Will the AI Act crush Europe's hottest AI startups?

Good morning there, 

It's been a big week in European AI already. While French AI startup Mistral confirmed it’s raised a €385m Series A from heavyweight US investors, activity in Brussels late last week has left some questioning whether the sector is about to be held back in Europe. Today, we ask whether EU AI regulation will put the brakes on the sector’s hottest startups.

Elsewhere, speedy grocery company Gorillas’ founder Kağan Sümer has raised a pre-seed round for his new healthtech and Checkout.com is facing another round of exec departures.

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Will European AI regulation crush its hottest AI startups?

This week kicked off with a bang in European tech, with the announcement that Paris-based generative AI startup Mistral had closed a €385m Series A round led by Andreessen Horowitz and Lightspeed Venture Partners.

But the sight of major US investors throwing their weight behind a European AI company was overshadowed for many in the sector by activity in Brussels just days before.

European AI regulations freshly agreed late Friday night were celebrated as a huge victory in Brussels — but investors and AI founders say they could significantly hinder the progress of smaller startups like Mistral, potentially pushing Europe even further behind in the global AI race.

Though the AI Act — which is yet to be finalised — would not apply to open source models like Mistral's unless they are considered high-risk, or are being used for banned purposes, some say most large-scale AI models will be considered high-risk.

“[Mistral] will have to anticipate that they fall under that category and if they do, they will have to comply with very heavy obligations, particularly around transparency,” says Marianne Tordeux Bitker, director of public affairs at startup and VC lobby France Digitale.

The draft legislation states that companies building general-purpose models will have to provide "detailed" public summaries of the data they used to train their model, which is "definitely going to slow down Mistral and other smaller teams", Gabriele Venturi, cofounder of open source AI startup PandasAI, tells Sifted.

The back and forth that will be required with regulators is no problem for bigger players like Google, Venturi adds, but will likely hamstring smaller startups — like those in Europe.

Extra pressure will also be put on teams by the requirement to 'red team' new models — the process of testing against various types of risks.

“I'm a bit worried about the compliance costs for many model providers," says Vanessa Cann, cofounder of German GenAI startup Nyonic. "For aspects like red teaming, we think we’ll have to hire about three people to check the robustness of our models."

That said, Mistral's investors aren't put off. “[The AI Act] is a risk, it would be foolish to say otherwise, but we have returned to this second round so we believe that this risk is controlled,” says Antoine Moyroud, partner at Lightspeed. 

Mistral declined to comment.

— Daphné Leprince-Ringuet, Tim Smith and Anne Sraders

🦍 Gorillas founder Kağan Sümer raises pre-seed round for secret healthtech startup.

• The former speedy grocery founder and CEO launched stealth healthtech Mirror earlier this year — and has raised between $6m-8m for the health management platform, according to Sifted sources.
• The startup will help people manage things like sleep, fitness and nutrition through a combination of tests, data from wearables and personalised recommendations.
• Mirror is currently in beta testing — and plans to launch in Germany in the first half of 2024 and the UK later next year. 

👀 Payments unicorn Checkout.com is facing its second round of executive departures this year, making further layoffs and closing down its Berlin and Porto offices, Sifted can reveal.

• Four senior execs have left the European rival to Stripe in the last month, including CTO Ott Kaukver, chief people officer Kerry Van Voris and two senior compliance execs. Ten executives have left in the past 18 months.
• At the beginning of this month, the fintech also laid off around 80 people from its engineering, product and HR teams — the latest in a series of layoffs, some of which were described as “layoffs by stealth” by employees earlier this year.
• The fintech says the cuts are “deliberate” and “designed to accelerate our growth, refocus on our London HQ and not on cutting costs”.

💰 Impact foundation Norrsken's company builder on track to close €100m impact fund next year, Sifted has learnt.

• Norrsken Launcher was started in a bid to compete with other impact funds looking for startups that don’t fit the bill for “normal” venture capital. The fund has made one investment so far, a €3m pre-seed in Swedish plastic replacement startup PlasticFri. 

🇩🇪 “Germany needs a narrative that says ‘yes we can’ rather than, ‘we’re going down’,” says the new chair of the German Startups Association, Verena Pausder, who was elected last week.

• To write that new narrative Pausder’s priorities are enabling more university spinouts and allocating more capital to deeptech and later-stage financing. She also wants to help ease immigration processes for tech talent and go big on breaking the capital bubble.
• “It’s one of my big goals to not make it a Berlin or Munich bubble thing and say ‘we’re here in Berlin, know how things are done right and then we’ll tell the rest of the country what they should be thinking,” she tells Sifted. “We need to put [states outside Berlin] in the light way more than we have in the past.”

☀️ Norwegian solar energy storage startup Photoncycle has raised a €3m pre-seed round led by Finnish VC Lifeline Ventures.

• The startup’s breakthrough in long-duration solar energy storage could make European households energy self-sufficient.
• Photoncycle will use the capital to scale up its technology and team significantly.

🕵️ UK and US regulators looking into Microsoft-OpenAI ties. The multi-billion-dollar partnership is being examined by competition regulators on both sides of the Atlantic — with a formal investigation likely to begin next year, the Financial Times reports. 

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✉️ How to get to inbox zero. While the prospect of emptying your inbox might be a pipe dream for many, Norberto Lopes, the CTO of travel API Duffel, achieves it on a weekly — if not daily — basis. His tips?

• Check regularly — "If you’re inundated with emails, the quantity alone can be overwhelming," he says. "So break it down throughout the day. For me, I check once in the morning, then in between meetings and once again at the end of the day."
• It's all about prioritisation — from responding immediately to archiving email chains that've reached their conclusion, "You need to be ruthless if you want email to be a tool that improves your work rather than cannibalises your time."
• But don't be too hard on yourself — "Getting to inbox zero is about reducing stress, not adding to it. If emails build up, don’t worry about it."

For more tips related to working at, building and scaling a startup, sign up for free to Sifted's Startup Life newsletter, which drops into your inbox every Wednesday. 

London-based SumUp, which offers payment solutions for small businesses to process transactions, raised €285m. Sixth Street Growth led the round and was joined by investors including Bain Capital Tech Opportunities, Fin Capital, and LIQUiDITY Capital.

London-based GFO-X, a crypto derivatives trading platform, raised $30m in Series B funding. M&G Investments led the round.

Copenhagen-based Hoba Therapeutics, which has developed novel therapeutics for patients with chronic neuropathic pain and hearing loss, raised €23m in Series A funding. Indaco Venture Partners and Medical Incubator Japan co-led the round, which also included participation from existing investors Novo Holdings, Eir Ventures and Export and Investment Fund of Denmark.

Berlin-based montamo, which is trying to solve the lack of skilled workers needed for the green energy transition by training migrants to become skilled construction workers in the energy sector, raised €2.1m in pre-seed funding. Project A Ventures led the round.

Paris-based MoSo, which allows content creators to adapt and share their videos across all social networks, raised €2m in seed funding. OneRagtime led the round and was joined by investors including Kima Ventures.

Manchester, UK-based Housr, which has developed a platform for students that brings together rental properties, utilities and lifestyle perks in one place, raised £1.5m in funding. Bachmanity led the round.

Copenhagen-based Seasony, whose robots allow vertical farms to automate a large part of their work, raised €1.5m in funding. North Ventures and Export and Investment Fund of Denmark led the round.

Perugia, Italy-based Cents, which allows ecommerce businesses to offer customers the option of donating to a charity project at checkout, raised €1.15m in pre-seed funding. SICI led the round and was joined by investors including CDP Venture Capital.

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