Sifted - Blighty takes stock of 2023

Good morning there,

We're in the final stretch of the working year, but from what some of my sources tell me, it hasn't been a quiet week. One VC told me they're rushing to finish analysis on a new deal, while a lawyer told me that this week is prime time for transactions. I'm curious to hear from the rest of you dealmakers: are you closing any deals this week, or getting any last minute pitches? Send me a note. I'll be eagerly waiting for Q1 to see some of this activity come to fruition...

Elsewhere today, we take a look at the state of UK tech in 2023, ask if AI can replace your toxic boss and reveal how not to get burned at an accelerator.

                                                                     —Anne Sraders, senior reporter

Get an exclusive look into the future of work What does the future hold for fintech? 

Have VCs fallen out of love with fintech? In our latest report, we uncover resilient startups as they explore new avenues for growth and survival. 

Blighty takes stock of 2023

As a battered and bruised 2023 staggers towards the finish line, UK tech is taking stock of the last 12 months. Yes, fundraising is down. Yes, valuations are down. Yes, we’ve lost some bright young startups.

VCs have been hurting too: only 43 new funds were raised in 2023, the lowest number for six years. The lack of VC action has hit the UK’s biggest sector, fintech, harder than most: funding fell 72% compared to 2022 and fintech lost its title as the UK’s top funded startup sector.

Some other particular sore points stick out. Over one weekend in March, UK startupland stood still as news of US regulators shutting down Silicon Valley Bank (SVB) in California was followed by SVB UK falling the following day. The UK subsidiary was then bought by UK bank HSBC for £1.

Elsewhere Babylon Health — one of the darlings of UK tech’s first generation of startup stars — collapsed after it ran out of money in the summer. The company was once valued at $4.2bn; but the pieces of the business it did manage to sell brought in less than $7m. 

There have been some wins though. AI startup Synthesia and AI-powered financial crime company Quantexa bagged $1bn valuations, and outside of AI and SaaS we saw some major cheques written for climate tech: not least EV battery scaleup Zenobe Energy’s monster £870m raise in September. 

Atomico and Highland Europe raised €1bn funds, while Dawn Capital raised a record $620m fund to back B2B startups at Series A and B. Northern Gritstone also raised a £312m fund to back spinouts in the North of England — and a government-commissioned review outlining better ways to commercialise research went down well among the tech community. 

While the UK’s ambition to blaze a trail on AI regulation raised some eyebrows when it was first announced early in 2023, a summit held at Bletchley Park was also broadly hailed as a diplomatic success back in November. 

So where does that leave us heading into 2024? With an election looming, are you confident Labour’s government-in-waiting could deliver for UK tech? Who do you think will be next year’s standout startups? And will fintech reclaim its crown? Email us and let us know your thoughts.

— Orlando Crowcroft, commissioning editor

👀 The CEO of Danish drugmaker Novo Nordisk, Lars Fruergaard Jørgensen, was named the Financial Times’ person of the year yesterday. 

• The company's drugs — like Ozempic, intended to treat diabetes — have become increasingly popular for weight loss among the broader population. That’s led to a surge in demand, and the company’s stock price has soared in the last three years.
• Its holding company, Novo Holdings, has also been setting aside hefty sums ($1bn-2bn per year) to invest in healthcare startups.

🛫 Swedish electric plane startup Heart Aerospace has signed a deal with the biggest public charter carrier in the US, JSX, to provide it with 50 of its 30-seater ES-30 planes. The letter of intent signed between the two also includes an option for the carrier to purchase an additional 50.

• Heart Aerospace had already sold more than 200 planes to the US and Canada when it raised a $35m Series A led by Breakthrough Energy in 2021. However, it will take another few years until they are built and delivered — the plan is to have the planes in the air by 2028.

🎧 Swedish scaleup Exeger, which makes bendable solar panels that can fit on bike helmets, headphones and portable speakers, has been given a loan of up to €35m loan from the European Investment Bank (EIB). 

• The loan facility will be used to scale up its production capacity to meet customer demand; the company has so far had its solar cells installed on headphones by Adidas, Urbanista and Marshall. 

🤖 Spain’s AI minister, Carme Artigas, announced yesterday that she is stepping down from government to return to the private sector. Artigas held the position for nearly four years, and shepherded the EU AI Act negotiations this year during the Spanish presidency of the EU Council. The former entrepreneur — who was listed as one of Sifted’s 21 people who mattered in European tech in 2023 — will continue as co-chair of the AI Advisory Board to the UN secretary general.

