Sifted - Making GenAI profitable

Good morning there,

The last time I pulled the data on the fastest-growing spinout teams in Europe there was a lack of representation from across the continent: 10 of the 15 on the list were from the UK’s ‘Golden Triangle’ of Oxford, Cambridge and London. Three were from Swiss research powerhouse ETH Zurich. 

This time round it’s a different story. There are 10 different institutions on the list of spinouts which have grown their headcount the most in the last 12 months. Oxford and Cambridge are there, but so too are places like the Technical University of Denmark, the University of Southampton and RWTH Aachen University. You can read the full list here. 

Readers, I want to know whether you’re seeing that variety reflected in the market. Are we getting better across Europe at not just spinning out but scaling companies born out of academic research? VCs are you seeing spinouts from more institutions appear in your dealflow? How could conditions for spinout success improve in Europe? Get in touch.

Elsewhere today:

• ‘It’s less than a handful of us’: How Photoroom became one of the world’s only profitable GenAI startups

— Tom Nugent, newsletter editor

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💸 How do you run a profitable GenAI startup? It’s a question that many founders in the sector might be pondering — and one that Paris-based Photoroom has found an answer to.

• Created in 2019, Photoroom — which provides GenAI tools for photo editing and is widely used for marketing campaigns by small and medium-sized businesses — broke even in 2020 and has remained profitable since. The YC alum reached €50m in annual recurring revenue last year and is now valued at €500m.
• Its secret sauce? Put user needs first, then build the right tools. “Our approach has been to start with users’ needs to develop useful models,” cofounder Matthieu Rouif tells Sifted. “The secondary effect of this is to create revenue, because you know exactly what the purpose of your product is.”
• At a time when most GenAI companies are raising large rounds without yet achieving significant revenues, Photoroom’s story is somewhat of an anomaly. In an article published last year, Sequoia Capital investors Sonya Huang and Pat Grady wrote: “Early signs of success don’t change the reality that a lot of [Gen] AI companies simply do not have product-market fit or a sustainable competitive advantage.”

⚡️ The fastest-growing spinout teams in Europe.

💰 US funding drives investment for European military tech startups. (Financial Times)

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Brussels-based Easyvest, an investment management platform which uses robo-advisors to manage customers’ portfolios, raised €13m in funding from Belfius and SFPIM. 

Dublin-based SuperNode, which develops superconducting cable systems, raised €8m in funding from Aker Horizons and Volnay.

Stockholm-based Lovable, which is building an AI to allow anyone to develop web applications, raised $7.5m in pre-seed funding. Hummingbird and byFounders led the round.

Munich, Germany-based Building Radar, which is building a software platform to automate workflow in construction industry sales, raised $7.2m in funding. Socii Capital led the round.

Paris-based Revyze, which is building a social learning app for schoolkids, raised $6m in seed funding. Speedinvest and Moonfire led the round and were joined by investors including Motier Ventures, Station F, Supercell cofounder Ilkka Paananen, King/Candycrush cofounders Riccardo Zacconni and Sebastian Knusson and Duolingo director of product Nickey Skarstad.

London-based Univa Health, which is developing a platform for personalised eating disorder care, raised £1m in pre-seed funding. YZR Capital led the round and was joined by investors including Calm/Storm Ventures.

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