Good morning Sifted reader,

As a journalist, I spend a lot of time talking to the people with the money in European hubs like London, Paris or Berlin — because that’s who a lot of people like to read about. But it’s not always these conversations — or these places — that present the most fulfilling conversations.

Last week, I travelled to Heilbronn, a small city in southwest Germany. With a little help from a friendly billionaire, Heilbronn is positioning itself as Europe’s next big AI hub; Miriam Partington has more on those ambitions in her excellent piece today.

It was the first time in a while that I had the chance to sit down with some early-stage founders and hear their stories.

An Aleph Alpha alumni told me about his ambitions to start a company at age 13 in Germany being scuppered because he needed his parents — and the local government — to sign off on him starting a company.

When I asked him with all the solemnity of a journalist who’s come from London: "Why found your company here in Heilbronn?" He was frank: "For one reason, I used all my savings to start a company, therefore I couldn’t move anywhere.”

Another founder I met is building an AI company to tackle food waste, starting with AI-based planning solutions for bakery chains, ie. let's use AI to make sure we don’t throw out so many leftover pretzels.

He told me how the address on the official fundraising documents was still his parents’ supermarket — the business that inspired him there was a need for a business like his.

Great companies and founders are a product of all these serendipities, funny anecdotes and small victories. They are what entrepreneurship is all about — not the glitz of a funding announcement.

— Eleanor, deputy editor

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It’s no secret that Northvolt is getting ready for an IPO — the Swedish gigafactory’s head of corporate finance told Sifted back in February that a listing was a year or two away. But, according to the Financial Times, the company is planning to do it on home turf.

The move would be a departure from the traditional IPO playbook for European tech companies, which have historically given European public markets the cold shoulder in favour of more lucrative US exchanges.

European exports to the US include music streaming service Spotify’s $28bn listing in 2018 and British multinational chip designer Arm’s $54.5bn relisting this summer, as they looked to tap up the larger pool of capital available stateside. European companies listing in the US have raised four times as much money as US companies listing in Europe since 2000.

But there is good reason for Northvolt to keep its float at home, says Adam Kostyál, senior vice president of listings at Nasdaq Europe. “A listing in the US is much more expensive than in Europe and one has to review if a listing in the US will create that extra value.”

If the gigafactory behemoth does plough ahead with a Swedish listing, it would join a small but very successful cohort of European tech companies that have reaped the rewards of floating at home.

Polish e-commerce Allegro, which listed in Warsaw at a valuation of $11bn in 2020, and fintech Adyen, which listed in Amsterdam in 2018 at a valuation of $8.3bn.

Mimi Billing has the full story.

🚀 Bloomberg has published a list of the 25 British startups to watch in the year ahead, spanning fintech, autonomous driving, data and AI. On the list are Universal Quantum, which recently raised €67m from the German Aerospace Centre; Peak, a Manchester-based AI startup that raised $75m in 2021; and OnlyFans, the adult content subscription service that saw revenues leap 17% in 2022.

💸 The Swedish startup evroc is opening up shop in the UK. With the aim to raise €3bn to build hyperscale data centres in Europe, evroc has recruited Philip Beevers from Google Cloud to lead the development hub in London, where it wants to build the infrastructure for evroc’s cloud platform.

💰 German LP KfW Capital launches Emerging Managers Facility (EMF) to boost diversity in VC.

The money comes from the German government's €10bn Future Fund — an initiative launched in 2020 to help plug the late stage funding gap in the country — and will invest €200m in the facility by 2030.
The investment vehicle will invest in smaller VC funds with €50m in assets under management and are managed by women or gender-diverse teams.
Chosen VC funds can receive a maximum of €12.5m or no more than 25% of the fund's total size.

🌳 Ex-Google employees are jumping into climate tech. Following Google's parent company Alphabet laying off 12k staff earlier this year — including cuts to an incubator focused on innovative projects including sustainability — many recent leavers are starting their own companies. Freya Pratty has tracked a number of them down.

🤖 Why can’t Europe and the US work together on quantum? Toby Cubitt, writing in Sifted today, criticises “protectionist barriers” from the UK, EU and US over quantum research, including the fact that quantum projects are excluded from the Horizon 2022 programme.

Cubitt says that the idea that quantum poses “national security risks” rests on a misconception about what quantum is — and what it isn’t.
Erecting barriers to collaboration in this field due to "imagined risks to national security" will only hinder progress on the very real promise of quantum, he tells Sifted.

🎄 Is it Christmas time already in French startup world? Early-stage companies just got a €500m funding boost in the 2024 budget thanks to new tax incentives for investors — and now the government is promising to bring long-awaited change to employee equity schemes, called BSPCEs.

French employees will soon benefit from what is known as an “illiquidity discount”, meaning they will be able to buy BSPCEs at a much lower price than the actual value of the share — and could be in for bigger rewards as a company grows.
It’s hoped that this will help founders attract talent with compensation packages that can compete against countries like the US and the UK, where illiquidity discounts are already common practice.

