Good morning Sifted reader,
When hard times hit tech in 2022, investors were quick to remind us that the best companies are formed in times of turmoil. Square, Stripe, Airbnb, WhatsApp — all founded in the 2008 Great Recession, they said.
The trick is now figuring out which companies founded in 2022 and 2023 will be 2030’s disruptive champions (if we think the winners will be clear in seven to ten years).
If I had names I wouldn’t be working at Sifted, but the direction of travel seems clear. All will be companies working in opportunities shaped by policymakers, geopolitical tensions and a desire to secure national resilience — from climate infrastructure to agritech. That’s something that can’t be said for the software and consumer app champions of the last decade, when capital was cheap and the world was a far more peaceful, united place.
This future powerhouse cohort will inevitably include one or two AI companies — where the role of geopolitics definitely can’t be understated.
This week, I’m in the small southwest German town of Heilbronn (population: 126k, major tourist site: a church dating back to the 11th century), where a massive AI campus for 5,000 is planned. The site is financed largely by the Dieter Schwarz Foundation, founded by the billionaire businessman and former CEO of Lidl (net worth:
Talking to people in the ecosystem, it’s clear that this push isn’t some cutesy PR exercise to help more startups blossom. It’s a response to a perceived existential threat: how will German corporates integrate AI, and can Germany secure the necessary AI capabilities to hold its own on the world stage in the future?
Many underestimate the role that governments and deep-pocketed, visionary entrepreneurs from the old guard can have in shaping that future.
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It’s suddenly sexy to be a scientist in Europe — with boffins working on everything from quantum to spacetech at the heart of Europe’s pursuit of tech sovereignty.
But there’s a problem.
Turning lab research into a company — known as spinning out — happens too slowly. Founders are also aggy that university term sheets too often leave them wanting, with high equity stakes putting off a lot of VC investors and leaving them to seek out alternative funding sources.
And, despite increasing attention on these issues (or perhaps because of it) in the UK, VC investment into spinouts is down this year, according to PitchBook. So far in 2023, there have been 84 deals worth £674m, compared to 152 deals worth just over £1.6bn across the whole of last year.
A much anticipated government review into the spinout process — expected before the autumn budget next month — is aiming to fix that. Equity stakes and funding for research are expected to be front and centre.
The opposition Labour party also plans to increase the number of spinouts in the UK if it takes power — and make it easier for founders to keep a higher equity percentage for themselves.
Not everyone thinks that’s enough though. The real problem, several VCs have told me, is a lack of funding to actually get promising academic research to the point of commercialisation and de-risk it in the eyes of investors.
– Tom Nugent, digital editor
🧠 DeepMind founder and former Google CEO say an independent regulatory body for AI is needed.
Mustafa Suleyman and Eric Schmidt tell the FT that lawmakers lack a basic understanding of what they need to regulate around AI, and an independent, expert-led body could go some way to solving that.
They propose the creation of an International Panel on AI Safety (IPAIS) — similar to the IPCC, which focuses on climate change.
"The IPCC doesn’t do its own fundamental research, but acts as a central hub that gathers the science on climate change, crystallising what the world does and doesn’t know in authoritative and independent form," they say. "An IPAIS would work in the same way, staffed and led by computer scientists and researchers rather than political appointees or diplomats."
📱 This Australian founder wants to build the UK’s first superapp.
Revolut, Klarna and Bolt all want to be to Europe what WeChat is to China — but all have arguably fallen short. Now Australian HR tech Employment Hero, which expanded into the UK last year, wants to give superapp-dom a shot.
- Its app allows employees to spend their salary as soon as they’ve earned it. In Australia, Employment Hero has also negotiated better rates for its thousands of users — on, for example, their energy bills.
- In the UK, it’s planning to also launch a recruitment portal — and help companies manage payroll.
🍟 VCs have a cunning new way to win over the hottest startups: getting them priority access to supercomputers.
- Some VCs are beginning to strategically invest in the companies building the supercomputers that house and deploy the chips that generative AI startups in their portfolios so desperately need.
- One of those startups is London-based NexGen Cloud, which plans to build a $1bn AI supercomputer in Europe in the coming months.
“You can think of it like: we’re effectively building a hotel, they [VCs] are buying the hotel. We help them rent out the rooms [to startups] and they can rent the rooms too [for themselves],” says NextGen CEO Chris Starkey.
🎙️ The Sifted Podcast. This week on the pod, we’ve got a guest appearance from Martin Lewerth, who tells us all about his new heat pump startup Aira’s €87m raise. We’re also discussing:
- UK fintech Modulr’s troubles with the financial regulator
- What Germany’s legalisation of cannabis means for startups
- How it all went wrong at UK healthtech Babylon
🏥 The 10 fastest-growing digital health startup teams in Europe. From workplace health insurance to elderly care startups, these are the companies that have grown the most in the past 12 months.
Annual spending on climate will need to more than quadruple to $5tn a year if we are to have any hope of limiting global warming to 1.5C. In our new report, we uncover the top subsectors investors are betting on.
💨 Methane is worse for the planet than CO2 — but investors are unmoved by solutions.
Methane is responsible for about 30% of the rise in temperatures since the Industrial Revolution, but startups working on tech to combat the problem have raised less than 2% of global climate finance.
Despite that, startups are still rolling out innovative solutions like tracking and capturing methane and reducing the amount of gas livestock produces.
💸 VC funding in Spain has proven less vulnerable to the global slump than most other European nations — but that might not be such a good thing, warns a new report by Spanish founder network Endeavor, based on more than 40 interviews with founders, investors and experts:
- The number of exits in Spain fell less than 7% between 2022-2023. That’s far lower than in Germany or the UK, where they fell 32% and 18%, respectively.
But the lack of growth-stage funding in the country is holding startups back. Just 9% of startups in Spain are at growth stage, the report found, compared to 16% in France and 21% in Germany.
“If this does not change, the Spanish ecosystem will not experience the virtuous cycle that emerges from the reinvestment of capital and talent from local success stories,” the report says.
- UK fintech giant Uncapped secured £200m in debt from Fortress Investment Group for its revenue financing model.
- London-based Globacap raised a $21m Series B for its fintech platform.
There are plenty of ways to get your fix.
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