Sifted - Climate's blockbuster week

Good morning there,

Last week I found myself in the Berlin Google office right by the Spree river on a blustery Wednesday afternoon. I was there to watch a batch of fledgling startups pitch their climate tech ideas for venture incubator Carbon13’s first Berlin batch. It was fascinating to hear about some of these technologies and their potential — but I couldn’t help but think about how many years it would be, and how much money it would take, before they reached scale. Today, I dig into some of the trends we’re seeing in climate deals so far in 2024 — and if the pace and interest from VCs will continue. 

Elsewhere, we look at the Spotify and Palantir alumni who’ve just raised for their new AI startup, layoffs at German HR tech unicorn Personio and the European biodiversity startups you should have on your radar. 

— Anne Sraders, senior reporter

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Climate’s blockbuster start to 2024

If you’ve been paying attention to the deals section of this newsletter lately, you may have picked up on a trend: there have been a number of massive climate deals hitting the newswires.

Last week, German portable battery startup Instagrid announced a whopping $95m Series C funding round from the likes of the Ontario Teachers’ Pension Plan and High-Tech Gründerfonds; and on the same day, Copenhagen-based EV charging infrastructure startup Monta also announced it raised a €80m Series B from investors like US-based Energize Capital, Denmark’s Export and Investment Fund and GreenPoint Partners. Also last week, Hamburg-based alt-food startup Infinite Roots (formerly MushLabs) announced Europe’s largest fundraise for a mycelium company, with a $58m Series B. 

Climate tech isn’t a new hot spot for VCs — in fact, the largest European VC deals in 2023 were in climate. But some say 2024 could see the sector get even hotter.

This year will “look better than 2023 in terms of the number of climate funding rounds,” predicts Melina Sanchez, principal and VP of impact at AENU (which participated in Monta’s recent round). “There is still dry capital in the first generation of climate VCs in Europe, and there is an increasing appetite from generalist VCs in climate as well.” 

She expects we’ll see more growth rounds for climate companies this year as they mature — although she doesn’t think there will be a “sudden influx” of growth capital into European climate. 

Of course, the excitement around climate tech isn’t just for these big companies; VCs are still backing a host of fledgling startups. At Carbon13’s event, six newly formed companies — one aiming to install lightweight solar panels on plastic greenhouses, another building a portable EV charger — gave their spiel on how their tech would change the world. Investors like Sanchez believe VCs’ “strong” preference for those earliest-stage companies (pre-seed and seed) will continue in 2024.

But the challenging bit is going to be whether the growing crop of seedling companies can mature to those Monta-sized rounds. There’s “still a noticeable climate growth funding gap (especially at Series B and C), and startups will have to be creative on how to complete their capital stack with project financing and the like,” Sanchez says. Plus, we may see more consolidation in 2024, particularly in popular areas like carbon accounting.

I’m curious: What trends do you think we’ll see in climate deals this year? Are there more Montas and Instagrids around the corner? Is there an area ripe for M&A or new startups that we’re missing? Send me a note.

— Anne Sraders, senior reporter

💰 Spotify and Palantir alumni-founded AI startup Wondercraft has raised $3m. The UK startup allows people to create podcasts, audiobooks, adverts and corporate training material using synthetic voices from a script written by a user or ChatGPT-like large language model (LLM). 

• Wondercraft plans to target individual creators and enterprises with a monthly subscription model. The idea is that it’s hugely expensive to produce audio content like podcasts and adverts, and an AI studio like Wondercraft could cut those costs significantly. 
• The round was led by US VC Will Ventures, which was joined by investors including Steven Bartlett and Y Combinator. ElevenLabs, which built the text-to-speech tech Wondercraft runs on and raised an $80m Series B last week, was also involved.

🇬🇧 The UK government is engaging with industry lobby group Startup Coalition over controversial new legislation limiting who can qualify as an angel investor — but it might be too late. 

• Startup Coalition sent an open letter to the Chancellor last week signed by more than 2,000 people pushing back against the new legislation. In a LinkedIn post on Friday, the group’s executive director, Dom Hallas, said that although the government was engaging, “there is no legislative mechanism now available to the Government to change the rules ahead of their implementation at the end of the month. That means that the new thresholds will come into force at the end of this month”.
• “This is obviously extremely disappointing,” he added, “not least because if the Government had engaged more fully when we (and others) had first raised this as an issue some time ago this wouldn’t have been the case [...] but it is now, sadly, not something that will be directly reversed at this stage”. That said, he added that the group will be working with HM Treasury and others in the coming days. 

☀️ Entrepreneur First (EF) thinks SF is still where it’s at. From now on, anyone who participates in the London-HQ'd talent accelerator’s programmes around the world will be invited to relocate to San Francisco if they make it through the first stage and receive funding from EF’s investment committee.

💵 US-based VC Lightspeed Venture Partners is reportedly planning to sell $1bn worth of startup stakes to return cash to its investors, the Financial Times reported. 

• The firm, which also has offices in Berlin, Paris and London, has reportedly approached investors about selling a portfolio of 10 companies and rolling the assets over into a so-called continuation fund — a common private equity strategy — which Lightspeed would continue to manage. Such funds are used to enable limited partnerships to get some liquidity while holding onto investments for longer. Lightspeed declined to comment to Sifted.
• The firm has invested in a host of European companies, including Vinted and Personio. Although not common in Europe, other VCs have set up continuation funds — HV Capital, for example, was the first firm in Germany to launch such a fund in 2022. 

✂ And, ICYMI, German HR tech unicorn Personio is laying off around 100 employees across product and tech. 

• The Munich-based startup, which was last valued at around $8.5bn, is backed by investors including Greenoaks Capital, Northzone and Index Ventures.
• Late last year, the company also opened a US office and said it planned to double its US workforce by the end of the year, Sifted reported. 
• “This was a deeply difficult decision and is one that took a lot of time to contemplate, but is crucial to continuing our strong position in the market and delivering on our exciting product roadmap” Maria Angelidou-Smith, chief product and technology officer of Personio, said in a statement. The company added that the layoffs were not due to cost-cutting. 

🌱 78 European biodiversity & conservation startups to watch.

💰 Why is fintech failing boomers?

🏢 Data infrastructure 101: Why it matters to your startup. (Sponsored by Aiven).

🌳 Come along to our climate tech pitch event. Join us virtually tomorrow to hear from Nossa Data, HeyCharge, Blykalla, ReBlade and Terrawaste, early-stage startups in VCs' new favourite vertical: climate tech. RSVP.

💼 On Wednesday, Tim Smith will be joined by Notion’s Robbie O’Connor, Index Ventures’ Paula Garcia Domingo, Figma’s Siobhan O’Reilly and Octopus Energy's Ashley Firth to find out how founders can understand, engage and empower Gen Z workers to fuel the next growth phase of their startup. RSVP.

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