Sifted - An LP's advice on fundraising

Good morning there,

One thing I've been hearing a lot about recently is portfolio management. When there's less capital available to fund your startups and they're not performing as you'd hoped, VCs have to do some long, hard thinking about which "winners and losers" in their portfolio make the cut to reinvest. It's a tricky and tough dynamic, and one I'm really curious about right now. Today, I dig more into the importance of portfolio management — and advice for VCs pitching LPs — in a conversation with a managing director at major UK LP British Patient Capital.

Elsewhere, Aleph Alpha speaks out on the new EU AI Act, a Paris-based fund raises €400m and a deep dive into the latest VC philosophy movement, "effective accelerationism". 

                                                              —Anne Sraders, senior reporter

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Advice for fund managers pitching investors from the UK’s most active LP 

Ian Connatty fields tons of pitches from eager GPs. And his organisation, British Patient Capital — the VC arm of state-backed British Business Bank — funds a lot of them. It’s backed 40 firms, managing 70 funds, since launching in 2018 — making it the most active LP in the UK in the past three years, per PitchBook. But in the rough fundraising market for VCs, LPs are growing choosier than ever. 

I recently asked Connatty, managing director at BPC and (newly appointed) deputy CIO of BBB, what a good fund manager actually looks like — and what they should keep in mind when trying to get BPC’s attention (and cheques). His top advice? “If there's one critical bit I would call out, it's that distinction between being an investor and being a fund manager,” he tells me. 

Portfolio construction and management — not just being able to find exciting new companies, but doubling down on your best names and not “throwing good money after bad” — is key, he says, especially at a time when many VCs are nervously eyeing their returns. Another big point Connatty highlights: self awareness. Being honest about what your strengths and weaknesses are — across the whole spectrum of the VC job, from sourcing to evaluating companies to managing the portfolio — is beneficial to prospective LPs. 

“If you say, ‘We're really good at finding these companies that nobody else can find,’ for example, and then we go speak to these founders and they tell us the direct opposite, that's not fantastic,” Connatty says. It’s all about “having an awareness and knowing that there's no right way to do this.”

I’m curious to hear from the GPs out there: how are you thinking about portfolio management and construction right now? How do you decide when to stop investing in a company, and how do you ensure you return capital to your LPs in good time? Send me a line. 

— Anne Sraders, senior reporter

🤖 Aleph Alpha says it “moderately welcomes” the new EU AI Act. The German startup, which recently raised one of the largest AI rounds in Europe, wrote in a letter posted on LinkedIn yesterday that while there are some positive elements to the newly agreed upon Act, big questions remain:

• How much “effort” will it take to comply with regulations — both “personal and technical”?
• How will regulations in Europe measure up to the US? “Regulation in Europe that is too strict in comparison [to other countries] remains a potential competitive disadvantage and a clear locational disadvantage,” the letter says.
• And will regulation restrict innovation?

🇫🇷 France’s best-kept secret: Singular closes new €400m fund. It’s only three years old, yet Paris-based Singular VC is up there with some of France’s biggest investors, having recently closed a new €400m early-stage fund to back European startups from seed to Series B. 

• This is Singular’s second fund, following a €225m fund launched in 2020 — and the firm’s founders say that neither was particularly hard to close. 
• Partners Jeremy Uzan and Raffi Kamber come straight from the ranks of established French VC Alven, where they backed companies including SaaS platform Algolia, business banking unicorn Qonto and fintech giant Stripe.

🗞️ OpenAI will soon be making available real-time content from German media conglomerate Axel Springer’s publications — including stories from Politico and Business Insider — via ChatGPT. 

• According to a press release, ChatGPT will be sharing “otherwise paid content”. Elsewhere, “quality content” from Axel Springer’s publications will be used to train OpenAI’s models.

🇩🇪 Yesterday, the German government agreed to a new 2024 budget that would cut funding to the country’s climate and transformation fund. The proposal, which still needs to be voted on, would see the fund slashed by €12bn in 2024.

• Berlin has already frozen the fund — which initially planned to invest €212bn in deeptech and climate tech startups, amongst other things, over a period of three years — after a court ruled that the allocation of a portion of the funds was illegal.

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🧐 Seeking e/accs. Dedicated social media lurkers may have noticed the proliferation of the moniker “e/acc” in tech-types’ X profiles, as the Silicon Valley-born movement of “effective accelerationism” — a belief in innovation that’s faster, harder and stronger — sweeps startup land.

It’s becoming attractive to many in Europe who are watching with frustration as the EU brings in landmark legislation to control AI. But can this rootin’ tootin’, gung ho philosophy of company building really work on this side of the Atlantic? Tim Smith talks to the European Accelerationists to find out.

We might be in the middle of a downturn, but in Barcelona, the mood is still upbeat. Particularly since, according to statistics compiled by lobby group Tech Barcelona, it’s beating Madrid.

• Barcelona is home to over 2,000 startups — including 409 that have raised more than $1m since launch. 
• And it has 24% more scaleups than Madrid, which have collectively raised $8.7bn in funding — $0.9bn more than their Madrileño counterparts.
• And the city now boasts seven unicorns, including Glovo and Wallbox. 

Barcelona's success is also partly explained by the fact that the city offers great access to top talent at a much lower cost than Silicon Valley, says Màrius Montmany, speaking to Sifted reporter Cristina Gallardo at the city’s Tech Spirit event. He chose Barcelona over California to set up his ecommerce app REVER, after taking part in YC.

Copenhagen-based Freya Biosciences, which is developing reproductive immunotherapies for women, raised $38m in Series A funding. Sofinnova Partners and OMX Ventures led the round and were joined by investors including The Export and Investment Fund of Denmark, Angelini Ventures and CE-Ventures.

Labège, France-based Antabio, which is developing treatments for drug-resistant bacterial infections, raised €25m in Series B funding from investors including the AMR Action Fund, the EIC Fund and BNP Paribas.

Paris-based Pivot, a software tool for companies to simplify the procurement process, raised €20m in Series A funding from investors including Visionaries, Emblem and Anamcara. 

Switzerland-based PLAN-B NET ZERO, a platform that offers a range of green energy production and distribution solutions, raised €9.2m in Series A funding. Yamato Capital led the round.

Zurich-based Metafuels, which is developing technology to make sustainable aviation fuel compatible with existing aircraft, raised €7.4m in seed funding. Energy Impact Partners and Contrarian Ventures led the round.

Amiens-based Samabriva, which is developing biopharmaceuticals and chemicals using plants, raised €4m in Series A funding. Noshaq and Investsud Tech co-led the round.

Lausanne, Switzerland-based Aesyra, which develops oral appliances to treat sleep conditions like sleep apnea, raised $3m in seed funding. Supermoon Capital and Creadd Ventures led the round and were joined by Zürcher Kantonalbank.

Delft, Netherlands-based RTI Blockchain, a platform to help companies manage reusable packaging items in the logistics sector, raised €2.5m in funding from investors including Borski Fund.

Hasselt, Belgium-based Raw Stadia, which provides professional sports teams with technology to optimise how their playing fields impact athletes’ performance, raised €1.5m in funding from investors including LRM, Noshaq and LeanSquare. 

Kyiv-based Hackless, which focuses on securing blockchains and DeFi protocols from hacks and exploits, raised $1.2m in funding from investors including Dao Maker, Insignius Capital, Cosima Capital, DeltaHub Capital, Factorial and Halvings Capital.

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