Sifted - Northvolt's talent halo

Good morning there,

Last week, I visited Vilnius to learn more about the booming Lithuanian startup ecosystem. One thing that attracted my attention was how many of the country’s leading tech companies are fully, or partially, bootstrapped. We get into all of that in today’s big story, and in my interview with the founders of cybersecurity giant Nord Security, who scaled their company for over a decade without raising venture capital. 

Also, ICYMI, please have your say in our survey, asking about what kind of managers you’ve had working at startups (this is your safe space to complain!).

Elsewhere today:

• The Northvolt effect — how the battery giant is spawning a new climate tech generation in the Nordics
  

— Zosia Wanat, senior reporter

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Why I'm long on Lithuania

There aren’t many European startup ecosystems that make me as excited as Lithuania’s. 

For many years, the entrepreneurial scene in this tiny Baltic country of 2.8m people has been overlooked by international investors, developing slowly but steadily in the shadow of Estonia's success. Founders there struggled to raise capital; the ecosystem didn’t have a major success story, like Skype, to create a flywheel of money and know-how for the next generation of entrepreneurs; and then in 2022 the Russian war broke out in its doorstep, deterring some international VCs.

But during my visit to Vilnius last week, it certainly seemed that the stars are now aligning to make Lithuania one of the most interesting places in central eastern Europe (CEE), if not the whole continent, to build exciting young companies. Two unicorns and IPO-contenders, second-hand clothes marketplace Vinted and cybersecurity giant Nord Security, have put the country on the map — and international investors are paying more attention to other local early-stage startups. 

“We're excited that in Lithuania the same [effect as in Estonia] is happening now. We see people from Morgan Stanley in the US coming in here to visit Vinted or venture capital firms like Accel invest in Kevin,” says Tom Okman, the cofounder and co-CEO at Nord Security.  

Given the size of the ecosystem (very small), everyone knows each other: founders are usually just a phone call away from investors, associations and politicians. Through WhatsApp groups, ecosystem parties and knowledge-sharing events, it’s easy for early-stage founders to get mentorship — and sometimes angel investment — from more experienced entrepreneurs. 

“The ecosystem is booming, and it’s not just in terms of funding rounds happening, but companies really doing business,” one investor told me. They added that the Estonian ecosystem is still ahead of Lithuania’s, and still getting more investor attention “but given Lithuania’s velocity, we’re going to surpass them in months rather than years”.

Of course, it’s not like Lithuania hasn’t been affected by the recent economic slowdown: funding levels have declined since a record 2021, when the country’s startups raised $83.9m, according to Dealroom. But the drop is mostly due to fewer big rounds, and investor activity at early-stage has remained fairly stable (and I’m hearing we can expect some exciting new funding rounds, with the participation of top US investors, very soon).

It’s also not like Lithuanian startups are desperate for money to grow — for years, their access to VC capital has been limited, so they’ve learnt how to thrive without it. It’s not a new thing in CEE: almost a quarter of unicorns born in the region are not VC-backed, according to a 2022 report. 

And in Lithuania, the trend is plain to see. 

Some of its largest tech companies — like web hosting platform Hostinger,  wellness startup venture builder Kilo Health and marketing automation platform Omnisend — have all been bootstrapped. 

In an interview published today on Sifted, the founders of Nord Security, another bootstrapping success story, tell me about how they built their company for a decade without VC funding — and why they're “technically almost IPO-ready”, but not about to go public, just yet. And stay tuned as, in the coming days, Sifted will be serving you more stories about bootstrapped companies from the region and beyond. 

Finally, what’s your opinion about bootstrapping: is it a better way to run a startup than looking for VC money? If you’re a founder: what have been your experiences? If you’re an investor: is a bootstrapped startup an interesting target for you? I’m waiting to hear your thoughts. And if you have any more insights and tips about the Lithuanian ecosystem — I’m also all ears. Get in touch here. 

— Zosia Wanat, senior reporter

🇸🇪 Former Northvolt employees are boosting Sweden’s next generation of battery startups. “With talent development, a second mover advantage is a very nice thing to have," Eloisa de Castro, founder of zinc-ion battery manufacturer Enerpoly — which is opening its first factory in Sweden today — tells Sifted. Her company, along with several other local energy startups, is benefitting from the talent pool energy giant Northvolt has built up in the region. 

🥳 How to build hype with a waitlist. It worked for Monzo; here’s how it could drive sign-ups for your startup too. 

😦 Berlin-based Amazon aggregator SellerX — once valued at $1bn — is to be auctioned off by its investor BlackRock, which has assigned the startup “non-accrual status”, meaning a borrower has defaulted on a payment.

• SellerX was part of a wave of pandemic-era Amazon aggregator startups that popped up in response to a boom in e-commerce, that are now struggling to turn a profit and are laying off staff.

👋 Ahead of a much-anticipated IPO, Klarna has lost its global AI manager, Martin Elwin, who was involved in establishing the company’s new AI-based customer service system, which it says can save around $10m per year in costs. The payment company’s CEO Sebastian Siemiatkowski told the FT last week that it aims to halve its workforce with AI-driven gains. It has already cut its staff from 5,000 to 3,800 in the past year. 

• A spokesperson at Klarna told Swedish media Di that the company won't replace Elwin. “Since AI has become such a natural part of the daily work at Klarna, we will no longer have a specific AI manager."

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Tallinn-based Sunly, which is developing integrated hybrid energy parks combining wind, solar and battery storage, raised €300m in debt funding from investors including Rivage Investment, Copenhagen Infrastructure Partners and Kommunal Landspensjonskasse.

London-based Attio, a CRM software provider, raised €29.8m in funding from investors including Redpoint Ventures, Balderton Capital, Point Nine and 01 Advisors.

Berlin-based Thryve, a B2B health data integration and analytics company, raised €4m in Series A funding. Capricorn Partners led the round and was joined by investors including IBB Ventures, CRB Health Tech and Carma Fund.

Berlin-based assetbird, a software platform for real estate purchases, raised €2.4m in funding from investors including 468 Capital and IBB Ventures.

Enschede, Netherlands-based 20Face, which is developing privacy-proof facial recognition software, raised €1.3m in funding from investors including Value Creation Capital, Oost NL and Twinning Participaties.

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