Sifted - Fundraising desperation 😢

Good morning there,

VCs are a pretty sanguine set, and even when things are bad, you’re bound to get some fairly upbeat predictions. But lately I feel like some investors aren’t being totally upfront about just how tough the market is right now — or, at least, they won’t be completely honest with a journalist. So, in today’s newsletter, I take a sobering temperature check of the funding environment with the help of one angel investor. 

Plus... our own Zosia Wanat reports from Web Summit; we look at which European startups have had the most success in the US; and round up the photonics startups European VCs have their eyes on. 

— Anne Sraders, senior reporter

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When will the funding chill be over? One angel investor’s fundraising temperature check 

The weather is getting chillier here in Berlin, and for founders and VCs alike, the fundraising outlook is icy. 

However, the holidays might be cheerier for some startups: Jag Singh, managing partner at Berlin-based fund Angel Invest, told me he expects November will be a busier month for dealmaking, as everyone rushes to get deals done before they all head off on holiday. 

But Singh has also noticed a more worrying trend this autumn: “We’re starting to see companies that have raised €5m, €10m seed rounds come back to the market. Their existing investors have said ‘no’ to putting more money in, and so now they’re just looking for cash wherever they can find it,” he told me. The upshot is, “If they’re coming to seed funds and pre-seed funds and micro VCs asking for €100k [cheques], that just shows that the system isn’t as lubricated, or functioning the way it should.” 

In many cases, investors may not be willing to re-up their investment in a startup because the company hasn’t been performing as they hoped. Other investors, as Singh points out, may not be sure when, or if, they’ll be able to raise their next fund or how much money they'll have to invest. 

There’s clearly a lot of desperation in the market — and has been for a while. “[Founders have] been desperate now for more than six months,” says Singh.  

Of course, there are outliers (AI companies are certainly an exception), and Singh says there are still deals getting done, with several of Angel Invest's portfolio companies in talks right now. But it brings up a host of other questions about what’s to come for founders and investors: When are we going to see a meaningful pickup in deals? Are investors growing pickier even within AI? How tense are LP-GP relationships right now given the dearth of distributed capital? How many companies out there are weeks or months away from shutting down? 

I’m going to be digging into these questions in the next few weeks and months, and I’m curious to hear what you think. If you have any hot takes, thoughts, or tips, send them my way.

— Anne Sraders, senior reporter

🤫 Web Summit is off to a somewhat quiet start. After a month-long drama, Web Summit finally kicked off yesterday in a disappointingly foggy Lisbon.

• The conference claims to have gathered more than 70k people — but, as a fellow journalist put it — “these are just not very important people.” I’ve also heard investors complain that the lineup isn’t as impressive and starry as in previous years.
• But, while the Altice Arena looked somewhat empty on Tuesday morning, the showcase pavilions are buzzing with startups, investors and big tech companies (with some notable exceptions). 
• The event’s opening session debated the topic du jour: AI regulation. Andrew McAfee, a principal research scientist at MIT, said you can either support “permissionless innovation” or “upstream governance,” referring directly to the EU AI Act. (His heart is definitely with the former). “If you want more upstream governance, it means less innovation. If we have more permissionless innovation, it means more harm. We have to make a choice.”
• But not everyone agreed. “This is not a soccer game,” said Albert Wenger, managing partner at Union Square Ventures, rejecting the “tribalist” approach. “There can be a little path [of consensus] that may be hard to find but will be rewarding.”

— Zosia Wanat, senior reporter 

🤝 French insurtech Luko nears new rescue deal. The Accel-backed insurtech is on the cusp of finding a new buyer after Admiral pulled out of its planned acquisition a fortnight ago, Sifted has learnt.

• Luko is now in live discussions with incumbent insurers Axa and Allianz, as well as insurance scaleups Leocare and Ornikar, about purchasing its French business on the same conditions of the Admiral sale, according to a person close to the deal. 

💰 Adobe’s $20bn purchase of Figma is set to face more antitrust hurdles in the EU, the FT reports. The deal, which was first announced last September and has been met with much regulatory scrutiny, will reportedly get hit with anti-competition charges from regulators in Brussels. Less good news for Index’s Danny Rimer and LocalGlobe’s Saul Klein, who invested in the company early days.

