• a look into Mistral's investment memo
• Cocoa VC's portfolio
• big tech going after AI-based startups

 

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Odds evaluation

🇫🇷 Mistral, which raised $114 million pre-product in a seed round led by Lightspeed in order to compete with OpenAI, made its investment memo public. 

Quick comments on it:

• The TAM is estimated at 110 billion in 2030 based on a research paperthat seems off. It’s there as an investment memo needs evidence for back up and makes for a good exercise - but, for example, they mention better image resolution, reduced conversion time, enhanced performance, and quick availability of output as drivers of the segment growth but fact is no company will differentiate an AI-based product in their P&L unless it will make a material difference in revenues whereas its biggest impact is presumably in saving money (expenses). 
• That is to say - the vague TAM makes it hard to skate where the puck will be, and what they call generative AI industry (i.e. standalone AI-based products as basis for other software tools) is an emerging landscape yet to be clearly defined. And hard regulated by Europe btw, which makes it more difficult to build on the continent.
• Also true is the insight of an emerging American oligopoly that can be foundational for the next AI-based computing paradigm, like FAANG has become today, and therein lies Mistral's opportunity. 
• Mistral defines its desired moats on 3 pillars: the model, the team and the Euro location.
• The model is positioned as open source vs everybody else’s being closed - open source is not a benefit though and in order to overcome the barriers of switching you will also have to provide a compelling benefit. Or whatever makes the product special. And, of course, subject to resources allocation and time a generic product can be developed competitively, no doubt, yet it’s the least risky element in the whole enterprise Mistral is building. As always with early stage startups evaluated through VC lens, GTM trumps product, and Mistral has no clear GTM explained/defined with or without fitting the open source model.
• They also say they’d like to be a Europe-first business - the European approach of building software products focused on local customers is, on the other hand, super risky. Europe is a very fragmented market, and rather secondary on absolute numbers, and even being dominant in Europe, which is ambitious, doesn't guarantee a market leading position. Did I mention the EU hard regulations?
• Also not exactly obvious why, in a few years time when Mistral will be able to put something competitive in the market, Euro customers may choose a French AI developer as opposed to an established company such as Open AI - i.e. Sam Altman already toured Europe and is doing biz devel at all cylinders, both D2C and through distributors (Microsoft, consultants etc). And frankly, his execution seems impeccable, meaning AI business is playing a game where Altman is going to be hard to beat, along with the likes of Google et al, also taking a stab at it while controlling large portfolios of locked-in customers. 
• Switching costs are high and Euro (French) patriotism works only with politicians - in a catchup game where the market evolves as fast as Mistral can develop product and put itself on the map. If they can't compete head-to-head against the big guys, the play is to get market share faster or at the edge - however, will the market be under-served faster than incumbents can sell, therein leaving ops for wannabes like Mistral while all the major players will be stuck in inertia? Closing the time and market gaps requires the French being more business savvy than American counterparts - I just don't see it, considering the current market momentum, its development and that Mistral is already four years behind product-wise.
• Not least, add to the lack of GTM clarity the fact that the team seems really thin business-wise. Not only that, but also assembling a competitive team over night just because you have 114 million for paying top dollars for hiring engineers (OpenAI's median total compensation package for a Software Engineer is $900k, btw) doesn't stand for a good DNA and company culture, and this is where the biggest implosion risks lie when it comes to a company executing against a hairy vision. Keep in mind that Open AI had been in stealth for 4 years growing the team and culture organically before publicly launching a product. Mistral will have pressure to hire good people and deliver as the time is already ticking - that's not how you build lasting companies.
• So where is the edge, if any? Just because you can doesn't mean you should - while I understand the founders ambition to show they can build product, is the me-too play from Europe going to provide venture-sized returns? 'This time is different', Lightspeed and Accel seem to rather hedge and play nice with the already all-in French government, it's obviously not a play to win, but play to be in the game somewhere, eventually getting your money out from being acquired for team/customers. I can see a path for building a competitive product, in spite of its risks, and so did the folks backing it. Less so for a competitive business - - the upside of it being that in a few years the generative AI ecosystem may be larger than a zero sum game controlled by a handful of powerful companies. And all of the above reasons aside, what makes me skeptical though is that great companies are not usually emerging on rushed basis, huge budgets and already high-pressured expectations (remember online groceries?), particularly in Europe, which is not really an ideal environment for building a world wide dominant software organisation. 
• Now, this is what any analyst would produce in terms of finding reasons not to invest in a startup. The reality is that this is opportunistic and at pre-seed, pre-product, deals are made based on convinction in team and markets. What do you guys think?

