Sifted - H1 dealmaking in numbers

Good morning there,

The numbers are in. Despite a sluggish first few months to the year, European dealmakers wrote some pretty big checks to startups in the first six months of the year — from rockets to AI. And though funding totals were down from the second half of last year, they bested the first six months of 2023. I look at the data and big trends below as part of a new inaugural report by Sifted tracking all of H1’s data (you can dig into the full report here).

Elsewhere today:

• Index Ventures raises $2.3bn across two new funds to double down on AI.
• 20 digital banking startups to watch.
• ‘BOOOM’ — the new €17m fund from solo GP Felix Plapperer.
• US chipmaker AMD agrees to acquire Finnish AI lab Silo AI.

— Anne Sraders, senior reporter

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Climate steals the spotlight for H1 dealmaking —  but deeptech is coming on strong

Dealmaking started slowly this year, but by 2024’s midpoint European startups had raised €27.8bn across 2,804 deals, according to a new report by Sifted — 8% less than the volume for the second half of last year, but 16% higher than the first half of 2023, when compared with Dealroom data. 

The lion’s share of that funding went to climate techs. They raised €7.7bn in the first six months of the year; B2B SaaS companies took the top spot for deal count. 

The largest portion of that climate funding went to electric vehicle companies, then energy storage and hydrogen startups, respectively. Among those deals: UK-based nuclear startup Newcleo raised €87m in May; German battery startup Instagrid raised a €87m Series C in January; Berlin-based green homes startup Cloover raised €105m in May; and Sifted scooped London-based climate risk platform ClimateX’s $18m Series A raise in June. 

Many climate techs turned to debt to finance their operations in the first half of the year — a bigger theme also seen across European tech. There was €18.7bn worth of debt raised between January and the end of June; €13.1bn of that to climate companies. The two biggest debt raises went to Swedish companies; H2 Green Steel raised €4.2bn and Northvolt raised $5bn, both in January. The two companies are part of a growing number of capital intensive infrastructure startups, which use debt to finance construction projects. Smaller startups like Berlin-based TerraOne, which is aiming to optimise the grid with battery storage and trading solutions, and raised $7.5m in seed funding in April, are also planning to raise debt, cofounder and CFO Thomas Antonioli told Sifted. 

Investors eyeing deeptech

The deeptech sector also gave climate a run for its money in H1. Startups building robots, rockets and, of course, AI drew investor euros to the tune of €5.5bn in the first six months of the year; there were 415 deals in the sector — and it was the second-best-funded vertical after climate for H1. 

Defence and dual-use companies — whose technologies have both military and commercial applications — drew interest. Since Russia invaded Ukraine in 2022, more VCs — both deeptech specialists and generalist investors — have been eagerly eyeing technologies to bolster Europe’s defence capabilities. Yet many are still running into red tape with their investors, LPs, while there has been a rift forming amongst VCs themselves over the lines between deeptech and defence tech. 

Robotics companies also banked large sums: Norwegian humanoid robot maker 1X raised $100m in January, while German robot maker RobCo secured 39.1m in February. Other startups like UK quantum computing company Quantinuum raised $300m in funding in January. 

Of course, we can’t have an H1 report without AI. Big raises like French OpenAI challenger Mistral’s €468m equity raise in June helped skew the funding data in the sector’s favour. Yet minus that large round and British autonomous vehicle startup Wayve’s massive $1bn round in May, other sub-sectors like spacetech have also been catching investors’ attention. The sector, which still hasn’t managed to take off in a big way yet, saw €490m worth of deals, boosted by large companies like German rocket builder Isar Aerospace’s €65m extended Series C funding in June; and Italian space logistics startup D-Orbit’s €100m in January. Semiconductors were also a big hotspot for VCs, with 42 deals in the first six months of the year. 

UK reigns supreme — but Mistral gives France a boost

The UK held onto its title as the best-funded startup hub in the first half of this year, with €9.5bn worth of deals. And thanks in large part to some big AI fundraises for Mistral and a $220m raise for H (previously Holistic AI), France snagged second place, with €4.3bn worth of deals — Germany was close behind with €3.9bn in deal value. 

Where H2 might be headed

Some VCs see less-favoured sectors making a comeback in the coming quarters. “After the ‘foundational model battles’ seem to be settling, VCs will continue to look for applications where AI really does make a difference,” perhaps “also in innovative consumer applications,” suggests HV Capital partner Jan Miczaika. “Fintech infrastructure is making a comeback,” and “startups with a demonstrable positive environmental impact are being chased by both generalist and purpose funds.” 

It’s likely the ecosystem will see more deeptech dealflow in the coming quarters: big VC backers like the European Investment Fund, Europe’s largest LP, are noticing VCs pitching more climate and deeptech funds — including defence tech funds. 

Download the full report here.

Readers, I also want to know: What are your top predictions for the rest of the year? Will we see a flood of unicorns charging the public markets? Will VCs finally get some AI deal fatigue? Will 2024 beat 2023’s fundraising haul? Send me a line.

— Anne Sraders, senior reporter

🤝 US chipmaker AMD yesterday agreed to acquire Finnish AI lab Silo AI — which develops generative AI models for corporate clients — in a $665m all-cash deal, which is one of the biggest such deals in a decade.

• The deal is expected to close in the second half of this year.

🇮🇸 Frumtak, a female-led Iceland-based VC, has closed an $87m fund (its fourth). It’ll invest in software, AI and deeptech startups, writing cheques of €1m-€3m. 

💰 Index Ventures, the San Francisco, New York and London-based VC, has raised $2.3bn across two new funds: an $800m venture fund and a $1.5bn growth fund. It’s also still investing out of a $300m seed fund raised in 2022.

💸 VC firm BOOOM — run by solo GP Felix Plapperer — has closed a €17m fund. The Berlin-based fund will invest in European B2B software startups at pre-seed and seed. The three founders of German logistics unicorn sennder will also act as mentors to all of BOOOM’s portfolio companies.

🇩🇪 German AI startup Aleph Alpha raked in €945k in revenue for the calendar year of 2023 — double 2022’s revenue of €426.5k — but it missed its target of €5.5m, financial statements show. The company tells Sifted that it will see an uptick in revenue in 2024 after it releases its new large language model this summer.

🏦 20 digital banking startups to watch.

🤝 How to build in North America as a European founder.

🤔 How to know if you can trust a fintech. (Sponsored by FinXP)

The sky’s the limit

Accounting for around 5% of global CO2 emissions, the airport and aviation industry is looking to go green through tech innovation and collaboration with startups. Join our upcoming Sifted Talks on July 17 with Groupe ADP, Alltheway, AEROVOLT and Beyond Aero to find out how the European startup ecosystem is helping to transform airports.

Greeking Out 2.0. It’s not all ancient ruins and sandy beaches — is Greece fast becoming a go-to destination for tech? Our report explores the success stories for the Greek startup ecosystem, highlighting what the Mediterranean hub might look like in the future. Download it here. 

B2B SaaS Rising 100. Meet the ultimate list of B2B SaaS startups we believe will someday join the ranks of the $1bn-plus unicorns. See who made the cut and explore the market forces shaping and shaking them in our report. Download it here. 

Sifted 30: Central Europe. Dive deep into our top-listed founders in Central Europe, as we explore the interesting trends behind the region’s fastest-growing companies. We’ll also feature interviews with the startups so you can follow their success stories. Download it here. 

The Sifted deals team is out of office today. Deals will return as normal tomorrow.

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