The biggest problem for VCs and startups in 2024

Good morning there,

I don't like to start your morning off on a depressing note, but fresh data just dropped showing the depth of the European venture downturn in 2023 — and it's predictably bad. I dig into the key stats, and what I think is one of the biggest challenges for VCs and founders in 2024, below. 

Elsewhere, we take a look at German climate unicorn 1KOMMA5°'s new revenue figures, generative AI startup StabilityAI's fresh lawsuit woes and how US-based Sequoia Capital's European venture scout programme is doing. 

— Anne Sraders, senior reporter

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The biggest problem for VCs and startups in 2024 

There’s a lot of talk about just how tough 2023 was for the European venture ecosystem — and now we have the data. And yes, it was bad. 

Deal value was down nearly 46% from 2022’s levels, at €57.1bn, according to a new PitchBook report out today. But on the bright side, if you exclude those two crazy years of 2021 and 2022, the trend is actually one of growth — deal value has been steadily increasing in Europe.

But, here’s the tricky part: exits — or, rather, the lack thereof — pose what I think is the biggest problem for VC in 2024. According to PitchBook, exit activity plunged to the lowest level since 2013 last year, with €11.8bn worth of exits — 70.9% lower than 2022. The vast majority of those exits were acquisitions. 

Pretty much everyone I talk to these days is worried about the lack of exits and, consequently, the lack of returned capital to LPs. It means they don’t have as much capital to recycle back into new VC funds, which in turn, won’t have more money to invest into fledgling startups. This all won’t work itself out in one year (as I’ve said before, I don’t think 2024 is the year we return to what could be considered more “normal”), but it’s going to be a key topic in the coming months.  

Of course, this is also a big conundrum for founders — and this year, startups may become more desperate for an exit if they can’t get a cash infusion from their investors. That might prompt some more fire sales to those lucky companies that have the means to snap them up. Plus, we’ll likely see more interest in secondaries as VCs grow more anxious to realise returns for their LPs.  

Unfortunately, other exit options, like the elusive IPO, probably won’t offer much of a respite this year. “We expect no meaningful recovery in the value or volume of public listings in 2024,” writes PitchBook analyst Navina Rajan; the macroeconomic picture is still too weak. That means that the host of IPO-ready companies waiting in the wings might have to keep their plans on ice a bit longer. 

Some VCs are more optimistic, though: Earlybird cofounder and partner Hendrik Brandis thinks we’ll see the “shy start of new transactions” in the second half of 2024, he tells me, adding that his own portfolio companies (those with money on hand, anyway) are continuing to look at acquisition opportunities. 

It’s looking like founders will have a big year of decisions ahead of them: to sell or not to sell — or, to buy or not to buy? 

If you’re a founder, I want to know what’s on your mind: are you thinking about selling your company this year? Or are you on the hunt to buy up a competitor? And VCs: how are you talking to your LPs about the current exit environment? Send me a line.

— Anne Sraders, senior reporter

🇩🇪 German climate unicorn 1KOMMA5°, which provides solar systems and heat pumps, doubled its revenue to €460m in 2023, up from €206m in 2022, its preliminary financial results show. The company also remained profitable in its second full financial year, with its operational profit (EBIT: earnings before tax and interest) more than doubling from €19m to €50m. 

• The Hamburg-based company expects to increase revenue to between €700-€750m in 2024. And despite the bleak IPO market, it is also considering a public listing in 2025, most likely on the US NASDAQ, it told Sifted in a recent interview. 

💵 Interested buyers had until yesterday to bid for Paris-based insurtech Luko, which was placed into receivership late last year. French insurance media outlet L’Argus de l’assurance reports that five insurance companies have submitted an offer. They include German multinational Allianz, as well as French startups Leocare and Lovys, French company Magnolia and UK bike insurtech Laka. 

• A deal that would have seen incumbent insurer Admiral buy Luko for €14m fell through last October when fresh audits of the startup raised new accounting concerns. A decision on a new deal is expected in the next few days.

