Sifted - YC's W24 Demo Day

Good morning there,

It’s a big week in startup world. If you’ve been following along, famed San Francisco-based accelerator Y Combinator is hosting its twice-annual demo day, with hundreds of bright-eyed entrepreneurs pitching their startups to investors yesterday and today. YC Demo Day is something of a temperature check for the broader ecosystem, and this week’s read is hot — for AI, that is. It’s been a repeat theme in recent YC batches, and today, I dig deeper into some of the batch’s European startups and why AI companies in this cohort could be different this go-round. 

Elsewhere, we look at the B2B SaaS startups VCs say you need on your radar, neobank Monzo’s new board member and Germany's deeptech talent woes.

— Anne Sraders, senior reporter

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VCs eye ‘quality’ AI companies in YC’s new batch

The last several batches of the famed San Francisco-based startup accelerator Y Combinator, or YC, all had one big thing in common: they were AI-heavy.

And it’s no different this time. Loads of startups in the winter 2024 batch — which pitched investors yesterday and will again today in YC’s twice-annual demo day — are applying AI to a variety of problems, from supply chain compliance to private equity due diligence. YC says over 50% of this batch are building with AI in some form. Of the 257 fledgling startups participating in this batch, YC confirmed with Sifted 14 are based in Europe. 

An eye-watering amount of investor cash has flowed into AI recently — and as Sifted reported last year, in the earlier days a slew of companies were being started that didn’t really solve a problem. But according to some investors who are eyeing up YC’s latest cohort, this time is different. 

"What we liked about this batch is that there is generally more quality in AI startups,” Alex Schmitt, a Berlin-based partner at Lightspeed Venture Partners, tells me in a note. “The first waves in [the] last batches naturally were very early in the overall hype cycle, but also in their journey and often only pivoted to ‘xyz-AI enabled’ during the batch; their first products were often more of a wrapper around general LLMs with little moat,” he says. (Lightspeed did, however, invest in one AI startup in last winter’s YC batch — Germany’s Langfuse, an LLM engineering platform.) 

Schmitt argues this time around there are “more teams building workflows to mimic or create ‘agentic behaviours’ — basically where workflows are being fully-automated end to end, instead of selling a software tool that complements a human-driven workflow.” YC partner Jared Friedman also recently noted a number of startups in this batch trained their own AI models.

Among this cohort’s European AI startups are Berlin-based Pretzel AI, which is an open-source, AI alternative to Jupyter Notebooks, a software development platform used by data scientists; London-based Model ML, which is building an AI tool for private equity firms and investment banks to manage due diligence and research; Topo, from Paris, which provides B2B sales teams with an AI agent that can be trained on their data to source leads; and Metofico, also in London, offering a no-code data analysis platform to help life science companies analyse complex datasets without the need for programming chops. 

Personally, I’m a bit wary of how different this batch’s AI startups really are from those you might consider low-competitive-moat. Take Swedish AI-for-lawyers startup Leya, for example. It’s one of the hottest startups in this batch, and VC newsletter Newcomer reported last week that US investor Benchmark has already invested in the startup’s Series A prior to Demo Day. (A partner at Benchmark and Leya’s CEO didn’t return my requests for comment by press time.) Specifically, Leya is building an AI bot to help lawyers answer legal questions and automate workflows. But such AI-copilots-for-lawyers have long been popular and already attracted lots of VC funding; I even wrote about it as a key theme of last summer’s YC batch. 

YC’s Demo Day is a bit of a barometer for the whole startup ecosystem — and as the AI frenzy continues to attract investor cash, I wager we’ll see more of a shakeout of which buzzy AI ideas fade or get subsumed by the big players, versus those that’ll start to pull ahead of the pack and gain traction with customers. And, of course, it’ll be interesting to see which other European AI companies get cheques in the coming weeks or months. 

Readers: What do you think? Are you impressed with this latest cohort’s startups? Do you think the AI companies in this batch are bringing something new to the table? Which companies stand out, and which are you interested in investing in? I’m all ears.

— Anne Sraders, senior reporter

🇬🇧 UK Neobank Monzo has recruited finance veteran Fields Wicker-Miurin to its board as an independent non-executive director (INED). She brings more than 30 years of experience spanning financial services, public policy and the arts, according to LinkedIn. 

• The new addition comes at a pivotal time for the company, which recently raised a £430m funding round in anticipation of a public listing. 
• Wicker-Miurin’s current board position at the Aquis stock exchange and previous experience as CFO of the London Stock Exchange is likely to come in handy if and when the neobank realises its IPO ambitions.

🚗 Carpooling app Blablacar has secured a €100m credit to fund its next M&A shopping spree as the scaleup looks to further expand its services in its 21 existing markets — ranging from France and Spain to Brazil, India and Mexico.

• The platform, named after the sound of strangers chatting during a shared trip, wants to become an all-in-one app for ground transportation by enabling passengers to also book local bus and train rides in addition to carpooling spots.
• It comes as the nearly 20 year-old company says that it has been profitable for 24 months, recording a 29% increase in revenue in 2023 to reach €253m — and marking a rebound in activity after a couple of years where ridership fell significantly due to the Covid-19 pandemic. The company didn’t disclose its losses. 

💰 The Bristol-based deep science VC firm Empirical Ventures has announced a first close of £8.25m for its first fund, which is targeting £10m. It’ll back pre-seed and seed-stage startups working on deeptech and techbio across the UK.

👀 “We can’t find a single German or European applicant”: Deeptech startups feel bite of talent shortage.

💰 13 B2B SaaS startups to watch, according to investors.

Meet the UK & Ireland’s fastest-growing startups

Dive into our inaugural regional leaderboard, ranking the top 100 companies on a high-growth trajectory across the UK and Irish ecosystems. 

Cambridge, UK-based Luminance, which provides legal teams with AI-driven software to help automate the contracts process, raised $40m in Series B funding. March Capital led the round and was joined by investors including National Grid Partners and Slaughter and May.

Paris-based Iceberg Data Lab, which provides financial institutions with environmental data and analytics tools to assess the biodiversity impact of their investments, raised $10m in Series A funding. Beringea led the round and was joined by investors including MAIF Avenir and AXA Investment Managers.

Nuneaton, UK-based Warwick Acoustics, which develops loudspeaker tech for in-car audio systems, raised £7m in funding. Mercia Ventures led the round and was joined by investors including NFU Mutual.

Tampere, Finland-based Polar Night Energy, which is developing a commercial battery that stores electricity within sand in the form of heat, raised €7.6m in seed funding. Jonathan Oppenheimer, Stephen Industries, Holdix and Turret led the round, and were joined by investors including PC Rettig & Co. Impact.

Vienna-based XUND, a healthcare platform which uses AI to analyse and help people understand and monitor their symptoms, raised €2m in extended seed funding from investors including Thieme Group, MMC Ventures and MassMutual Ventures.

Padua, Italy-based NEXT, which is developing modular electric vehicles for transportation and last-mile delivery, raised €1.25m in funding. Cysero led the round and was joined by investors including Kilometro Rosso.

Stockholm-based Alrik, a logistics software tool for the construction industry that enables supervisors to monitor fleet activity and reduce emissions, raised €1m in seed funding from Pi Labs.

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