Sifted - Is the Tory tech play too conservative?

Good morning there,

I recently took a trip to the North East of England for the official opening of UK semiconductor startup Pragmatic’s new factory. I was in good company — the event drew a crowd of government officials, potential customers, investors and a member of the British royal family. 

So why all the fuss? 

The factory is set to be one of the largest producers of semiconductors in the UK by next year, according to the company, and comes off the back of a £162m Series D in December last year that was anchored by a cool £60m cheque from government-backed UK Infrastructure Bank. 

It’s part of a UK drive for tech sovereignty — which has seen the country roll out several support packages for startups focused on other key technologies like quantum and AI. I dig more into the Tory tech play below.  

Elsewhere today, three VCs tell us which quantum startups they’ve got their eyes on, we dig into a16z’s London-based crypto accelerator and have news of a Madrid-based startup that’s raised a $28m Series A just seven months after launching.

— Kai Nicol-Schwarz, reporter

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Is the Tory tech play too conservative?

It’s not every day a startup courts royalty. But two weeks ago, at a former plastic piping factory just outside Durham in the North East of England, Princess Anne cut the ribbon on semiconductor startup Pragmatic’s new manufacturing facility. Pragmatic says it will produce billions of chips every year and be one of the largest in the UK by volume of chips produced by 2025.

Why does that matter?

Semiconductors — or chips — are in various devices from smartphones to cars and underpin most modern-day gadgets. They’re also one of the technologies cited as key to European tech sovereignty: the region’s ability to develop and retain key homegrown technologies, which also includes things like quantum, AI and biotech.

There’s a long, long way to go to shore up chip manufacturing over here though. Close to 70% of manufacturing capacity lies in South Korea, Taiwan and China, according to semiconductor lobby group SEMI. 

That hasn’t stopped the UK government from taking a punt and signalling that Pragmatic — which produces tiny, flexible chips that can be used as tracking devices in things like packaging — is strategically important.

A £162m Series D the company raised in December last year — one of the largest raises for a chip company in Europe — was anchored by a £60m cheque from the government-owned UK Infrastructure Bank (UKIB). Just months before, UK chancellor Jeremy Hunt also singled out semiconductors as one of the key areas of investment for UKIB.

“We are keen for the bank’s investments in supply chains to support the government’s ambition to achieve greater economic security and supply chain resilience within the bounds of its existing objectives,” he wrote in a letter to UKIB CEO John Flint. “This includes semiconductor manufacturing, where the bank can help accelerate the UK’s domestic capabilities and/or reduce the carbon intensity of their manufacturing.”

What else is the government doing?

A £1bn semiconductor strategy was passed last year, which will see investment made over the next decade into semiconductor infrastructure, security and research and development. Other pots of money have been announced for areas like AI, quantum and biotech — but tech folk have generally been quick to scrutinise. 

The founder of chip startup Paragraf, Simon Thomas, told the Guardian that the semiconductor measures were “frankly flaccid”. Last month, a UK deeptech and semiconductor trade association said that the nation's semiconductor companies were at a strategic disadvantage compared to international rivals and wanted change to boost investment.

Other governments have been a little more generous.

Germany has a €1bn growth fund to boost its deeptech and climate tech startups, the French government has been dishing out financial support to its tech sector like never before and the EU’s €43bn Chips Act aims to double the EU’s share of the global microchips market to 20% by 2030.

Across the Atlantic, America’s $369bn climate bill has already enticed European startups stateside, and US officials are encouraging UK chip startups to move their ops across the pond to tap into a $53bn support package.

So, is the UK scuppered? Readers, I want to hear from you. Does the UK government need to stump up more cash for its homegrown tech companies or is it simply operating within its means? Do you work for a UK startup that’s considering leaving to take advantage of more generous financial support packages elsewhere? Is there an approach to public funding support that’s actually working in Europe? Get in touch and let me know.