👀 London-based startup Stability AI is getting sued, again. Tayab Waseem is taking the company to court, saying he’s owed up to $300m after Stability AI “reneged” on a promise of giving him a 10% stake in the company, Business Insider reports. A company spokesperson told Sifted that the action “is an opportunistic and baseless suit that was previously filed and withdrawn. Waseem was a medical student and intern who departed to resume his studies well before Stability AI shifted its business to generative AI. Any claim that Waseem was unfairly treated by Stability AI is without merit and we will aggressively defend our position in court."

• Waseem isn’t the only cofounder who claims he’s been diddled out of money by the company. Last year, another cofounder Cyrus Hodes filed a lawsuit saying that the company’s CEO Emad Mostaque bought his 15% stake in the company for just $100, after what Hodes called a “brazenly deceitful” argument that the company was “essentially worthless”. At the time, a spokesperson for Stability told Sifted that the suit was “without merit and we will aggressively defend our position”.

🕵️‍♀️ In early 2020, US VC Sequoia secretively launched its scouts programme in Europe — an individual investor network in which “scouts” are given capital to invest in promising early-stage companies. Three years on, Sifted looked at how the programme has grown on the continent. 

• Europe’s scout programme started with a few dozen investors spread out across several countries. Running in cohorts, they get $100k a year to invest — and are usually entrepreneurs or operators at high-profile companies. Find a (non-exhaustive) list of active European scouts here.

🧊 A UK startup says it can refreeze the Arctic. Melting ice in the Arctic is one of the most visible — and worrying — signs of our rapidly changing climate. Welsh startup Real Ice is working on technology that could, it says, refreeze parts of the Arctic ice and boost its thickness. 

• The startup is currently working with the University of Cambridge’s Centre for Climate Repair to develop its tech further, before beginning large-scale deployment in three years’ time.  

💰 How to raise money for your deeptech startup 

Berlin-based Everphone, which lets companies and their employees rent mobile phones, raised €270m in Series D funding. Capnor and Calista led the round and were joined by investors including Cadence Growth Capital.

Karlsruhe, Germany-based Ineratec, an e-fuel supplier, raised $129m in Series B funding. Piva Capital led the round and was joined by investors including Planet A Ventures, MPC, High-Tech Gründerfonds, FO Holding, Safran Corporate Ventures, Honda, ENGIE New Ventures, HG Ventures, TDK, Copec WIND Ventures, RockCreek, Emerald and Samsung Ventures.

Delft, Netherlands-based QphoX, which is developing a quantum modem device to connect and scale quantum systems, raised €8m in funding. QDNL Participations led the round and was joined by investors including The EIC Fund, Quantonation, Speedinvest, High-Tech Gründerfonds and Delft Enterprises.

Bratislava-based Cloudtalk, which provides calling software for sales and customer service teams, raised €26m (€20m in equity and €6m in debt) in Series B funding. KPN Ventures and Lead Ventures led the round and were joined by investors including Point Nine Capital, henQ, Presto Ventures and Orbit Capital.

London-based Vertice, which helps companies manage their annual software spending, raised €23m in Series B funding. 83North and Bessemer Venture Partners led the round. 

Geneva-based Stalicla, which is developing precision medicine pipelines for neurological disorders, raised $17.4m (including $3.8m in a credit facility) in Series B funding. SPRIM Global Investments led the round.

Netherlands-based Taylor, which develops electronics and software for solar panel manufacturers, raised €8m in funding from investors including pension fund ABP and Rubio Impact Ventures.

London-based Sky Engine AI, a synthetic data cloud platform for data scientists and engineers working on computer vision projects, raised $7m in Series A funding. Cogito Capital Partners led the round and was joined by investors including Edge VC, Taiwania Capital, Movens Capital and High-Tech Gründerfonds.

Madrid-based Harbiz, a platform for fitness professionals to manage their business, raised €5m in funding. Octopus Ventures led the round and was joined by investors including JME Ventures, Athos Capital and Enzo Ventures.

Barcelona-based Remuner, which helps companies manage and automate sales commissions, raised €2m in pre-seed funding. Pear VC led the round and was joined by investors including K Fund, Bonsai Partners and Enzo Ventures.

Milan-based Jampy, which develops wellness products and supplements for pets, raised €1m in pre-seed funding. 360 Capital led the round.

Utrecht-based Runnr.ai, which develops software for hotels to communicate with guests, raised €1m in funding. Arches Capital led the round.

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