Good morning there,

A couple of weeks ago I spent the day pottering about Bristol’s tech scene. The timing was good — a local incubator had just been named the third-best startup hub in Europe — and everyone I met was full of regional pride. But it was the city’s impressive semiconductor history — dating from the 1970s — that caught my eye. I dig into how the Bristol chip-making flywheel is spinning, below.

Elsewhere today, A16z’s Sriram Krishnan is on the latest Sifted pod, Dutch cloud company HyperAI is suing UK chipmaking startup Graphcore and South Korea has become the first Asian country to join Horizon Europe.

— Kai Nicol-Schwarz, reporter

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Chips off the old block

A couple of weeks ago, I was running around a grey and drizzly Bristol meeting startup folk in the area. Despite the weather, there was a buzz in the air.

That morning, the FT had released a report about Europe’s leading startup hubs. SETsquared, a startup incubator run by six universities in the south west and south east of the UK, including Bristol, came in third — which practically everyone I met mentioned. Since launching in 2002, its alumni have gone on to raise £4.4bn, according to the incubator.

What caught my attention, though, was the lineage of semiconductor startups sparked by the incubator.

Truth be told, Bristol’s semiconductor credentials can be traced back to the 1970s, when US chip company Fairchild Semiconductor made the city its UK home. A little later, another silicon chip developer, Inmos, launched in Bristol and went on to raise millions in UK government funding.

A generation on, the chip flywheel started to turn further courtesy of SETsquared alum XMOS, which designs semiconductors and has raised $113m since spinning out from the University of Bristol in 2005.

Inside the startup, a division that was developing processors specialised for AI spun out as its own entity in 2016. That was the birth of Graphcore, led by CEO Nigel Toon and CTO Simon Knowles — who left the same roles at XMOS.

Graphcore grew into one of the UK’s most promising tech darlings, but hit choppy waters last year as it struggled to generate serious revenue with its tech. It made layoffs in 2022 and is reportedly on the hunt for an acquirer. That’s brought an opportunity for others.

“While layoffs may not be good for that particular company — it can be good for the area in terms of disseminating new information and ideas,” says Jonathan Ferguson, VP of silicon engineering at Dutch semiconductor startup Axelera — which is building hardware and software for AI applications.

Axelera opened an office in Bristol in June 2023 and hired five employees — including Ferguson — from Graphcore the previous winter. While those hires weren’t laid off — the bulk of Graphcore’s staff cuts happened in its Norway and China offices — looming uncertainty at a company can make employees start looking elsewhere for work, Ferguson says.

“Graphcore pulled a lot of people into the area, and now they’re staying,” he adds.

Another semiconductor company, VyperCore, which is developing chips for data centres, has also tapped Graphcore employees. The startup opened an office in Bristol in July last year and hired a quarter of its 16-strong team there from the UK chip company.

“Bristol is the epicentre of leading-edge high-performance processor design in Europe,” says founder and CEO Russell Haggar. “That's why Graphcore started in Bristol, and that's why other companies are setting up design teams there. The city has a 40+ year pedigree in this space.”

The Bristol semiconductor sector is indicative of a thriving deeptech ecosystem in the UK’s south west. Solid university connections to develop innovative tech, support programmes to help commercialise it and an ecosystem of founders, as well as experienced tech workers, provide much-needed experience for new startups.

It’s proving a potent combination. Last year, a report by the Royal Academy of Engineering Enterprise Hub and data platform Beauhurst found that outside of the fabled ‘Golden Triangle’ (London, Oxford and Cambridge) places like Bristol and Manchester were emerging as attractive spinout hubs.

It got me curious about other towns and cities around the UK that are building happening startup sectors away from the gilded lights of the Golden Triangle. Where should we be looking for juicy startup stories outside of London, Oxford and Cambridge? Where else is the startup flywheel spinning? Which cities are talent hotspots for key emerging tech sectors like semiconductors? Let me know your thoughts.

— Kai Nicol-Schwarz, reporter

💰 London-based Ascension VC has raised a £17m first close for a fund backing tech for good startups. The fund will back startups serving a mass market and low-income audience, at pre-seed and seed, with ticket sizes of around £700k.

