Sifted - What's next for AI unicorn DeepL?

Good morning there,

Every time a scaleup from central and eastern Europe raises a big growth round, I’m curious to know who invested — there are so few local funds that can support the region’s companies after Series A that most of the time it’s a big US or western European VC stepping in to fill the gap. 

So when I saw that Czech grocery delivery unicorn Rohlik had raised €160m in debt and equity last week, I presumed it’d be more of the same. But when I saw the European Bank for Reconstruction and Development (EBRD) down as the lead investor, my curiosity was piqued. It’s unlikely tech folk outside of CEE have heard much of the bank’s venture activity — but, as I outline in today’s big story, it’s been pretty active filling the funding gap across Europe’s underfinanced markets.

Elsewhere... the countdown is on to apply for Sifted's Benelux Startup Leaderboard — a ranking of the region's fastest-growing startups by revenue growth. Founders, if you who think your startup should be on there, or VCs, if you have portfolio companies you think could make the cut, you/they can apply here. It's free, and the deadline is this Friday — so be quick!

Also today:

• What’s next for AI translation unicorn DeepL? 
• 89% of CVCs plan to increase or maintain level of startup investments.
• Smart grids early-stage market map: 58 startups to watch.

— Zosia Wanat, senior reporter

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Have you heard of the EBRD?

When Czech online grocery business (and the country’s first unicorn) Rohlik announced it had raised €160m in an equity and debt round Friday morning it wasn’t just the flow of serious money into the flagging grocery delivery sector that caught my eye. I was also drawn to the name of its lead investor.

My bet is that most European founders would have a problem decrypting the initialism EBRD (which stands for European Bank for Reconstruction and Development) — let alone thinking of it as a potential source of capital. But the decades-old international development bank has been a backer of tech for more than 10 years.  

Its venture arm, EBRD VC, has invested more than €200m in 33 European scaleups, including Docplanner, a Warsaw-based platform for patients and doctors to manage appointments, Causaly, a Greek-founded GenAI platform for research insights and PandaDoc, a Minsk-founded SaaS company for paperwork.

EBRD’s main focus since being founded in 1991 has been to use investment as a way to help old Eastern bloc countries transition into capital-market economies. Its remit has since grown to encompass almost 40 countries stretching from central and south eastern Europe to central Asia. The bank is owned and financed by 73 governments, as well as the European Union (EU) and the European Investment Bank (EIB). 

Its venture arm was set up more than a decade ago to fill a funding gap in places like central and eastern Europe (CEE), where there are limited investors that raise funds of more than €100m and that can back the region’s startups after Series A. It’s currently deploying its third fund, of €250m, and writes tickets between €2m-25m (with a sweet spot between €5m and €15m) at Series A and B.

Its team of eight based in London have a generalist approach — with a slight preference towards B2B SaaS — but can’t back companies working on biotech, defence and tobacco. 

EBRD also deploys growth capital. It aims to deploy €500m-800m per year in 20-30 investments across all EBRD countries and across all sectors (not only in tech companies). The bank says that tech deals represent “a growing share of new investments, although from a relatively low base.” Companies that have received a wedge of this money include Turkish fintech Param, Greek insurtech Hellas and Polish e-commerce company Allegro. It’s also the pot Rohlik received its investment from. 

EBRD isn’t the only financial institution that has its eyes on CEE and southern Europe. There’s the European Investment Fund (EIF) — the EIB's VC arm. There’s also the International Finance Corporation (IFC), a sister organisation to the World Bank, which invests in startups and scaleups in the region. The IFC has a clear development goal — boosting entrepreneurship and job creation in the region — and its investments are at “the intersection of profits with purpose”.

Ervin Luga, head of venture capital investment at EBRD, says that the bank’s deals are more “opportunistic”. He stresses that the fund does have development goals too, but they’re measured at the portfolio level, rather than company by company.

Luga says that filling the funding gap is important for boosting the region’s local markets. He adds that he doesn’t have to look far to find companies worth investing in. 

“There is a substantial talent pool to warrant significant funding sources,” he says. “And so by just trying to fill that gap and providing this funding, I think that we actually create a pretty big benefit for these countries. 

“One of the key reasons why US companies are actually growing faster is the availability of funding. And there is much more funding available in the US for companies than there is in Europe; when you compare it to [EBRD’s] regions, there's even less”.

Do you think institutions like the EBRD help the region? What do you think about public institutions stepping into VC’s shoes? And have you had any positive (or negative) experiences? Message me. 

— Zosia Wanat, senior reporter

🇨🇿 Rohlik, the Czech online grocery business, has raised a €160m equity and debt round led by the European Bank of Reconstruction and Development, with the participation of existing investors and the European Investment Bank.

👾 What’s next for AI translation unicorn DeepL? And how does it keep its edge amid rising competition? 

• Founder and CEO Jarek Kutyłowski shares with Sifted how carving out a niche (translation for enterprise) has paid dividends for his startup; what’s next on the roadmap (translation of spoken language is a prime contender); and how he convinces AI talent to join his company over others. 

👀 “Let’s not go overboard” on AI energy use concerns, says Bill Gates. Speaking in London, Gates — who runs climate tech investment fund Breakthrough Energy Ventures — defended the huge amounts of power required to run new AI systems. Data centre consumption will drive a 2-6% rise in energy consumption, Gates said, but AI will also accelerate a reduction in emissions worth more than 6%.  

⚡️ Smart grid early-stage market map — 58 startups to watch.

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

89% of corporate investors plan to increase or maintain their level of startup investments in the next three years (compared to the last three), finds a new report from Mountside Ventures and Love Ventures.

Corporate investors have, over the past decade, heavily increased their involvement in European startups. In 2010, corporates accounted for just 10% of the funding startups raised; now they account for more than a quarter of startup funding, in terms of volume of capital invested, according to Dealroom.

And it looks like they’re not backing away anytime soon.

The report also found that — aside from having a keen appetite to invest in startups — corporates prefer to back companies at Series A; seed and Series B are also popular stages to invest at. B2B startups and, unsurprisingly, AI startups are the favoured destination for corporate capital.

Could your startup be the next number 1?

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July 3 | Online. French tech reporter Daphné Leprince-Ringuet will be moderating an upcoming Sifted Talks with industry experts to find out how tech leaders can effectively harness the power of AI and machine learning for better business results. RSVP. 

July 9 | London. Join us for a live panel discussion on the impact of AI on work hosted by Startup Life’s Anisah Osman Britton. We'll be discussing things like what's possible with AI right now, how you take advantage of new technology as you scale and whether AI really can replace humans at work. There’ll also be networking and (free) canapés and drinks. Spaces are limited — RSVP now to secure your place.

Eindhoven, Netherlands-based Axelera AI, which is building hardware and software for AI applications, raised $68m in Series B funding from investors including Invest-NL, the European Innovation Council Fund, Innovation Industries, Samsung, Verve Ventures, Fractionelera and CDP Venture Capital. 

Cologne, Germany-based Vytal, which develops reusable food packaging for restaurants, canteens, retailers and event organisers, raised €6m in funding. Emerald Technology Ventures led the round.

Berlin-based Feather, a digital insurance platform for expats, raised €6m in funding from investors including Keen Venture Partners and Plural.

Delft, Netherlands-based Innatera, which develops processors designed for use in “edge” applications, raised an additional $5m in Series A funding. Innavest and Invest-NL led the round and were joined by investors including the EIC Fund, MIG Capital, Matterwave Ventures and Delft Enterprises.

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