🚚 End of Europe’s e-van dreams? Building electric vans is a capital intensive endeavour at the best of times, made harder in the current environment. Startups face competition from incumbent car companies, which often have the upper hand on sourcing components and a bigger bank balance to fall back on. Europe’s crop of e-van startups are feeling the strain.

Last week, Swedish startup Volta Trucks announced it had appointed administrators. It said its collapse was, in part, due to the bankruptcy of Proterra, a US company which supplied Volta with batteries. Volta’s board said Proterra’s closure had led it to fall behind on production targets and affected its ability to raise necessary capital.
British company Arrival, which is Nasdaq listed, is also reported to have brought in advisers to work on restructuring options, including potential administration.
UK-based Tevva was said to be struggling to pay suppliers earlier this year. In August, it announced a merger with Nasdaq-listed car company, ElectraMeccanica. That deal fell through last week — the company has now said it plans to engage with other potential merger partners.

👉 How to moderate great panel discussions. Sifted's Startup Life newsletter authors Anisah Osman Britton and Miriam Partington share their top tips on captivating an audience. From scheduling a prep call to cutting off long winded answers, they run through the moderator's playbook.

How Invest Alberta, Leapsome, Lawcubator and Eventcombo found success in North America

As a startup with big ambitions, expanding across the pond is likely a top priority. Join the founders of these four startups at today’s Sifted Talks to learn top tips for global expansion.

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"We simply don’t understand the risks [of AI] in enough detail.”

Michelle Donelan, the UK minister for science, innovation and technology, laid out her government’s plans to prepare for a future “increasingly driven by AI,” as the country prepares to welcome world leaders for the AI Safety Summit next week. Read the top takeaways from the speech here.

🇵🇱 Want to know more about Poland’s startup ecosystem? This comprehensive report from industry group VC Leaders has got you covered. Some key main points:

Poland’s startup ecosystem has strong talent foundations but still faces growing pains around efficiency and maturity — it’s still missing global connections and sufficient capital.
International expansion, sales, liquidity and hiring are Polish startups’ main challenges.
For VCs the main issues are limited private capital, low dealflow quality and difficulties in fundraising.
There aren’t too many exits in Poland: developing more unicorns and global success stories can help across many areas in raising the ecosystem’s attractiveness and potential.

🤔 The potential of AI startups in CEE. Tech media publication The Recursive has prepared the first-ever comprehensive report on the state of AI in Central and Eastern Europe (CEE). The region, known for its engineering talent, has been a cradle of some of the most successful European AI companies — like UiPath, Rimac Automobili, SEON — but it’s still very often overseen by international investors. Some key takeaways from the report include:

There are over 900 active AI product companies in the region, most of them in healthcare and life sciences sectors.
CEE AI startups raised $4.2bn in funding in the last three years, attracting more and more top-tier investors.
Over 30% of these startups have their headquarters in more developed startup hubs such as the US and the UK.
There are over 120 VCs in the region actively investing in AI startups, although less than 30% specialise in AI or deeptech.

Learn about the hottest deals, main trends and the remaining challenges here.

🇸🇪 Reporter Freya Pratty's dispatch from Malmö. I’m skipping rainy London for the next few weeks and have taken up a — sadly temporary — role as Sifted’s Malmö correspondent.

I’m in the Swedish city as part of a residency programme organised by a group of local organisations. After a few days here, I’ve started to get a handle on its ways — learning to bike on the right-hand side of the road and hunting out the many aesthetic cafes.
I want to meet Malmö-based climate founders and investors (so email if that’s you!) and I’ll be writing dispatches from my time here in our climate newsletter, which you can sign up for here.

🔥🔥🔥

Quantum-Systems, the German drone and robotics startup, has raised €63.6 million in Series B funding from HV Capital and DTCP, as well as Project A, Thiel Capital and Airbus Ventures.

🔥🔥

AI-powered, text-to-video platform OXOLO — based in Hamburg — has raised a €13m Series A led by DN Capital.
GoodBytz, the robotic kitchen developer from Hamburg, has raised a €12m Series A led by Oyster Bay, alongside Block Group.

🔥

Laka, which provides insurance for bikes and e-bikes, has raised €7.6m led by Shift4Good. The London-based insurtech has also acquired French e-bike insurance broker Cylantro.
Rome-based ADOR Diagnostics, a molecular diagnostics biotech, has raised $7.5m in an investment round led by telecoms manufacturer BATM Advanced Communications.
German AI e-commerce startup VisionAI has raised €5m in seed investment led by HV Capital.
Algorithmiq, which is developing photo-activated drugs for cancer prevention and treatment, has received a further $4.25m from Wellcome Leap following its €13.7m Series A in June.
London-based Drovo, specialists in media advertising tech for transit vehicles, has raised a £3m Series A led by Maven Capital Partners.
AI-driven sales automation software Piper, based in Barcelona, has received €3m in a funding round led by Seaya Ventures.
Ctrl Alt, the London-based wealthtech that provides the infrastructure for investing in alternative assets, has raised a €2.5m round led by Forward Partners and Middlegame Ventures.
London gen AI startup Klu has announced a €1.6m seed round led by firstminute capital. Its LLM platform is designed for building, evaluating and optimising AI applications.

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