Sifted - Public money yet to reach Northvolt

Good morning there,

Sifted Summit officially kicks off in London today! The whole Sifted team of journalists is around, so founders, operators, investors, grab us for a coffee and a chinwag. And if you're not there today, you can get yourself a last minute ticket here.

Elsewhere, senior reporter Freya Pratty and Europe editor Mimi Billing have tracked the public money trail that’s flowed into Swedish gigafactory Northvolt. Governments have pledged more than €2.7bn to the company over its lifetime — including a €902m investment from the German state, announced with fanfare and a photoshoot starring the country's chancellor Olaf Scholz. 

But, as Northvolt urgently hunts for new capital, Sifted analysis shows that the majority of the funding promised by governments is yet to hit Northvolt’s bank account. More on that here.

Elsewhere:

• UK fintechs scramble ahead of new fraud compensation scheme
• Can Germany become a deeptech capital of Europe?

— Tom Nugent, newsletter editor

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🇸🇪 Billions of euros in public money has been pledged to Swedish gigafactory Northvolt in the last nine years. But as Sifted analysis shows, only a fraction of that has been confirmed to have been handed over. The majority of funding from governments — including nearly €1bn from the European Union — is contingent on the embattled startup hitting certain milestones on its factories, meaning it's unlikely to help the company’s immediate search for capital.

• Several public pension funds have also given the company upwards of €2bn but, in their case, the capital has been handed over, leaving them with the largest exposure should Northvolt fail to secure the funds it now needs. More details here.

🇩🇪 Germany — and in particular the Bavarian capital Munich — is becoming a big hub for deeptech startups building everything from robots and rockets to new materials and defence tech. But VCs and founders point out a few big challenges that may stymie growth. Dig into those here.

🇱🇹 Two years ago, a little-known Lithuanian healthtech Kilo Health was revealed to be Europe’s second-fastest growing company — and it had achieved that by being bootstrapped. Since then, the startup's growth has slowed down significantly, the company fired more than 100 people and shook up its management, removing the company's cofounder, Tadas Burgaila, as CEO (he's now its head of growth). 

• The company is now looking at a more sustainable growth model, but remains ambitious: it wants to achieve a $1bn annual revenue target in the next three to five years. Senior reporter Zosia Wanat sat down with the company to find out how it plans to achieve that. 

🇬🇧 A new set of reforms are set to roll out on October 7 in the UK to tackle the rising issue of authorised push payment fraud, and some fear the changes could negatively impact young fintechs in the country. From next Monday, the Payment Services Regulator will stipulate that all payment service providers (PSP) must compensate authorised push payment (APP) fraud victims up to £85k within five days. 

• Two fintech investors — who spoke to Sifted under condition of anonymity — said they felt the rules could be an impediment to innovation. One said it could drive some smaller fintechs “to go bankrupt overnight” and suggested it might decrease the number of new startups going into the regulated payment service provider space. 
• “It raises compliance burn to a level that’s questionable for a smaller fintechs,” they said.

This article first appeared in Sifted’s fintech newsletter. Every Tuesday Tom Matsuda brings you the latest news, analysis and deals from across the sector. You can sign up here. 

🎯 Precision fermentation could be ‘the most important climate tech ever’ — so what’s holding it back? (Sponsored by ECBF)

🇬🇧 UK climate tech startups are struggling for lab space: This new project could be the answer. (Sponsored by British Land)

Just Effing Do It

European tech has made astonishing progress over the past 10 years. If unicorn spotting is your thing, then you will have noted that, by 2021, 98 cities in 28 European countries had given birth to a $1bn tech company.

The trouble is that no matter how fast European tech has grown, the US and China have been growing faster. Europe still lacks many globally relevant tech companies. European politicians are right to fear the further loss of technological sovereignty. If you do not do tech, then tech will be done to you.