— Kai Nicol-Schwarz, reporter

🤝 US payments, ID and data security company Entrust has completed its acquisition of UK identity verification scaleup Onfido. While the deal value is undisclosed, Husayn Kassai, founder and former CEO at Onfido — and now advisor to the company — told Sifted in February that all the startup’s backers are set to make a profit on their investment. 

• Oxford University, Onfido’s first investor with a cheque of £12k in 2012, could make a 320x return, he said.

💰 Madrid-based Onum — which helps companies manage and monitor big datasets — has raised a $28m Series A from Dawn Capital, Kibo Ventures and Insight Partners just seven months after its launch. The startup will use the money to expand globally, mostly to the US. 

• According to the company, only about 15% of a typical organisation’s data is business-critical and requires immediate analysis. But since most businesses have no way of separating valuable information from noise, many organisations send all of their data to analytics platforms for analysis, resulting in higher costs and longer processing times.
• Onum says its mission is to help those companies isolate and observe the right and valuable information within a dataset, in real time.

🫡 Leaping over the valley of death: The critical need – and opportunity for – late-stage impact investing.

🌟 Meet the European startups taking part in a16z’s crypto accelerator.

👀 11 quantum startups to watch, according to VCs.

🤔 Clinical trials need a revamp — could Europe lead the charge? (Sponsored by Debiopharm Innovation Fund)

😮 Elon Musk predicts AI will overtake human intelligence next year. (FT)

Female-led startups, already generally overlooked for venture funding, are having a rough start to 2024. In Q1, European startups with at least one female founder raised the lowest amount of funding since the second quarter of 2020, according to new PitchBook data. 

• Female-founded startups raised €1.9bn across 385 deals in the first three months of 2024. Among those deals were Berlin-based e-commerce aggregator Razor Group’s $100 million Series D, and Swedish longevity startup Sand Clinic's €4m angel round, both in March.
• Still, it’s not all bad news: female-founded startups broke records last year, setting an all-time high for the proportion of overall deal value and count in 2023, as Sifted reported.

Helsinki-based Basemark, which supplies computer vision software that lets car manufacturers develop their own AR applications for in-vehicle screens, raised €22m in Series B funding. ETF Partners led the round and was joined by investors including the Finnish Industry Investment (Tesi), Constructor Capital, Business Finland and the European Innovation Council.

London-based ID5, a privacy-preserving adtech identity service that allows user-level identification without relying on third-party cookies, raised $20m in Series B funding from investors including S4S Ventures, TransUnion, Progress Ventures, Seventure Partners, 360 Capital Partners, AXIO Capital and Aperiam Ventures.

London-based TransferGo, a consumer platform for global remittances, raised $10m in funding from Taiwania Capital.

Nantes, France-based Weenat, an agritech startup that offers the agricultural community real-time weather and agronomy data, raised €8.5m in Series C funding from investors including the European Circular Bioeconomy Fund, Pymwymic, LIBERSET and IDIA Capital Investissement.

London-based Waymap, an accessibility-focused navigation app that works outdoors, indoors and underground raised £7m in funding. TELUS Pollinator Fund for Good led the round and was joined by investors including Venrex and Comprador Holdings.

Bilbao, Spain-based Nymiz, which uses AI to anonymise data and increase data privacy, raised €2.8m in funding. Swanlaab Venture Factory led the round and was joined by investors including Auriga Cyber Ventures, CDTI Innovación, Archipelago Next, Kalonia Venture Partners, GoHub and Startup Wise Guys. 

Berlin-based Torg, a digital marketplace that connects service and private label buyers with suppliers in the food and beverage industry, raised €2.7m in seed funding. Connect Ventures led the round and was joined by investors including Sondo and Ventures Together.

London-based JENA, which provides solopreneurs with a full tech stack including a website, AI-powered booking system, CRM and payments, raised £1.2m in pre-seed funding. True and Gfund co-led the round and were joined by investors including Ventures Together.

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