🇳🇱 Airbridge Equity Partners, an Amsterdam-based investment firm, raised €63m for its second fund to invest in European tech scaleups.  

🇸🇪 Former Klarna COO Knut Frängsmyr was appointed the new CEO at Swedish online bank Avanza in September — but after just one week on the new job, he’s out. Why? Frängsmyr has an ongoing legal dispute about the rebuilding of his house, details that weren’t shared with Avanza during the recruitment process, according to local media.

👀 Investors are ditching the traditional VC model and raising funds to buy out struggling startups, the FT reports. Some investors believe the current tricky environment is full of opportunity to scoop up majority stakes in cash-strapped companies in an effort to turn them around — à la the private equity model.  

• One new firm, UK-based Resurge Growth Partners, was created this year by investors Oren Peleg and Eyal Malinger to do just that. The FT reports they’re targeting €120m to buy startups, investing between €10m-30m on average. 
• “There’s a real opportunity here to play a very important role, which is to help companies transition from venture ownership to private equity ownership,” Peleg told the FT.

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🇺🇸 Expanding to the US has been lucrative for a number of European companies. Startups like Russia-founded Miro, Ukraine-founded Grammarly and Portugal-founded Talkdesk top the list of the highest-valued businesses that have moved their HQs to the States. Read more here. 

🔦 The 13 photonics startups to have on your radar, according to VCs.

🥓 “The last thing you expect is a farm in Hoxton” — finding space for Europe's biotechs is tough, but to get around the problem real estate developers are starting to turn old office blocks into swanky science labs. Hoxton Farms, a UK-based startup developing a cultivated pork fat substitute, has just moved into one in central London. Sifted's Sadia Nowshin went to check it out.

🛴 Transportation methods like ride-hailing and e-scooters — aka ‘shared mobility’ — are set to make up an estimated 7% of all urban transportation by 2030, up from 3% today, according to a new report from consulting firm Oliver Wyman. 

🤖 AI is still all the rage with investors polled by PitchBook and Web Summit. The pair’s annual conference survey — which this year polled 111 global VCs attending the conference — found that a whopping 75.8% of investors made at least one AI investment in the last 18 months, while 7.2% have made at least six AI investments. 

• Roughly a third of those VCs polled also said they often use AI and data analytics when assessing investment opportunities. Meanwhile, about 36% said that while they don’t currently use AI/data analytics to review deals, they’re planning to in the next one to two years. 
• However, the survey also found some lacklustre stats: 71% of investors claimed to have been increasing hiring or exploring ways to increase representation of women and marginalised groups in their firms and portfolio companies, but only 43% of investors said they actually did increase representation of women. 

🔥🔥 Switzerland-based Nouscom, a company working on developing engineered viral vector vaccines to treat cancer, raised €67.5m in Series C funding. Andera Partners, Bpifrance and M Ventures led the round and were joined by investors including Revelation Partners, Indaco Venture Partners, Panakès Partners and XGen Ventures.

🔥 Munich-based Retorio, an AI-driven coaching platform for functions like sales, raised €9m in Series A funding. SquareOne led the round and was joined by Storm Ventures and Porsche Ventures. 

🔥 Utrecht-based Solvimon, a platform for businesses to manage their billing and pricing operations, raised a €9m seed from Northzone and angel investors. 

🔥 France-based Toopi Organics, a biotech developing plant biostimulants from the fermentation of human urine to use as a fertiliser, received €8.4m from the European Innovation Council (EIC) accelerator.

🔥 Ghent-based Aikido Security, which is building a platform to make software security more simple and efficient for developers at SaaS companies, raised a €5m seed. Notion Capital and Connect Ventures co-led the round and were joined by investors including Inovia Capital Precede Fund.

🔥 UK-based Glox Therapeutics, a company developing precision antibiotics against drug-resistant bacteria, raised a £4.3m seed. Boehringer Ingelheim Venture Fund and Scottish Enterprise led the round. 

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