Sifted - The state of European tech

Good morning there,

It’s that time of year again. Christmas parties are beginning to fill up calendars, it’s getting dark long before the working day has finished and Atomico’s State of European Tech report has dropped. 

The 10th edition of the report is a nostalgic one. Alongside diving into 2024’s startup stats it looks back at the catalogue of data points that have gone up and to the right in European tech over the past 10 years. TL;DR: European startups this year are on track to raise more VC dollars than they did during the decade between 2005-2015. 

But European tech is also at a bit of a crossroads. The US continues to take more tech talent away from the continent, the funding gap between the two sides of the Atlantic remains wide and founders and VCs are gloomier than ever about the future of the region’s tech sector.

I dive into all that — plus some more positive notes — below.

Also, Sifted’s editor Amy Lewin, Europe editor Mimi Billing and editorial director John Thornhill are all at Slush this week. Also there? Say hi!

Elsewhere:

• ‘A climate fund is now way too generic,’ says Nucleus Capital — as it launches €40m fund focused on synthetic biology
• Former Lilium CFO joins Volocopter — as both companies hunt for a lifeline
• Brain-inspired AI chip startup Gemesys raises €8.6m pre-seed round

— Kai Nicol-Schwarz, reporter

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💸 Ruhr, Germany-based Gemesys, which is designing chips that “mimic the behaviour of the human brain”, has raised €8.6m in pre-seed funding. 

• Atlantic Labs and Apex Ventures led the round, which also included a grant from the German government through the country’s EXIST ‘transfer of research’ programme, which backs research-based companies.
• Gemesys is designing chips that allow AI models to be trained and run directly on devices like smartphones and hearing implants. This eliminates the need to transmit any raw data to a data centre and reduces the energy use associated with traditional model training.

💰 Nucleus Capital has launched a new €40m fund focused on companies rethinking food production or industrial production using synthetic biology. Nucleus’s new fund is 90% subscribed, with final close anticipated in the coming months. The fund backs pre-seed and seed-stage companies mainly in Europe but with some focus on the US. 

• LPs include KfW (Nucleus is the investor’s first emerging manager bet), the European Investment Fund, Rentenbank, Alpha-Q VC, Speedinvest, an unnamed global insurance company and several family offices focused on food production.
• “A climate fund is way too generic,” says cofounder Maximilian Schwarz, outlining why Nucleus has developed its niche thesis.

🤝 German electric aircraft company Volocopter has hired Oliver Vogelgesang — who held the role of CFO at fellow German electric aircraft startup Lilium until earlier this year — as its new finance chief. Volocopter previously flagged it was at risk of insolvency, while Lilium filed for insolvency in October. 

• Vogelgesang has replaced former CFO Christian Bauer, who Volocopter says will remain as its chief commercial officer.

🚀 Munich- and Bordeaux-based SpaceX competitor The Exploration Company, which is building a reusable space capsule, announced its €150m fundraise, confirming Sifted’s scoop from October.

• The new round was led by Balderton Capital and Plural, along with investors including Bessemer Venture Partners, NGP Capital and Bayern Kapital.

The state of European tech: 2024

Funding continues to fall, venture debt has had a record year and the US is poaching European technical talent are headlines from a particularly nostalgic State of European Tech report by Atomico.

The annual report — in its 10th year — paints a picture of a European tech scene that has grown exponentially over the past 10 years but currently stands on rocky ground.

Funding is on track to hit $45bn this year which, while down on 2023’s figures, would be higher than any year before the foie gras funding days of 2021.

Debt funding is up to record levels. In the first three quarters of 2024, European startups raised $4.7bn in venture debt, equal to 14% of the total share of VC funding.

There’s bad news for European startups looking to hire top tech talent though, as the region lost a net 492 technical workers to the US in 2023. That’s down from a net loss of 1,585 in 2022, but roughly the same as the net loss of 530 in 2019 (not counting the migration-limited covid years of 2020 and 2021).

Those migrating workers are departing a growing talent pool. Over the past 10 years, the number of tech workers in Europe has increased by 7x to 3.5m — 2.9m of those have joined the sector in the past decade.

But there’s been no major improvement in closing the massive gender funding gap — and at some stages, things have got a whole lot worse for women.

At pre-seed, all-women founding teams picked up 4.9% of capital between 2021-2024, way down from 13.2% between 2017-2020. At Series A the gap also widened, with all-women founding teams raising just 3.2% of capital in 2021-2024, down from 4.6% in the three years before then.

And while the report predicts the European tech sector will create 15m new jobs, be worth $8tn and produce its first $1tn tech company by 2034, founders and VCs aren’t all that optimistic about its future. 

This year, 40% say they’re less optimistic than 12 months ago, with just 34% saying they were more so. It’s a big shift from the sentiment a decade ago, when 55% said they were more optimistic about the future of European tech than they had been a year earlier, and just 8% said less.

Dive into my analysis of the full report here.

And readers, I want to hear from you. What data points catch your eye? Are we missing any crucial stories in European tech? Are you feeling more gloomy or optimistic about the prospects of European tech than you were 12 months ago? Get in touch and let me know.

— Kai Nicol-Schwarz, reporter

👀 Tech investor Xavier Niel urges Europe’s AI startups not to cash out. (Financial Times)

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London-based Goodstack, which provides tech for companies to offer philanthropic services like corporate grants, in-kind product donations and employee and customer giving, raised $28m in Series A funding. General Catalyst led the round and was supported by investors including Morpheus Ventures and Repeat.

Munich, Germany-based Qplix, which offers wealth management software for family offices and private banks, raised €25m in funding. Partech led the round.

Berlin-based Juna.ai, which develops AI agents for industrial process control, raised $7.5m in funding. Kleiner Perkins led the round and was joined by investors including Norrsken VC, John Doerr and Ellipsis venture.

Munich, Germany-based Pruna AI, an AI optimisation engine for machine learning teams, raised $6.5m in seed funding. EQT Ventures led the round and was joined by investors including Daphne, Motier Ventures, Kima Ventures, Roxanne Varza (Station F director), Hervé Nivon (Scenario cofounder) and Olivier Pomel (Datadog CEO).

Manchester, UK-based Silveray, which digitises X-ray images and makes detectors more flexible, raised £4m in seed funding. Northern Gritstone led the round and was joined by investors including ACF Investors, Empirical Ventures, Deeptech Labs and Hamamatsu Photonics Europe.

Helsinki-based Happy Plant Protein, which is developing vegetable protein made from legumes or cereal flours, raised €1.8m in pre-seed funding. Nordic Foodtech VC led the round and was joined by investors including Butterfly Ventures. Business Finland contributed grant funding.

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