What startups can expect from UK election

Good morning there,

Change could be coming to the UK and its business community as the country begins gearing up for an election. Prime Minister Rishi Sunak made a surprise announcement yesterday afternoon that the country will head to the polls on July 4. There’s more on that below, and a little of what startups can expect from the two main parties as they compete for votes.

We’ve also got news of German startup DeepL raising $300m at a $2bn valuation, as the AI hype train rolls on. We dig into why a leading quantum researcher from Amazon is joining a small UK startup. In another development, climate tech reporter Freya Pratty looks into the European tech companies doing business with Saudi megaproject organisation Neom, despite ethical and human rights concerns.

— Tim Smith, news editor

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What startups can expect from UK election

Yesterday UK prime minister Rishi Sunak announced that the country will hold a general election on July 4. With little over a month to prepare, the country’s two main parties will be jostling to make their case for why they are the best people to lead the country and, indeed, its business prospects going forward.

The Conservative party — which typically styles itself as the pro-enterprise party — has suffered some reputational damage among the business community during their 14 years in power. First, there was the Brexit referendum and the political instability that followed it. Later, Goldman Sachs, Bank of America and the IMF criticised the 2022 “mini budget” which included £45bn of unfunded tax cuts. 

With the startup community, it’s also run into trouble for some ill-thought through changes to angel investing — which it U-turned on after criticism.

Labour — traditionally the party of the working classes and unions — has been on a reputational PR push of its own. After left-wing leader Jeremy Corbyn lost the 2019 election, Keir Starmer took the reins, promising to be more pro-business and take the party back to a more centre-left position.

The election comes at a finely poised moment for UK startups. 

Founders are buoyant about the state of AI in the country, telling Sifted that the Conservative government’s “approach is the right one” when it comes to regulating the technology, and quantum company builders praise the government’s “fantastic support of the sector”.

Startups will be hoping that, whoever wins in July, there is some stability when it comes to rules, regulations and support schemes on offer for young, high-growth businesses.

For Labour’s part, it’s planning to set up a “Regulatory Innovation Office” – a “pro-innovation” body to speed up regulatory decisions; a 10-year research and development budget to encourage longer-term tech investment; and Skills England, a new body to meet UK skills needs. It’s also planning to make big investments into renewable energy which could benefit the country's climate tech startups, and increase the use of AI in the NHS.

If the Conservatives remain in power, they’ve promised to build on the Mansion House reforms to unlock more patient capital from pension funds for VCs and startups. Chancellor Jeremy Hunt has also spoken about the need to bolster the London Stock Exchange and encourage more businesses to list in the UK. 

“It’s a potentially huge moment of change for the ecosystem,” says Dom Hallas, head of UK lobby group Startup Coalition. “The last time Labour were in a position like this in the polls the tech startup ecosystem barely existed — now it’s a big part of the economic story both main parties will try to tell. Tech is unlikely to be the main vote mover but there will be plenty to look out for on talent, access to capital and improving regulation.”

For more on who might be in charge of tech if there is a change of government, read our piece profiling the “brains behind Labour’s tech policy”.

Over the next few weeks, we’ll be calling on politicians from both sides who are vying for the UK’s votes to hear what they’ve got in store for business, finance, startup and tech policy, as well as hearing the view from founders and investors on what matters.

Get in touch to tell us what you think.

— Tim Smith, news editor

🇬🇧 UK quantum startup Phasecraft is today announcing its US expansion with the opening of its first international office, in Washington DC. The team there will be led by Steve Flammia, former principal research scientist at the AWS Center for Quantum Computing and the director of Virginia Tech’s Centre for Quantum Computing. 

🇩🇪 Cologne-based DeepL, which uses AI for language translation, has raised $300m at a $2bn valuation. The round was led by Index Ventures, with participation from ICONIQ Growth and Teachers’ Venture Growth, as well as existing investors IVP, Atomico and WiL. 

• The startup was one of five private European tech firms to reach a billion-dollar valuation in 2023. It also expanded to the US, now its third largest market, in January this year. 

😬 UK second-hand car seller Cazoo has appointed administrators — putting 200 jobs at risk. Cazoo raised $1.4bn from investors, including Stride, Mubadala, Molten and General Catalyst, before IPO-ing in the SPAC heyday of 2021 with a lofty $8bn valuation. Its market cap trended downward since. 

