Sifted - Jetpacks for the military

Good morning there,

Yesterday, the second edition of ai-Pulse — the AI-themed event masterminded by French billionaire Xavier Niel — took over Paris-based startup campus Station F. But despite a stellar speaker lineup, I couldn’t help but sense a slightly more blasé mood than last year.

My theory? Recent numbers for startup funding in France aren’t looking so good — and investors at the event confirmed that the past few months have seen somewhat of a lull. Why exactly is TBC; I dig into what’s been on founders’ and investors’ minds below.

Elsewhere, reporter Kai Nicol-Schwarz goes on a trip to UK jetpack startup Gravity’s training facility to find out what it's like to fly, wearing a suit equipped with seven jet engines. 

He was there courtesy of Gravity for a half-day jetpack experience, alongside a couple of others who’d forked out thousands of pounds to attend. But, as founder Richard Browning tells him, that revenue stream could soon be dwarfed by another source of income: military contracts. More on that below.

Also today:

• The family offices investing most in European climate tech
• Could Trump's re-election trigger more investment into European climate tech?

— Daphné Leprince-Ringuet, French tech reporter

🚀 UK startup Gravity is close to inking deals worth “tens of millions of dollars” over the next 18 months to sell jetpacks to two countries' armed forces. It's also trying to create a new sport after holding jetpack races in the UAE.

• Investors have seen the potential. Gravity raised a $6.1m round last year and has just closed a $13.3m Series B. It counts Draper Associates (a backer of autonomous vehicle company Cruise and bitcoin wallet Coinbase) on its cap table.
• UK tech reporter Kai Nicol-Schwarz tried out the jetpack and spoke to founder Richard Browning about securing funding and commercial deals for a product that has rarely left the realms of science fiction in the past 70 years.

🤝 Most of the time, family offices operate as LPs, investing in VC funds, but some make direct investments into startups. Using data from PitchBook, we looked at how many investments family offices have made into European climate tech startups in the last five years.

Here are the top 5:

1. Belgium-based Korys Investments, which invests the wealth of the Colruyt family, which owns supermarket stores.
2. France-based Noria, founded by Christophe Guillaume, who previously sold a cereal ingredients company.
3. Aurum Impact, founded by Germany’s Goldbeck family, a construction business. 
4. Australia-based Euphemia, which invests the wealth of Up-founder Dominic Pym. 
5. Stratel, a Norwegian, family-owned investment office.

See their investments and which other offices made the list here.

This article first appeared in Sifted’s climate tech newsletter, which drops into inboxes every Thursday. Not signed up yet? You can do that here.

🇺🇸 Donald Trump’s US election victory has left European climate tech asking what he’ll do with the hefty subsidies offered to green tech companies under Joe Biden’s Inflation Reduction Act (IRA). Trump has repeatedly railed against the bill and promised to block any more funds from the package being spent. If he stays true to his word, could that spur more investment into climate techs on European soil?

Finger on French tech's pulse

A year ago, French billionaire Xavier Niel threw a blockbuster event dedicated to AI in Paris’s iconic startup campus Station F. Dubbed ai-Pulse, the show was an opportunity for Niel to gather fellow billionaires Rodolphe Saadé (CEO of shipping giant CMA CGM) and Eric Schmidt (former Google CEO) to announce a joint €300m investment in Kyutai, a brand-new non-profit AI lab based in the French capital.

The first edition of ai-Pulse carried a palpably febrile atmosphere — it came just a few months after AI darling Mistral raised a €105m seed round and US AI startup Poolside relocated to Paris. The crowd was full of excitable, enthusiastic founders and investors filled with optimism about the future of France’s tech scene. It was a high bar to set. 

Yesterday ai-Pulse came back to Station F for a second edition — but with a few degrees less hype.

“We’re not Americans, we can’t get €300m every year,” one founder attending the event told me, laughing. 

The event started with a five-minute intro from Niel, which no one heard because of faulty mics — a classic tech conference mishap. The five-star lineup also included speakers from high-profile companies like Dell, Nvidia and Ampere.

