Sifted - IP unicorns

Good morning there,

I spent last Thursday schmoozing with academic founders, VCs and industry folk at Stage Two, an annual spinout event in Berlin. On the positive side for European tech: we have some of the smartest people in the world building really cool companies based on deep, hard science.

On the less positive side: there’s still a lot of work to do to normalise entrepreneurship as a career path for academics — we also need more people who know how to sell highly technical products to customers once research has been spun out. Scroll on for my takeaways. 

Elsewhere today:

• 13 Swiss startups to watch, according to VCs
• Hard pivot: Ukraine’s tech workers face the ultimate test
• What I've learnt in five years reporting on startups

— Tom Nugent, newsletter editor

Exits look set to return - is your startup ready? 

With just 10% of startups having a chance of being acquired after their Series C round, the stakes are high. Our expert guide gives you the tools to navigate the M&A landscape and build a strategy that makes sure no money is left on the table.

🇸🇪 Swedish startup Yazen has raised a €19.5m Series A. The startup provides a digital service that combines GLP-1 weight-loss medications, like Ozempic, Wegovy and Mounjaro, with lifestyle advice. Like many other startups in the space, it has been riding the upward trend of GLP-1 drugs. 

• Yazen’s Series A is the largest round for a startup vending these drugs in Europe. The company, which says it is operationally profitable in Sweden, will use most of the new capital for marketing and growing its team, as it plans international expansion from its base in Lund.

🇨🇭 13 Swiss startups to watch, according to VCs.

✍️ Sifted's outgoing news editor shares some final thoughts on how tech companies can hurt entrepreneurship and independent businesses.

👀 Out with a bang? VC predictions for Q4.

🇺🇦 When tech folk talk about disruption, they don’t mean anything like the kind Ukraine has faced since Russia’s full-scale invasion in 2022. Ukrainians have endured buildings collapsing around them, sirens blaring, electricity and heating outages and unimaginable loss. Work there happens wherever it can: in bunkers, basements, or makeshift offices.

• “Our morale fluctuates. But our outlook remains hopeful,” says Olga Shapoval, executive director of a tech hub in Kharkiv, a city that suffers regular shelling.
• In this extract from our new Eastern Europe Leaderboard, we check in on Ukraine and discover how the war has forced defence tech investment up the agenda in Europe.

IP unicorns

Last Thursday at Berlin’s Radialsystem — an arts centre in an old pumping station next to the River Spree — dozens of academics took to the stage to pitch companies created from their research.

They were there as part of Stage Two, an annual spinout event put on by RWTH Aachen University and HHL Leipzig Graduate School of Management that brings together tech transfer offices, academic founders, corporates and deeptech VCs from some of Europe’s most notable firms. IQ Capital was there, so too were High-Tech Gründerfonds, Earlybird and UVC.

Everyone who took to the stage looked dead clever. And they’re working on things that are the result of heaps of hours spent in labs across the continent.

A couple of themes stood out from the pitches. One was tech that could be used to make drones more efficient. GaltTec — spun out of the University of Tartu in Estonia — is making microtubular solid oxide fuel cells for drones, off-grid equipment and portable devices. It’s targeting drone manufacturers as its first market, with the aim of longer uninterrupted flight times and lower upkeep costs. There was also SunCubes — from Politecnico di Milano in Italy — which has developed a laser-emitting generator and receiver system for wireless charging. Its use cases include re-charging drones during flight.

Other academics who pitched are using their brains to work on flood prevention and risk, pertinent given the devastation caused by flooding in central Europe in September, and more recently in Spain; last week flash floods in the east of the country killed more than 150 people.

Riverkin, a spinout from ETH Zurich in Switzerland, has developed sensors that can measure the health of river systems and spot changes that could indicate a risk of flooding or pollution. Another company, FloodWaive — a spinout from RWTH Aachen — has developed an AI model that acts as a real-time early warning system for flooding risk.

$1bn IP

The companies on stage show why investors have been paying more attention to university spinouts in recent years.

One VC at the event told me they believe the next generation of European unicorns will be founded on rich IP — compared to the last decade or so which has seen software-based fintechs like Revolut and Klarna and mobility giant Bolt become household names on the continent.

Another investor told me the vast networks academics often build while researching and before spinning out can help them find partners for pilot projects or early strategic backers. That’s rare for founders at such an early stage, they added, and attractive to investors.

What’s still missing at the early stage?

One investor told me cap tables can still be a mess. Historically, one big complaint within the tech transfer space has been that universities take too much equity in their spinouts. But this investor said they’ve also seen cases where the principal investigator (PI) — the person in charge of a research project — doesn’t want any involvement in the day-to-day running of the company but still takes a high amount of equity; that’s not ideal, they said.

We also have a lot of great research in Europe, but not enough people who know how to make money from it, another investor told me. There’s more need for sales-minded operators who also get the science — whether academic founders who have commercial nous, or someone external who can be brought in.

One attendee said in Germany they see a big need for more education around entrepreneurship as a viable career path. There are still just two career paths typically presented to students, they said: one is to join an established corporation, and the other is to continue in academia. We also need to become a lot more comfortable with the risk-taking involved in starting a company, they said. 

Readers, I want to hear more about what’s going on with tech transfer on the continent. Which countries are worth paying attention to? VCs, which universities are giving you the most dealflow? And do you believe you can find your next fund returner from one of the top research labs in Europe?

— Tom Nugent, newsletter editor

Our review of Q3

We examine the key trends and data points from across European tech over the past three months. European tech was hit with a reality check in Q3, but despite the quietest stretch, there's plenty to unpack, including the now-short-lived bursts in megarounds, debt financing and fintech activity. 

London-based Fyld, which enables fieldworkers to survey and collect data from job sites with their smartphone or tablet, raised $10m in funding from NatWest. 

Aarhus, Denmark-based Kanpla, a platform for canteens to optimise operations and give their customers a better experience, raised €8m in Series A funding. HenQ led the round.

Madrid-based Webel, an app that allows users to hire home services like cleaning, handyman jobs and personal trainers, raised €1.4m in funding from investors including Goodwater Capital, Decelera Ventures and Zaka VC.

London-based Levellr, a community management and insights tool to manage Discord communities, raised $1.75m in funding from investors including Mitch Lasky (Benchmark partner), Owen Mahoney (ex-Nexon CEO), Fuel Ventures, Colopl Next and LFG Holdings. 

Berlin-based Cloudsquid, which builds AI agents that can extract and transform unstructured data, raised $1m in pre-seed funding. High-Tech Gründerfonds and Backbone Ventures led the round and were joined by investors including Reetu Kainulainen (Ultimate AI founder) and Udi Miron (former VP product, Ultimate AI).

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

For more deals, analysis and M&A insight, become a Pro subscriber to receive our weekly Deals newsletter.