Sifted - Is the growth funding gap a myth? 

Good morning there,

Spend any time in the European venture world and you’re likely to hear about the ‘growth funding gap’. Policymakers and public funders have made a point of talking about — and working to address — a lack of homegrown growth funds to invest in Europe’s scaleups. 

But is the gap real? And are late-stage companies on the continent actually struggling to get funded? I dig into that below with colleagues Amy Lewin and Miriam Partington. 

Also today, we have news that Swedish battery manufacturer Northvolt’s €2bn deal to supply German car manufacturer BMW with battery cells has been cancelled, after it was also reported that the gigafactory is carrying out a strategic review of a planned factory in Borlänge, Sweden. Scroll on for more details.

Elsewhere: 

• UK startup Sava raises $8m to develop next-gen continuous glucose monitor
• ‘The opportunities are infinite’: Paris-based Breega launches $75m African fund
• Sifted Scout: 20 defence tech startups to watch

— Anne Sraders, senior reporter

/A message from our sponsor HSBC Innovation Banking

Choose the bank that’s made for the innovation economy

HSBC Innovation Banking provides deep sector expertise, bespoke banking solutions and unparalleled international connections to innovative, high-growth businesses. Working with companies at every life stage, from startup to IPO and beyond, they are at the heart of the innovation ecosystem.

🇸🇪 Swedish battery manufacturer Northvolt's €2bn deal to supply BMW with battery cells has been cancelled. "Northvolt and the BMW Group have jointly decided to focus Northvolt's activities on the ambition of developing next-generation battery cells," BMW and Northvolt said in a joint statement.

• It was also reported yesterday that the battery maker is undergoing a strategic review of a planned factory in Borlänge, Sweden. Reports in Swedish media yesterday said the land the Borlänge site sits on will be sold. Northvolt has since issued a statement saying no final plans have been made, and it is conducting a review of the site. “That discussion is still ongoing,” a spokesman said.
• Northvolt, which has raised a total of $13bn to date, has one gigafactory up and running in the north of Sweden, and is constructing one in Gothenburg. It is also constructing one in Germany and has another planned in Canada.
• The Borlänge site was announced in 2022 to make active materials for the cathode (a part of a battery), to be sent to other Northvolt sites for battery manufacturing.

🇫🇷 Paris-HQ’d Breega, which invests across Europe, has closed $52m of a targeted $75m seed fund to back African startups. The fund will be managed by partners located in Breega’s new offices in Lagos, Nigeria and Cape Town, South Africa. It will cover Africa’s startup hotspots — Nigeria, Egypt, South Africa and Kenya — as well as several French-speaking African countries like Morocco and Senegal. 

• With Africa’s population expected to grow by 1bn people by 2050, the VC plans to invest in solutions that address “core needs” that the continent is set to face across agritech, edtech and healthtech. It’ll also back technologies that underpin the critical infrastructures like fintech, logistics and mobility and energy and climate.

🇬🇧 Oxford, UK-based post-quantum cryptography startup PQShield, which develops quantum-ready hardware, software and communications technology, announced a $37m Series B funding round led by Addition. The funding announcement comes as the US’s National Institute of Standards and Technology’s post-quantum cryptography standards are due to be ratified in the States, meaning companies there will have to comply with new, quantum-ready rules. 

💸 UK-based startup Sava has announced an $8m seed round to develop the next generation of continuous glucose monitors (CGMs) — small devices that measure a user’s blood sugar levels. The company aims to build a less invasive and cheaper CGM and is looking to take advantage of the “massive greenfield opportunity” in the space, says cofounder and CEO Renato Circi.

• The raise was led by Balderton Capital and Exor Ventures — and takes Sava’s total funding to $13m. The startup will use the money to take its CGM through clinical trials and scale its manufacturing capability.

🇩🇪 German software giant SAP and the Technical University of Munich (TUM) yesterday announced the opening of a new AI research centre on the university’s Garching campus north of Munich. 

• The plan is to have 700 SAP employees and 120 TUM researchers working together on software solutions, covering areas such as digital supply chain, the environment and quantum computing. 
• TUM, alongside its startup lab UnternehmerTUM, is known for churning out a lot of startups. Ecosystem watchers say that the quality of Germany’s research and scientific institutions is its biggest strength, but there are gaps in its ability to turn that research into companies.

Is Europe's growth funding gap a myth?

