Sifted - Onfido's exit

Good morning there,

The ideal startup journey goes something like this: Founders have an idea, they build a company around products or services that are valued by their customers, they attract employees who are passionate about the work and who have skin in the game and, with some luck and hard work, they grow that company to a point where it's an attractive acquisition target for another, bigger company — or for the IPO markets.

With a little more luck, they are able to cash out and handsomely reward those employees and investors who supported the company — and maybe those people will go on to start their own companies with that payday cheque. It's a nice story, for sure, but one that's not as common these days amid the dearth of exits and icy IPO market.

Today, my colleague Amy Lewin digs into one company that may soon be living that dream: UK scaleup Onfido, which is in acquisition talks with US payments company Entrust. It's a deal that could see one early investor make a hefty 320x return on its initial investment. Scroll on for more. 

Elsewhere, France has its first unicorn of the year, the former deputy CEO of Société Générale announced a first close of a new fund, and after electric vehicle company Arrival announced it was filing for administration in the UK, we ask if Europe's electric vehicle dream is over.

— Anne Sraders, senior reporter

How to create the AI-powered office of the future

Where do you begin with a workplace AI policy? Our latest report reveals how founders are creating an AI implementation plan for their business — and how you can too. 

Onfido's exit

Yesterday UK scaleup Onfido announced it was in acquisition talks with US payments company Entrust. 

If the deal goes ahead, it could be great news for early investors, the founders and employees. The company’s first backer, the University of Oxford, could make a 320x return on its initial investment. And more than a dozen employees could become millionaires, cofounder Husayn Kassai tells Sifted.

Those employees might also go on to start their own companies (14 already have), or angel invest — kicking off the kind of flywheel that all startup ecosystems thrive on. Several of Onfido’s early angels were startup founders themselves at the time they invested, like Wise’s Taavet Hinrikus, BlaBlaCar’s Frédéric Mazzella and Nicolas Brusson, SwiftKey’s Jon Reynolds and Brent Hoberman’s Lastminute.com. They’ve made returns ranging between 9-24x on their investments, says Kassai. 

Onfido’s founders, Eamon Jubbawy, and Kassai, are already both on businesses number two, three and four. Jubbawy is CEO of carbon removal registry Isometric, having also cofounded payments company Sequence and recycling startup Safi after leaving his operational role at Onfido. Kassai is CEO of Quench, a platform that uses AI to personalise learning.

The Onfido-Entrust deal is the kind of M&A investors and startup employees have been eagerly anticipating. The number of M&A transactions dropped more than half in 2023 compared to 2022, and have been tailing off for three years, according to last year’s State of European Tech report. 

But some are concerned that regulators and anti-trust laws might scupper a dose of M&A. 

In December last year, Adobe called off its planned $20bn acquisition of design startup Figma, following pressure from regulators in the UK and EU. (A blow for Index, its biggest VC backer.) In September, Dutch travel giant Booking was blocked from acquiring Swedish flight booking platform Etraveli by the EU. Microsoft spent almost two years battling regulators to buy gaming studio Activision Blizzard, finally getting approval last October. A proposed merger between European scooter startups Tier and Dott might yet run into anti-competition hurdles too. 

All this could be off-putting to deep-pocketed Big Tech companies, some of the most likely acquirers of European tech. In 2023, Amazon, Apple, Google, Meta, Microsoft and NVIDIA did just 8 startup M&A deals, down from 33 in 2022, according to CB Insights.

“Large buyers are more gun-shy because of regulatory hurdles they need to jump through,” Abe Finkelstein, managing partner at investment firm Vintage, an LP in European VCs like Accel, 83North, Creandum, HV Capital, LocalGlobe and Seedcamp, told me yesterday. On the call I took immediately before that, a secondaries investor told me the same thing. 

Kassai, meanwhile, told me he has no concerns regarding Onfido’s deal going through. 

Are we on the cusp of a Great Year of Exits? Are thousands of startup employees about to cash in and go on really nice holidays? Or will Onfido prove to be one of the luckier ones? Let me know what you’re seeing in the market. Email me.

— Amy Lewin, editor

👀 It’s not that often that the public gets a sneak peek into a startup’s financials — but French unicorn Mirakl, a SaaS company that provides tools to support businesses’ online marketplaces, has published a selection of numbers from its 2023 results. 

• The startup’s ARR grew 20% to reach $160m, and it says that the Mirakl platform, its main product that provides the software and services underpinning ecommerce sites, is now profitable. The company overall, however, is not yet in the black. Mirakl did not publish its losses.
• Valued at $3.5bn, the startup provides services to more than 450 businesses, ranging from Airbus to Asos. All combined, customers generated $8.6bn in merchandise value on Mirakl-powered platforms last year — 50% more than in 2022, meaning big revenues for the company, which takes a cut of each sale on its platform.

