VCs' tips for fundraising founders in 2024

Good morning there,

I just got back from Switzerland on Friday, where a bunch of VCs and founders (as well as would-be founders) gathered for the annual START Summit in St. Gallen. The mood of the conference was, I’d say, relatively upbeat: the big unicorn statue — symbolising the idolised $1bn company — made a comeback this year, and VCs chatted on panels about how they’re busier this spring with deals than they were last year. But the undertone was that we’re not out of the woods yet, and challenges remain for startups. Today, I dig into some big takeaways and share advice from VCs on fundraising in 2024. 

Elsewhere, we take a look at the unicorns that have been minted so far this year, one indoor farming startup’s strategy for growing climate-resilient hops and the man who sells startups orphaned by their investors to US tech giants.

— Anne Sraders, senior reporter

VCs' tips for fundraising founders in 2024

I imagine it's quite daunting to be an entrepreneur right now. You look at the slew of headlines in the last year or so and they paint a bleak picture of the state of tech startups and VC funding; to be clear, challenges remain. Persistently high interest rates have made VCs more risk-averse and selective, while many startups continue to struggle to raise money as funding levels have dropped in the last year. 

But entrepreneurs start companies in every environment  — and I recently found myself in a big room full of them. Last week, I attended the START Summit with a bunch of students and young founders (and founder hopefuls) in St. Gallen, Switzerland. Complete with a unicorn statue that faithful Sifted readers might remember from last year's summit, the mood of the conference seemed cautiously optimistic.

I took the chance on stage to ask a few German VCs — Judith Dada, partner at General Catalyst/La Famiglia, Alex Schmitt, partner at Lightspeed Venture Partners and Rainer Märkle, general partner at HV Capital — what advice they had for founders trying to raise in these difficult times, and what they should be aware of considering the bar to write that cheque is higher. 

Schmitt advises founders starting companies not to get bogged down: it'll likely be a good number of years before you sell your business — and probably in a very different market to today. "While it's important to understand the environment that you're in, you're building now for something in the future, which will change anyway,” he says.  

Still, today’s market will certainly affect your deal terms and valuation. You’d be advised not to go for the absolute minimum dilution by trying to get “some crazy valuation,” says Dada, adding that founders should anticipate parting with 15% to 25% of their company in typical (read: not crazy-competitive) rounds. And unless you’re building a hyped AI company, you shouldn’t expect to get 20 term sheets. But one thing you should expect, especially in early funding rounds, is a “clean” term sheet without onerous veto voting rights or multiple liquidation preferences, the VCs say.  

It’s also not so easy anymore to get customers for your product, as company budgets have been slashed. But if you do have some buyers lined up, “traction is something that’s really gold, and it helps you massively in your fundraise,” says Schmitt. The VCs say that having a roster of customers means more now than it did in 2021. 

In general, Schmitt urges founders to “account for more time, account for more runway” when raising money. The time to raise a Series B round, for instance, has grown by 85%, according to recent Carta data.

Founders shouldn’t “get distracted by good news, bad news,” Märkle adds. “Navigate, pivot, change, adapt, but focus on finding a real solution. All the rest — the funding rounds, the valuations, your partners, at some point the exit — will then strictly be a result.”

To be sure, it all sounds pretty upbeat. Märkle even jokes that “every year you come to the stage and you say, 'Actually, this year is the very best time to fund a company and start a company'. But actually [in] '24, it's really true.”

We’re not out of the woods yet though, and the reality is that fundraising, by and large, is still a challenge for many startups. Meanwhile, companies around the world are defaulting on their debt at the fastest rate since the financial crisis, while European startups are also reportedly increasingly turning to more complex debt raises amid the lack of capital. 

But there are some early green shoots in the fundraising market, and VCs tell me they’re getting busier this spring. For the sake of new founders raising money right now, we can only hope that Märkle’s prediction is true: That 2024 really is the best time to start a company. Time, of course, will tell. 

— Anne Sraders, senior reporter

You’ve got a great product, but can you actually sell it?

We get the advice (and success stories) of experts from Morgan Stanley Inclusive Ventures Lab, influencer marketing platform Wearisma and Made For More Marketing on where to start with a sales strategy and how to create an inclusive brand voice.