European policymakers and public funders regularly bemoan the lack of local capital to fund growth-stage companies here. 

Europe is still behind the US when it comes to funding growth rounds, with European late-stage deals (Series C and D) including US VC participation raising €6.6bn so far in 2024, compared to €4.1bn in late-stage deals excluding US VCs, according to PitchBook data provided to Sifted.  

Governments are rolling up their sleeves to fill Europe’s so-called ‘growth funding gap’, pushing more funding into late-stage VC funds and scaleups, via programmes like Tibi in France — which pledged €7bn to attract more investment into late-stage funds. Similarly, the EIF’s €3.75bn Tech Champions Initiative backs big growth funds and the recently-announced WIN initiative in Germany, like Tibi, aims to direct more money into growth funding. 

But many promising startups in Europe — like Mistral, Helsing and DataSnipper — are already getting funded. 

So, my colleagues Miriam Partington, Amy Lewin and I wondered, is there a lack of capital for the continent’s companies? 

“I tend to think the [late-stage funding gap] is a myth actually,” Christoph Janz, founding partner at Berlin-based VC Point Nine, told Miriam a few months back. “The funding gap in Europe, which was massive 10-15 years ago, has been largely closed because there are now many more European funds [and]… because many US funds have started to invest in Europe some years ago.” 

Some European founders also tell us there’s no shortage of capital — if you’re worth it, that is. “A quick scan of the past few years shows that good companies have found it easy to raise large rounds,” Torsten Reil, cofounder and co-CEO of Helsing — which is reported to be raising a new round at a $4bn valuation — told us. “It is true that most growth funding in Europe has come from US investors, so there is an opportunity for quality European growth funds to participate more.”

“Having said that, most complaints about funding gaps come from sub-par founders. Please quit and do something else.”

You can dig into the full piece here, but I’m curious to hear from you, readers. How tough is it to get growth funding right now? Is the lack of European growth funds really a problem? Do you agree with Torsten that if you’re good enough, there’s no shortage? What are the pros and cons to accepting a US VC cheque? Shoot me an email.

— Anne Sraders, senior reporter

The Greek startup ecosystem in 2024 

Two years after our first report, we’re back with another deep dive of the Greek tech ecosystem. Since the downturn, Greece’s young companies have remained resilient, bringing more investor attention and inspiration for future founders. Read on for the success stories and predictions for the startup ecosystem.

🪖 Sifted Scout: 20 defence tech startups to watch.

🤔 How to convince VCs to invest in your product (even if its not for them).

📣 Readers, we want to hear from you. What’s the best thing on European tech you’ve read recently? Drop us a line.

Geneva, Switzerland-based iOnctura, which develops therapies for neglected and hard-to-treat cancers, raised €80m in Series B funding. Syncona led the round and was joined by investors including the EIC Fund, M Ventures, Inkef Capital, VI Partners, Schroders Capital and 3B Future Health Fund.

Munich, Germany-based Isar Aerospace, which develops and builds launch vehicles for transporting small and medium-sized satellites into Earth’s orbit, raised ~€65m in Series C extension funding from investors including Nato Innovation Fund, G3T, 10x Group, Besant Capital, Finadvice Med HOLDINGS, LP&E, Lakestar, Earlybird, Airbus Ventures, Bayern Kapital and UVC Partners.

Saint-Geours-de-Maremne, France-based Materrup, which makes low-carbon cement, raised €26m in funding from investors including Eurazeo, EIC Fund, UI Investissement, Aquiti, IRDI and Argiduna Capital.

Delft, Netherlands-based Qblox, which supports academic and industrial labs with quantum control electronics, raised $26m in Series A funding. Quantonation and Invest-NL Deep Tech fund led the round and were joined by investors including QDNL Participations and the European Innovation Council. 

If you’d like to submit a deal, get in touch. 

For more deals, analysis and M&A insight, become a Pro subscriber to receive our weekly Deals newsletter.

Correction: Yesterday in this newsletter we said that Anna Vershebeniuk, one of the three newly announced partners at Lazard Elaia Capital, used to be a partner at Headline. She was actually a principal. We also got the name of another of the firm’s partners, Alexandre Margoline, wrong. Apologies.

• Sign up to our specialist newsletters if you want more on fintech, climate tech, startup life and VC.
• Tune in to Sifted’s podcast, Startup Europe.
• Join the Sifted team along with 3,000+ startups, founders and investors at Sifted Summit this October. Get your ticket now!