💰 After a banking career spanning almost two decades, Société Générale’s former deputy CEO Didier Valet has closed €75m of a target €150m pan-European seed fund called Varsity VC. The fund is dedicated to healthtech, climate tech, enterprise software and — you guessed it — fintech. 

• Seed investing in France is becoming increasingly competitive, with many new VCs like Frst and Newwave now focusing on the earliest stages of company development. But Valet says that with €150m, Varsity would be one of France’s largest seed funds. The fund has already backed five startups including wealth management company RockFi.

📈 With a new €40m Series C, Sequoia-backed accounting platform Pennylane has seen its valuation double to €1bn — and has become France’s first unicorn of the year. The company is emerging as a winner amid a shaky market for fintech and is planning to use the fresh injection of capital to jump on opportunities to acquire competitors. “We want to be predators, not prey,” says CEO Arthur Waller.

• Pennylane’s software centralises data — such as invoices, tax returns or financial statements — in real time, in one platform that’s shared by both enterprises and accountants.
• The company says that the last two years have seen customer numbers grow 40-fold to reach 135k SMBs and 2,000 accountancy firms — and while it is only present in France at the moment, it has big ambitions to expand to the rest of continental Europe.

Spot the next unicorn before your competitors

Sifted Pro provides definitive insights on Europe’s early-stage ecosystem through weekly sector Briefings, our data-driven scouting tool, networking events and unlimited access to our journalism — keeping you on the pulse and connected to industry leaders.  

🦄 16 UK soonicorns to watch.

💪 How to beat your competitors for talent.

😬 Electric vehicle maker Arrival listed on the Nasdaq in 2021 with a lofty $13bn valuation, making it the largest-ever listing for a British tech company at the time. But fast forward three years and Arrival, once championed by former prime minister Boris Johnson, has filed for administration for its UK arm. 

• There were company-specific issues at Arrival, commentators say. It tried to make all its components in-house — an expensive strategy. It also pioneered the idea of manufacturing close to customers, meaning it was hard to reach economies of scale. 
• There were also industry-wide factors at play. The incumbent car companies have moved into the sector, with deep pockets, and Chinese players — which increasingly dominate the electric car segment — are moving into vans too. 
• Arrival UK’s collapse comes just months after the bankruptcy of another European e-van maker, Sweden’s Volta Trucks. At the end of last year, another e-van maker, UK-based Tevva, suffered a failed merger agreement with an American company. That’s led to us asking, are Europe’s e-van dreams over?

It seems that UK biotech funding is settling into a steady rhythm after the boom times of 2021 — according to a new report from the UK BioIndustry Association.

• UK-based biotechs raised £1.25bn from VCs last year, according to the report — just 6% less than in 2022, and compared to a 43% drop in investment year-on-year across UK tech as a whole. If you take out 2021’s £2.9bn, funding for 2020, 2022 and 2023 is almost level. 
• The country’s biotech scene also sat on top in Europe last year — bringing in 41% of the region’s total VC investment into the sector.
• Among the top deals for last year were Apollo Therapeutics’ £209m Series C, Ascend Gene & Cell Therapies’ £105m Series A and Beacon Therapeutics’ £96m seed round. There was also a £48m Series A for AstronauTx, a UCL spinout working on Alzheimer’s treatments — an area several investors tell me is hotting up this year.
• For the treatments being developed by these companies to land in the laps of patients, they need to make it through rigorous testing — an area in which the UK is also ahead of Europe, according to the report. The country leads the region with the highest number of companies conducting clinical trials.

London- and Cork-based Screendragon, which provides management cloud software for things like marketing and brand management, raised $27m in funding from Kennet Partners and Federated Hermes Private Equity.

Paris-based Jow, an app for personalised grocery shopping, raised $13m in extended Series A funding. Northzone led the round and was joined by Eurazeo.

Stockholm-based Myrspoven, which provides buildings with AI software to optimise their energy usage, raised €5.4m in funding. 4impact capital, Vantaa Energy and AMAVI Capital led the round. 

Paris-based Guided Energy, which helps EV fleet managers optimise their charging networks, raised $5.2m. Sequoia Capital and Dynamo Ventures led the round. 

Sofia-based Evrotrust Technologies, which provides privacy software for things like e-signatures, raised €3.3m in funding from investors including Silverline Capital.

If you’d like to submit a deal, get in touch. 

• Sign up to our specialist newsletters if you want more on fintech, climate tech, startup life and VC.
• Tune in to Sifted’s podcast, Startup Europe.
• Join Sifted’s journalists for live Sifted Talks with industry experts, diving into the biggest questions facing startup Europe.
• Access investment-grade research on the hottest sectors, rising stars and success stories from across European tech by subscribing to Sifted Pro.
• Follow us on LinkedIn and X.