Even Charles Kantor, the CEO of ultra-secretive startup H — which recently saw three out of five cofounders leave three months after it raised a $220m seed — took to the stage to share teasers of the company’s product, to be released “very soon”. Spoiler: it’s a cutting-edge technology to create AI agents, with the potential to “disrupt productivity goals” and exploit “huge opportunities”. 

Despite this, ai-Pulse 2.0 was undeniably tamer than last year — a mood potentially reflective of the latest trends in the French tech sector.

Sifted data for Q3 this year shows a significant dip in deal count across the country. There were fewer than 100 deals announced between July and September, a quarter-on-quarter drop of more than 45%. The €1.2bn raised across those deals put France way behind the UK (€3bn) and Germany (€2.4bn) in Q3. 

“Since the start of September, seeds haven’t been closing,” one VC told me at the event. “Rounds that used to take two weeks are taking months [...] people are feeling a bit morose.”

And although the quality of founders is still high, they said, there are fewer deals — while other hubs in Europe, particularly Munich, are stealing the spotlight. Sifted data found that Munich was second in Europe for funding in Q3 — behind London — with startups in the city raising €1.2bn. Berlin followed, and then Paris, with less than €700m raised.

What gives? Another investor told me it could be that founders are adopting a wait-and-see attitude following France’s recent political rollercoaster, which featured a surprise change of government following a snap election called by President Emmanuel Macron in early June.

“Or it could be that the AI bubble is starting to pop,” one VC weighed in. 

After months funding AI startups left, right and centre, investors may be starting to look more closely at pitch decks, the same VC told me. “That’s probably for the best, and shows that the quality of VCs is increasing as well.”

One AI founder said this shift is real. The context is still very favourable to AI startups, they said, but whereas two years ago VCs were racing to fund every hot AI company, there is now more scrutiny of business models, commercialisation roadmaps and exit strategies. 

With that prism come more questions. “It’s a complicated market,” said this founder. “[AI] companies with huge valuations are currently losing lots of money.”

VCs — I’m interested to hear from you. What questions are you asking AI companies these days? Are you confident that they have the potential to deliver high margins? And is AI a bubble ready to burst after months of euphoria? Send me your thoughts.

— Daphné Leprince-Ringuet, French tech reporter

Meet Europe’s Rising 100 2024

Searching for Europe’s next unicorn? Then look no further than our definitive list of 100 B2B SaaS startups changing the game. We also check in on how last year’s cohorts are faring in today’s ecosystem.  

Cambridge, UK-based Forefront RF, which develops tunable radio frequency technology for smartphones and wearables, raised £16m in Series A funding from investors including BGF, Foresight Group, Octopus Ventures and Cambridge Innovation Capital.

Vigo, Spain-based Marosa, software to help multinational companies with tax reporting and e-invoicing compliance, raised €12m in funding. PE firm Aquiline led the round. 

Oslo-based Glint Solar, a platform to help energy companies evaluate and pre-design solar installation sites, raised $8m in funding. Smedvig Ventures led the round and was joined by investors including Momentum, Futurum Ventures and Antler.

Paris-based Siit, a platform for IT, HR and operations teams to manage internal requests, raised $5m in seed funding. StageOne Ventures and Seventure Partners led the round.

Galway, Ireland-based Octostar, a platform to support organisations involved in investigative activities like national defence and crime prevention, raised €2m in funding from investors including Cysero Euveca and Kilometro Rosso led the round.

M&A:

London-based Patchwork Health, a workplace management software for healthcare, has acquired L2P Enterprise, which provides medical appraisal software, for an undisclosed amount.

• Patchwork previously raised more than £27m from investors including Perwyn, Praetura Ventures, BMJ New Ventures and KHP Ventures.

Berlin-based Nilo Health, an employee mental health support platform, has merged with Likeminded, which provides mental health services for corporates.

• The new entity, called ‘Nilo - A Likeminded Company’, raised €4.5m in funding from Vorwerk Ventures and Heartcore Capital.

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