But that’s no reason to despair. As we write about in Sifted every day, there is extraordinary entrepreneurial dynamism across Europe. The ecosystem is maturing, bigger investments are being made and the level of ambition to tackle the world’s hardest problems is rising. If you want a further injection of optimism, then tune into the Sifted Summit, which starts today. (Last minute tickets available here.)

The founders of some of Europe’s most dynamic startups — including Starling Bank, Kry, Wolt, Synthesia and Aleph Alpha — will be telling us how they are impacting deeptech, healthcare, financial services and the environment. I always come away head buzzing with new ideas, re-energised by the positive talk.

Many startups have abandoned hope that European governments will do much useful. The one area in which European productivity appears unmatched is the production of weighty reports on sagging productivity. Mario Draghi’s recent competitiveness report is another great blueprint for what needs to be done: boost investment by €800bn a year, complete the single market and deliver on the capital markets union. It just needs politicians to get on with the job and not pass over-burdensome regulations or fly the nationalist flag instead.

“Politicians are saying the right things and have the right vision. But they are making some galactically stupid decisions that do not align with that vision,” I heard one VC say last week.

In the meantime, there is much the industry can do itself to build a better future. Index Ventures has been campaigning effectively to improve stock option regimes across the region. The Tibi reforms in France have helped mobilise institutional growth capital. And the European Startup Network, among others, have been pressing for practical reforms and stock market consolidation to ensure more tech companies IPO in Europe. 

But the best demonstration effect is to keep building — and backing — promising European startups: JFDI. Just Effing Do It.

— John Thornhill, editorial director

Nearly three in four (74%) of startups plan to raise external capital within the next 12 months, up from 69.5% in 2023. The majority (69.9%) plan to raise €500k or more, according to the 2024 German Startup Monitor.

• Despite this, founder confidence in their ability to fundraise is even lower than it was last year. Just under a third (30%) of startups rate access to capital and investment positively — less than in previous years (2022: 37.2%; 2023: 33%)
• Elsewhere in the data, 71.3% of founders think that developing a common European capital market is needed to improve financing options for startups. 
• “The further development of the European capital market is key to the long-term success of startups here. IPOs offer the opportunity not only to strengthen the global competitiveness of our economy, but also to create a self-sustaining financing cycle for startups,” said Sebastian Pollok, deputy chairman of the German Startup Association, in a statement.

— Miriam Partington, senior reporter

The M&A negotiation - how to get the best outcome for your startup

Cash rules everything, but it’s not the only thing to consider when making a deal. Your future relationship with the business, employee welfare, brand image and more are all things you should consider. Our latest guide dives deep into the M&A process, so you can maximise your company’s value and secure a well-rounded deal.

Amsterdam-based Pluq, which is building an electric vehicle charging network, raised €50m in debt funding from P Capital Partners. 

Vienna-based Flinn, which enables medtech companies to automate quality & regulatory processes, raised €10m in funding. Cherry Ventures led the round and was joined by investors including Speedinvest and SquareOne.

Paris-based Formality, a smart contract management platform, raised €8m in funding from investors including Partech and Serena. 

Puglia, Italy-based Foreverland, which develops carob-based alternatives to chocolate, raised €3.4m in seed funding from investors including Grey Silo Ventures, Eatable Adventure, Kost Capital, CDP Venture Capital, Exor Ventures, 2100 Ventures, Ulixes Capital Partners, Newland Syndicate and Moonstone.

Bucharest-based Adapta Robotics, which manufactures adaptable robotic products, raised €2m in funding from Catalyst Romania.

Hradec Králové, Czech Republic-based Partory, which streamlines the production of low-cost industrial equipment, raised €1.25m in funding from Jet Investment.

Vilnius-based Sort A Brick, an AI-powered LEGO brick sorting solution, raised €1.15m in funding from investors including Firstpick. 

Freiburg, Germany-based Pluvion, which develops AI-driven software solutions for the water management industry, raised €1m in pre-seed funding. D11Z led the round and was joined by investors including BW Seed Fund and Kopa Ventures.

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

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