👀 Stability AI CEO Emad Mostaque has resigned from the London-based AI startup. Shan Shan Wong, Stability's chief operating officer, and Christian Laforte, its chief technology officer, will take over as interim co-CEOs. Mostaque will also leave the board, a company blog post confirmed.

• It follows a wave of high-profile departures from the startup in the last 12 months — most recently research scientist Robin Rombach, one of the two academics who developed the image generation model Stable Diffusion for which the company is best known.
• Mostaque posted on X that he made the decision to step down to focus on fixing "the concentration of power in AI".

🇬🇧 Greensphere Capital, a UK-based fund manager, has raised £66.3m for its Gaia Sciences Innovation Fund to back startups and spinouts coming out of a group of British bioscience and environmental institutes. The group includes the Royal Botanical Gardens, Kew, University of York, Norfolk and Norwich University Hospitals NHS Trust and the University of East Anglia.

• Funding will go to companies working on products and services that can help tackle biodiversity loss and climate change.
• The funding comes from the UK Infrastructure Bank, which put £50m into the fund, alongside a £15m investment from Frank Mars, a member of the board of directors at Mars Inc.

🇳🇱 Netherlands-based Meatable says it has set a new record for cultivated meat production. The foodtech shared that it has managed to develop pluripotent stem cells into the fat and tissue muscle that make up its cultivated meat products in just four days, down from eight. 

• It’s the fastest production time in the industry, which is good news for potential mass production when products hit the market. 
• But stringent regulations across most of the world mean that cultivated meat products aren't approved anywhere except the US, Singapore and Israel. Even then, Wired reported last month that all the restaurants that sold the product have recently stopped doing so. 

💰 Meet the man who sells VC orphans from CEE to tech giants in the US.

🦄 Which European startups have hit unicorn status in 2024?

👀 38 B2B hospitality, travel & events startups to have on your radar (Sifted Pro subscription required)

🌱 Ekonoke, a Spanish indoor farming startup, believes it’s cracked the secret to growing climate-resilient hops in controlled environments. Stretching at almost 10 metres high, its hydroponically grown, indoor hop plants are flowering under multicolour LED lights. They could also upend one of the recent stories swirling around startup land: that vertical and indoor farming companies are just another nice idea that once had VCs swooning, before buckling under the gravity of tough unit economics and thin margins.

• Ekonoke believes it has an edge over the companies growing salad leaves that have come and gone before it. This is because of the advantages of selling an in-demand crop which is getting harder to produce due to climate change. Its business model relies on entering 20-year contracts with beermakers, which involves setting up a hop-growing facility right next to their breweries. So far, all of Ekonoke’s production is being sold to Corporación Hijos de Rivera, the manufacturers of the Estrella Galicia beer — which already sells IPA and amber lager beers made with the startup’s hops. 
• “The difficulty was to obtain returns comparable to those in the countryside,” CEO and cofounder Inés Sagrario tells Sifted during a visit to Ekonoke’s R&D facility in Alcobendas, northern Madrid. “Others have tried but haven’t succeeded. Perhaps because of a lack of focus — at one point we dropped all of what we were doing before and concentrated on hops full-time.”

🤔 Microsoft announced last week that DeepMind cofounder and Inflection AI CEO Mustafa Suleyman is joining to head up its new AI consumer division. It adds to the tech giant's other AI bets, which include a hefty partnership with OpenAI and a recently signed deal with French startup Mistral, leading the FT's Due Diligence to ask: has the Big Tech company found an antitrust cheat code? (FT — subscription required).

💧 Climate investors see growing opportunities in water tech (FT).

🇺🇸 Tomorrow, Europe editor Mimi Billing will bring together a panel of experts to hear their actionable advice on how to nail your tax strategy when expanding in the US. RSVP.

⭐️ Tomorrow, we'll be showcasing five of the rising stars from the world of deeptech — exclusively for Pro subscribers. Explore the latest developments and discover some of the most promising startups from across Europe. RSVP.

🎤 Also tomorrow, French tech reporter Daphné Leprince-Ringuet will be going all in at Paris startup campus Station F's karaoke night — going to be there? Drop her a line. 

Geneva, Switzerland-based nsave, an app that allows people residing in economies with unstable banking systems to make payments and open bank accounts in Switzerland, raised $4m in seed funding. Sequoia Capital and TQ Ventures co-led the round and were joined by investors including Y Combinator, SV Angel, FONGIT and ACE Ventures.

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