing the quarterly share of European VC deals by up, flat or down rounds (%).

Things look brighter at the earliest stages, however, where valuations are heading up. The median pre-money valuation of angel rounds is €3.1m in 2023 so far (a record high); at seed stage, it’s €5.2m — the same as last year.

— Amy Lewin, editor

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🍃 Carbo Culture opens one of Europe’s largest carbon removal plants. The Finnish startup says its new biochar production plant will be able to remove 3,000 tonnes of carbon dioxide from the atmosphere a year — roughly equivalent to the emissions of 1,500 petrol cars.

🍟 The rat race for tech’s hottest commodity. Saudi Arabia and the UAE are buying up thousands of top of the range Nvidia chips — a key cog for building artificial intelligence software. The chips are in high demand. Last week, it was reported that Chinese internet giants Baidu, ByteDance, Tencent and Alibaba are rushing to get their orders in too.

🏡 Fintech founded by former Apple and Monzo execs shuts down. Fronted, which used open banking and other tech to help renters finance deposits with credit, has turned the lights off. The UK startup had raised £20m since launching, and things looked to be on the up when it came out of hibernation after the worst of the pandemic, with a seed round led by Passion Capital.

🇫🇷 Outside of Paris, French founders are struggling. Startups based in the capital raise 80% of the country’s funding and host most of its startup infrastructure, leaving other regions languishing despite having plenty to offer.

💰 The startups making life easier for investors. For all the innovative companies they might invest in, institutional investors are pretty underserved by technology themselves; the software and platforms that they rely on for everything from record keeping to accounting are notoriously antiquated. But a new wave of fintechs wants to give them an upgrade.

🪙 European regulators are ready to roll out the landmark Markets in Crypto-Assets (MiCA) law after it passed in May, which aims to set clear rules for cryptocurrency companies. What could it mean for startups? And will it keep crypto under control?

🎨 21 generative AI startups investors have got an eye on. Generative AI startups have raked in a record $620m so far this year, according to Dealroom. Investors have been swept up in the kind of FOMO-driven deal-making that saw four-week-old French startup Mistral raise an eye-watering €105m in June, despite having no product. Germany’s DeepL also picked up a €100m round in January, which gave it unicorn status.

But who could be next? Sifted turned to VCs from Fly Ventures, Amadeus Capital Partners, Lightspeed Ventures, Speedinvest, Earlybird and Connect Ventures for the generative AI startups to watch in 2023, including:

Charm Therapeutics, which develops small molecule medicines for difficult-to-drug targets with its GenAI platform DragonFold.
ElevenLabs, an AI-powered startup that specialises in creating synthetic voices.
Cradle, which is building an AI platform that will enable biologists to accelerate protein design.

Read the full list of 21 here.

More startups to keep on your radar: The 41 most promising impact startups in Europe | 9 digital health soonicorns to watch

😴 "6 hours works for me. Less than that and my brain is in pain" — Elon Musk has pitched in to the latest scintillating sleep debate to grip tech Twitter: how much time do you get in bed? It was sparked by a tweet from the US-based founder Immad Akhund. Spotify founder Daniel Ek, in case you were wondering, is "struggling to do more than 7 hours".

🤝 "Turns out a great culture beats a pile of cash" — The reason Markus Villig, founder and CEO of mobility unicorn Bolt, thinks his scaleup has been so successful as it approaches the 10-year mark this week. The company's last round was a whopping €628m raise in 2022, from investors including Sequoia.

Your next role could be one of these:

AGICAP, a cash management solution, wants a new strategic accounts manager in Lyon
Pitch, a collaborative presentation platform, is on the hunt for a senior data analyst in Berlin
Cleo, an AI-powered budgeting app, is looking for a senior ruby engineer in London

💰 Series A+

UK-founded Zeelo, a global transit tech company powering bus operators, employers and schools to provide sustainable transport, has secured $14m in its latest Series A extension round, taking its total to $34m.
Finnish startup Comptek Solutions, a quantum computing startup preventing semiconductor manufacturing defects, has secured an €8m Series A.
University of Manchester spinout AssetCool, which is developing a coating for overhead power lines to make them more efficient, has raised a £2.25m Series A from investors including Northern Gritstone.

💰 Pre-seed and seed

German insurtech SureIn has secured €4m in seed funding led by Pact VC.
UK-based Clean Food Group, which is developing healthier and more sustainable oils and fats, has raised £2.3m in a pre-Series A round from investors including Agronomics, Doehler Group and Alianza Team.
Swiss football coaching app Coachbetter has scored a $2.9m seed round led by Brighteye Ventures and ZEN11Holding.

💰Undisclosed

Dutch Xeltis, which makes implants to help the body naturally create blood vessels, has bagged €12.5m from the European Innovation Council Fund.
UK-based 11x AI, which creates AI "digital workers" to automate repetitive tasks, has raised $2m led by Project A Ventures, with participation from the scout funds of Sequoia, Accel and Atomico, as well as NoLabel Ventures and Tiny VC.
Spanish climate tech Universal Plastic, which uses AI and blockchain tech to quantify, audit and record data from plastic waste collections, has raised €2m.