LPs include Big Society Capital, housing association Places for People, charity Esmée Fairbairn and several family offices and high-net-worth individuals.
It’s targeting £50m for the fund in total, which it hopes to close sometime in 2025.

😬 Dutch cloud company HyperAI has sued UK chipmaking startup Graphcore over breach of contract, accusing the British startup of walking away from a cloud partnership deal and failing to deliver technical support that it had paid for.

HyperAI, founded in the Netherlands in 2021, filed the case in the Amsterdam courts late last year, CEO and cofounder Andrew Foe tells Sifted. He says the failed relationship has had a “profound financial impact” on his company.
A spokesman for Graphcore said: “Graphcore does not comment on pending litigation matters, other than to state that we vigorously dispute HyperAI’s meritless claims.”

🤝 South Korea has become the first Asian country to become an associate member of Horizon Europe, the EU’s R&D programme.

The negotiations with the European Commission concluded yesterday, enabling South Korea to take part in the scheme from 2025.
The highly anticipated move means European startups will be able to collaborate with South Korea-based institutions in projects funded by Horizon’s Pillar II, which has a €53.5bn budget to address societal challenges in areas such as health and climate change as well as boosting Europe’s industrial capabilities.
South Korea’s participation also comes as the US and Europe push to build a network of like-minded tech partners to counter China’s rise.

🇩🇪 Hanover, Germany-based Cardior Pharmaceuticals, which develops RNA-based therapeutics for heart diseases, is set to be acquired by Danish pharma giant Novo Nordisk for up to €1.03bn.

The total price includes an upfront payment, plus additional payments when certain milestones are met. The startup currently has a heart disease treatment in phase 2 clinical trials.

💸 Hydrogen startups in the north west of England can tap into £1.5m in government-backed funding from Sustainable Ventures. The fund has partnered with tech consultancy CPI to deliver a Manchester-based support programme to startups across a 12-18 month period.

🛴 Micromobility startups TIER and Dott have completed a merger, which they initially announced in January. At the time, the companies said that existing investors, including TIER’s largest backer Mubadala Capital and Dott’s main investor Sofina, would invest €60m in equity into the new joint entity.

The deal follows a tough year in the micromobility sector, which saw TIER lay off more than a fifth of its staff in November 2023. Dott also “implemented efficiency plans” last year, it told Sifted.
German publication Manager Magazin reported in January that the merger would value the new company at just €150m — a big drop from Tier’s 2021 valuation of €2bn.

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👀 A16z’s Sriram Krishnan: ‘We're all-in on the UK’.

💪 ‘Resilience’ of Belgian economy supports local startups. (FT)

Paris-based 900.care, which develops refillable cleaning and personal hygiene products using recycled plastic and refill pills, raised €21m in Series A funding. Lombard Odier Investment Managers led the round and was joined by investors including White Star Capital, Swen Blue Ocean and Founders Future.

Paris-based Firecell, which provides manufacturing and logistics companies with private 5G mobile networks, raised €6.6m in seed funding. Ventech and Matterwave Ventures co-led the round and were joined by investors including Bpifrance’s Digital Venture fund and Bouygues Telecom Initiative.

Stockholm-based Buddywise, which uses AI and machine learning to provide real-time detection of safety risks and fatality prevention in industrial workplaces, raised €3.5m in seed funding. J12 and Kvanted co-led the round and were joined by investors including Aligned and Antler.

Paris-based Airthium, which is developing heat pumps aimed at decarbonising industrial heating processes, raised €3m in funding. Daphni, Eren Groupe and Polytechnique Ventures co-led the round.

London-based Belong, a wealthtech platform which offers retail investors an optional loan to scale up their long-term investments in equities, raised £2.9m in pre-seed funding. Octopus Ventures led the round and was joined by investors including Viola Fintech, Connect Ventures, Portage Ventures and January Ventures.

Toruń, Poland-based SP Tech Solutions, which uses algorithms to optimise planning and operational control for rail transport, raised PLN 12m (€2.78m) in funding from Vinci HiTech.

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Sifted - Chips off the old block

💪 ‘Resilience’ of Belgian economy supports local startups. (FT)

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