Why more US VCs could pull out of Europe

Good morning there,

I definitely didn’t plan it this way, but I moved to Europe ahead of a big 12 months for sporting events. Much to my delight, Germany, where I’m based, is hosting the UEFA European Championship football tournament this year, and across the border in France, Paris is playing host to the Olympics this summer.

The latter is estimated to bring 16m people to the French capital. And it’s not just the athletes that are preparing. French startups like Alltheway, a luggage delivery company, and HostnFly, which provides concierge services for house rentals, are gearing up for a boost to their businesses, as Paris-based Daphné Leprince-Ringuet reports today.

In today's big story, I look across the pond to the US — and dig into why I think we’ll see more US VCs pulling back on Europe, as American appetite for European deals has waned. Elsewhere, we look at an OpenAI-backed startup’s big new funding round and which of Germany's most valuable unicorns are profitable.

— Anne Sraders, senior reporter

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Why more US VCs could be pulling out of Europe this year

Late last week, the Sifted Slack channels were buzzing about one big story: mega US investment firm Coatue Management was losing its London-based general partner just two years after it opened a Europe office, Bloomberg reported.

The news didn’t come as much of a surprise to me: Coatue employed a similar playbook to Tiger Global (both of which are big investors in public markets) by spreading bets in startups through its growth fund in 2021. And, as the market has soured in the last year or so and late-stage deals have fallen off a cliff, naturally the firm was going to rethink its strategy, especially amid reports of paper losses in its growth equity portfolio. Coatue, which will retain a few operational employees in the London office, according to a person familiar, said it was a move to “streamline” its investing approach, adding that its “commitment to European ventures remains steadfast,” according to an internal memo seen by Bloomberg. Coatue declined to comment on the record. 

But considering what we’ve seen in the VC industry lately — from firms deciding not to raise new funds to layoffs — I wager there might be a couple more US VCs pulling back in Europe.

“Investors are probably focusing a little bit more on their own domestic markets” and existing portfolio, considering how challenging the current environment is, Nalin Patel, lead EMEA private capital analyst at PitchBook, tells me. 

They’re also slowing down; US investors have put the brakes on in the last 12 months. The number of European deals with US investor participation plunged over 44% in 2023 from the year before, with US VCs involved in 1,224 deals last year versus 2,201 in 2022, according to PitchBook data provided to Sifted.

Of course, the investing pace has slowed on US VCs’ own shores as well. And we’ve been seeing more reports of VC firms abruptly shuttering or laying off staff. One managing partner at a US fund recently told me that he believes “most US investors are avoiding” Europe in general.

That’s not to say that US investors don’t see any opportunities in Europe (especially in AI) — nor do I expect a massive exodus of big firms out of the continent altogether. I think it’s more likely we see some layoffs here and there, with VC firms keeping their teams lean and mean on this side of the Atlantic. And some mavericks — like Andreessen Horowitz and IVP, recently — will ignore the rest and set up outposts in London and on the continent despite the markets. 

If you have heard of other US VCs dialling back on their Europe exposure or office space, or have any intel or perspectives to share, please get in touch. I’m going to be watching this closely as we see how the European and US startup markets pan out in 2024.

— Anne Sraders, senior reporter 

🤖 OpenAI-backed 1X just has raised a $100m Series B led by EQT Ventures. The Norwegian robotics startup plans to use the new capital to mass produce its two-legged android that completes domestic tasks in people’s homes. 

• 1X teaches its robots by using similar techniques to training large language models, but as well as text, it is using VR and its 50-strong android team to gather data when doing tasks. “The main way we teach robots how to do things is that we clone human behaviour and human thought into the machine,” says CEO Bernt Øivind Børnich.
• 1X’s first bot, EVE, was spotted last week serving commuters coffee at a train station in Oslo, and is already being put to work in fields like logistics and security.

🚗 Munich-based car subscription provider FINN has raised a €100m Series C, nine months after changing CEO. Planet First Partners led the round and was joined by existing investors HV Capital, UVC Partners, Korelya Capital, White Star Capital and Picus Capital. 

• Last year, the company’s chief Max-Josef Meier stepped down after allegations of sexual harassment at a Christmas party at the end of 2021. 
• Maximilian Wühr — the company’s former chief growth officer — took over as CEO in April 2023. The company tells Sifted its team grew by 40% last year and is targeting expansion into new markets and growing its EV fleet.

🇫🇷 In just over six months the Olympics will kick off in Paris, bringing an estimated 16m visitors to the French capital for two weeks — a huge logistical, security and touristic challenge that is rife with opportunities for startups to contribute.  

• Alltheway, a company that specialises in luggage delivery, is expecting its activity to triple, while Hostnfly, which provides concierge services for house rentals, anticipates that the Games will contribute up to 20% of its annual turnover next year. Its secret? Partner with large corporations in the travel industry that need startups’ innovative technologies to deal with a sudden increase in activity.
• Even the International Olympics Committee (IOC), which is better known for signing deals with big players like Coca-Cola or Visa, has granted a licence to indoor exercise startup Kinomap to provide its users with the same virtual itineraries as Olympic athletes.
• The government is also working closely with startups building new technologies in the security space — and has recently handed million-euro contracts to three startups to provide AI-powered video surveillance during the event.

🧠 How European startups are taking on neurodegenerative diseases.

🇩🇪 How many of Germany's most valuable unicorns are profitable?

🤔 What is a VC orphan and what to do if you become one?

London-based hyperexponential, a pricing intelligence platform for insurers, raised $73m in Series B funding. Battery Ventures led the round and was joined by Andreessen Horowitz and Highland Europe.

Helsinki-based Cactos, which offers smart electricity storage systems, raised €26m in funding. OP Finland Infrastructure LP and the Finnish Climate Fund led the round.

London-based NumberEight, which enables advertisers to profile users while protecting their privacy, raised $2.7m in seed funding. ACF Investors led the round and was joined by investors including Nauta Capital and Ascension Ventures.

Birmingham, UK-based Furbnow, which developed a platform to optimise energy consumption at home, raised €1.1m (£950k) in pre-seed funding, which included grant money from Innovate UK and Mission Studio. SFC Capital led the round and was joined by investors including Norrsken Accelerator.

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