• In a last rebuff to Paris-based AI startup Mistral — one of the companies that expressed concern about the EU AI Act — Artigas pointed out at an AI event in Madrid yesterday that its founders closed a €385m funding round the day after the EU AI Act was agreed.
• “The law can’t be that bad when it has enabled this investment — are you going to tell me that a company [valued at] €2bn can’t give us some technical reports on transparency?” she said.
• Artigas added that she now thinks it’s possible for a startup founded in Spain to reach a similar valuation without relying on foreign capital. “Nowadays, there’s no reason why a company founded in Spain could not find either in Spain or in Europe all the investment it needs to become a unicorn,” she said. Deeptech founders in the country, who decry the lack of patient capital — especially at Series B and C — might disagree.

🤔 Does your startup need a lawyer? David von Rosen, founder of Lottoland, didn't need one — and he doesn't think you do either.

☢️ By now you should know that AI is coming for our jobs, but can it replace your toxic boss? 

• Entrepreneurs are now building automated tools to try and take the personal pettiness out of the office environment, and try and make career development less about favourites and personal biases. 
• They’re also building tools to try and address workplace stress and burnout, raising questions over how much AI chatbots should be responsible for our mental health.

🔥 How not to get burned at an accelerator. They might not be everyone’s cup of tea, but accelerator programmes remain an attractive option for some founders looking for a capital injection alongside the bonus of some guidance and networking. But not all accelerators are made equal, as founders told Sifted. Their advice to founders considering an accelerator include:

• Protect yourself legally — “I wish that I had asked about a contract,” says founder Marco Filippi, who had little legal recourse when he found himself abruptly ejected from an accelerator without explanation — or the second tranche of a stipend he had been promised.
• Don’t give away too much equity — accelerators typically take 7-10% in return for funding, but Khalil Hefaf, investor at Target Global, warns that they can take upwards of 10%, and in some cases as high as 25%. That can cause issues later down the line. “At the end of the day, you want the company to succeed [and] founders [to] own a good chunk of equity in the early stages given the upcoming dilutive rounds,” he says.   
• Think about the costs — if you’re attending a global accelerator, do both you and your cofounder have to go? Björn Schimmöller, cofounder and CEO of deeptech synthetic immunobiology company iuvantium, says that first and foremost you need to consider your company’s individual financial situation. “It’s a big expense, and there was no point going there with more than one person,” he says of the accelerator he took part in.

Want to read more about the ins and outs of being a founder? Subscribe to Sifted’s Startup Life newsletter, which drops into your inbox every Wednesday. 

London-based Octopus Energy, a large renewable energy producer in the UK, raised €800m in funding from investors including Origin Energy, Tokyo Gas, Canada Pension Plan Investment Board and Generation Investment Management.

Munich-based EVUM Motors, which manufactures electric work vehicles, raised €20m in funding. Jolt Capital led the round. 

Paris-based Okomera, which aims to identify personalised cancer treatments by creating and analysing replicas of tumours on microfluidic chips, raised €10.2m in seed funding. Résonance led the round and was joined by investors including Polytechnique Ventures and Berkeley Skydeck Fund.

Lyon-based NETRIS Pharma, which is developing therapies that target cancer resistance, raised €7.5m in extended Series A funding from investors including the EIC.

Munich-based Blickfeld, which makes perception and mapping software, raised €7m in funding. New Future Capital and UVC Partners led the round and were joined by investors including Bayern Kapital, Continental, Fluxunit, High-Tech Gründerfonds and Tengelmann Ventures.

Amsterdam-based Fiat Republic, which connects cryptocurrency platforms with traditional banks, raised $7m in extended seed funding from investors including Kraken Ventures, Fabric Ventures, Arca, Inovo.vc, Speedinvest, Credo Ventures and Seedcamp.

Zurich-based CareerFairy, which developed a livestream video recruitment platform catering to students and recent graduates, raised €3.5m in pre-seed funding. Mediahuis led the round and was joined by investors including Swiss Post Ventures and Backbone Ventures.

Warsaw-based Quesma, which enables companies to connect their apps to database platforms, raised €2.3m in pre-seed funding. Heartcore and Inovo.vc led the round.

Copenhagen-based Magic Feedback, which uses AI to help companies classify user feedback, raised €1.2m in pre-seed funding. Maki.vc led the round.

Southampton, UK-based OhmSpace, which provides electric propulsion technology for satellites, raised €1.2m in seed funding. Scientifica Venture Capital and Innova Venture led the round.

London-based Vitt, a revenue-based financing platform that enables startups to earn interest on their unused cash, raised €1m. Better Tomorrow Ventures and Speedinvest led the round.

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