Sifted - Germany's richest man's AI plans 🇩🇪

Good morning Sifted reader,

The US has always been something of a promised land for ambitious European startups — a third of them that chose to expand to the US between 2015-2019 went even before they raised their Series A, according to Index research.

Today, we launch a brand new series on European startups expanding stateside. Over the next few weeks we will look at the startups that have succeeded in America, as well as those that have failed. We will also be talking to founders and VCs about what it takes to ‘land the whale’ and expand across the Atlantic. How to do it, when to do it, what to do and what not to do.

– Orlando, commissioning editor

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Monzo, Revolut, N26, the list of neobanks that have struggled to break the US is a who’s who of European fintech.

But why? What is it about the American market that makes it almost inevitable that European fintechs will — like an unlucky European tech conference attendee on their first trip to Las Vegas — lose their shirts and find themselves having to borrow cash to get a cab to the airport?

Well, part of it is regulation, writes Amy O'Brien in the first instalment of Sifted’s US expansion series today. To operate in the US, fintechs have had to take on — and share profits with — a local bank, meaning it is extremely hard to make money in the same way as they do in Europe.

Interchange fees are higher in the US than in Europe — an average of 2% compared to 0.3% or 0.4% on each transaction — but investors say that European challenger banks have to give their American partner as much as 30% of that. Making money off credit and recycling deposits into loans is also not allowed without a banking licence, which is extremely hard to get.

One UK fintech has bucked that trend. Cleo AI launched in 2016, but by 2022 business was going so well in America that it shut up shop in the UK and went full-stateside. CEO Barney Hussey-Yeo tells Sifted that ultimately he would like to go home — he still spends 70% of his time in London — but it won’t be to make money.

“We can become a public company or a large multi-billion dollar company in the US alone, we don’t need the UK. But we’ve always said our mission is to help people improve their financial health, and in the UK that’s really needed,” he says.

🇬🇧 British prime minister Rishi Sunak is set to give a speech today warning the most advanced forms of AI could bring “new dangers and new fears”. The UK government said it believes more research into AI risk is needed, and has published three reports into the capabilities and risks from frontier AI models, ahead of the AI Safety Summit taking place in England on November 1-2.

In one of them, the government says by 2025 generative AI "is more likely to amplify existing risks" rather than create wholly new ones, but it will increase sharply the speed and scale of some threats – including cyberattacks, fraud, scams, impersonation and child sexual abuse images.
A second report warns humans may increasingly hand over control of important decisions to AI systems, and cites concerns from experts who say future advanced AI systems will seek to increase their own influence and reduce human control, with potentially catastrophic consequences.
Artificial general intelligence might not emerge imminently: future models will probably be able to cooperate, coordinate and negotiate with humans and other AIs, but the emergence of artificial general intelligence might take longer than what some organisations developing frontier models claim, a third report says, suggesting many experts who claim the imminent emergence of AGI via Frontier AI "have a commercial interest in them."

👖 Secondhand fashion marketplace Vinted considers IPO. The Lithuanian unicorn is pondering a secondary share sale that could be worth €200m ahead of a potential listing, according to the Financial Times.

But no final decision has been made at Vinted, and the company is considering a number of options, including selling new shares alongside existing ones.

🍟 Nvidia told to stop some AI chip exports to China. The chip giant said in an SEC filing that a ban on sending high-end AI chips to China expected to be introduced in November had been brought forward and was "effective immediately."

⚽️ “We have fewer athlete investors” — France correspondent Daphné Leprince-Ringuet sat down with 2018 football World Cup winner Blaise Matuidi to discuss his VC fund Origins as it opens an office in Paris. His take? There’s lots to learn from the US when it comes to turning athletes into savvy tech investors — and it starts with ensuring they get better education.

🇩🇪 Germany’s richest man has big plans for his home region of Heilbronn-Franken. The Dieter Schwarz Foundation — founded by the billionaire businessman and former CEO of global supermarket chain Lidl — wants to make sure that Europe has its own answer to OpenAI.

💻 17 B2B SaaS startups to watch — according to VCs from Speedinvest, Antler, SFC Capital, Astia Fund and HV Capital.

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DigitalPlatforms, the Italian SaaS startup, has raised €15m from Anthilia Capital Partners.

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Munich-based Happy Ocean Foods, which manufacturers plant-based seafood alternatives, has raised €1.5m in a seed round from Companisto.

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