• Last year, we looked at the reasons behind the company’s woes. Among them is a poorly-timed IPO, one investor speculated, along with a $630m debt vehicle, which sources said was weighing its stock price down. 

🇫🇷 AI was the focus of a handful of announcements made by the French government as part of the VivaTech conference happening in Paris. The details are:

• The next AI Summit, which will be hosted in France, is pencilled in for February 2025.
• Speaking earlier this week at a meetup of the country’s “biggest AI talents”, featuring researchers, startups and investors, president Emmanuel Macron announced a new fund-of-funds dedicated to AI will launch by the end of the year. The government will support a quarter of the fund; its target size is undisclosed. It expects additional investments from private actors — intending to eventually expand the project to other European states. 
• The government will invest €360m in nine universities and research institutes to train up to 100k AI experts every year, up from 40k. 
• France also inked a strategic partnership with the UAE to collaborate on the development of AI technologies. The two countries will work together to increase investments in each other’s ecosystems, improve the supply of semiconductors, develop better training for AI experts and ramp up infrastructure and computing power, specifically in France. 

💪 France’s 2024 ranking of its best-performing 120 startups, the French Tech Next40/120, is out. Without much surprise, the top of the list includes household names like healthtechs Alan and Doctolib as well as ridesharing app Blablacar. It also includes freshly minted unicorns such as AI darling Mistral, fintech Pennylane and SaaS startup Pigment. To be listed, companies must have raised at least €40m, or have achieved more than €40m in revenues in 2023.

• The 120 companies had a combined revenue of €10bn, a 32% increase compared to last year’s list; just under 30 startups, or about a quarter, reported being profitable. 
• Only 17 companies in the list have a female leader or cofounder, and a single startup cofounded by a woman, Pigment, made it into the top 40.

🤝 French healthtech Doctolib, which provides online booking, teleconsultation services and patient document management for doctors, has acquired Berlin-based Aaron.ai, a startup that provides AI-powered telephone assistance for medical practices. Aaron.ai’s 90-strong workforce is set to join Doctolib’s German team. The financial details of the deal have not been disclosed.

• For now, Aaron’s technology will be integrated with Doctolib’s activities in Germany and will be available to the 200k healthcare professionals that it serves in the country. But CFO Pierre Vergnes previously told Sifted that the company is planning to increase the use of AI across its business. In the next two years, the healthtech expects to develop four new AI-based services that will act as smart assistants to practitioners.

🤔 For startups, a contract with a Saudi megaproject like The Line — a 170km glass-walled city set to take shape in the Arabian desert  — can be game changing. The futuristic site is being built by Saudi government entity Neom, which can offer young companies big contracts, which are almost impossible to find in Europe. But, behind the dollar signs, Neom is starting to attract headlines for the wrong reasons, causing moral questions for some that work with the organisation.

🏄‍♂️ Why VCs should be diving into the blue bioeconomy. (Sponsored by ECBF)

Applications are open for Sifted's Leaderboards

We’re looking for startups in both the Southern Europe or Benelux region with a strong track record of revenue generation to feature on our inaugural leaderboards — rankings celebrating the region’s fastest-growing startups. Believe your startup deserves a spot?

Amsterdam-based Ore Energy, which develops energy storage batteries using iron-air technology, raised €10m in funding from Positron Ventures and SPRIND.

Berlin-based Captain T Cell, which is developing T cell therapies to target solid tumours, raised €8.5m in seed funding from investors including i&i Biotech Fund, Brandenburg Kapital and HIL-INVENT. 

Zug, Switzerland-based WeatherXM, which designs and builds crypto-enabled weather stations, raised $7.7m in Series A funding. Lightspeed Faction led the round and was joined by investors including Protocol Labs, Borderless Capital, Arca, Alumni Ventures, Placeholder VC, Red Beard Ventures, Metaplanet, GS Futures, Consensys Mesh, Westerly Ventures and dlab.

Paris-based En Carta Diagnostics, which develops point-of-care molecular diagnostic kits, raised €1.5m in pre-seed funding. CentraleSupélec Venture led the round.

Vienna-based silana, which develops robots to automate the sewing process in fashion production, raised €1.5m in pre-seed funding. SOSV led the round and was joined by investors including HAX, OÖ HichtechFonds and Material V.

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