 

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Interesting deals

Nordics

🇫🇮 Freesi, developing tools for 180 customers doing indoor air quality and climate monitoring, analysis and optimisation, added strategic equity investment from Hydda from Sweden.

🇩🇰 Zapp, operating 1,000 public and semi-public charging points around Denmark, raised $700k from local angel investors.

🇸🇪 AdamanT Quanta, developing diamond-based quantum tech for time-keeping, detection, and sensing, raised $850k from Industrifonden, Almi Invest, and Navigare Ventures.

🇳🇴 Intelecy, developers of industrial AI solutions, raised $3.5 million in a round led by Yara, and pricing the company at $18 million.

🇳🇴 Defigo, selling smart locks worth 1 million in ARR for the B2B real estate market, raised a $4 million bridge round from local investors.

🇩🇰 Arkyn, developing a mobile SAAS on top of SAP, raised $1.5 million from Trifork.

🇸🇪 A Retro Tale, ecommerce op selling vintage luxury 3 million worth a year, raised $2.2 million from H&M and local angel investors.

🇩🇰 Comundo, developing a plug 'n' play carbon accounting solution that can provide building emission data based on actual consumption, raised $2.5 million pre-seed from People Ventures and Likeminded VC.

🇸🇪 EmbeDL, developers of an SDK used to deploy deep learning on less expensive hardware, using less energy and shorten the product development cycle, raised $4.2 million in a seed round led by Spintop Ventures. 

🇩🇰 kompasbank, building a neobank for SMBs, extended its series B w/ additional $9.3 million. The initial round was closed at $13 million in December 2022.

🇮🇸 DT Equipment, providing realtime chemical analysis of aluminum in industry, raised $10 million in a Series A2 round from Novelis, Metaplanet, EIC Fund, Chrysalix Venture Capital and Brunnur Ventures.

🇩🇰 Podimo, operating a podcasting company, announced a bridge funding round backed by existing shareholders. Podimo has raised more than 170 million since 2019.

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The UK

🇬🇧 Kitt, operating a real estate digital marketplace that connects landlords with tenants for providing a fully customizable workspace solution, raised a $8 million seed extension round with Hoxton Ventures.

🇬🇧 Supercritical, operating a marketplace that allows companies to purchase fully-vetted and qualified carbon removal credits, raised $13 million series Aled by Lightspeed Venture Partners, joined by RTP Global, Greencode Ventures, MMC Ventures.

🇬🇧 TreasurySpring, providing access to short-term funding markets via a Fixed-Term Fund platform, raised $19 million series B co-led by Baldertonand Black Lion.

🇬🇧 Bios, developing a device that can be implanted on humans interpreting and changing the signals to the nervous system, raised $20 million from Selvedge Capital and XTX.

🇬🇧 Volt, an open banking fintech for payments and more, raises $60 million series B led by IVP, joined by CommerzVentures, EQT Ventures, Augmentum Fintech and Fuel Ventures. Deal was closed at a $350M+ valuation - Volt has raised $24 million series A 24 months ago. 

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France

🇫🇷 Greenbids, developing tools which use machine learning in order to find the most carbon-efficient form of digital advertising, raised $1.8 million seedfrom Elaia and Familie C.

🇫🇷 Geosophy, doing a SAAS able to determine the available underground resources under a real estate asset, raised $2 million from UI Investissement, Noria and local angel investors.

🇫🇷 Gladia, developing an audio transcription API that you can integrate with other products, raised a $4 million seed funding round led by New Wave and joined by Sequoia Capital and Cocoa.

🇫🇷 Hyperline, developing a subscription management tool used as a billing platform for B2B SaaS businesses, raised $4.4 million seed in a round led by Index Ventures, joined by Cocoa VC and angel investors.

• Hyperline and Gladia add up to 🇫🇷Faks (pharma marketplace) and 🇸🇪Twirl (data infra SAAS) announced by Cocoa VC in past two months. Full portfolio here.

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Other geographies 

🇧🇪 NineID, developing SAAS reducing the risk of corporate cyber attacks by preventing physical security breaches, raised $1.2 million in a seed extension backed by Pitchdrive, Comate Ventures and angel investors.

🇷🇴 Finqware, developing a treasury automation platform on top of open banking, raised $2 million from undisclosed investors.

🇧🇪 Swave Photonics, a fabless semiconductor startup, raised a $3 million seed extension from Acequia Capital and existing investors. Swave initially raised $7.4 million in seed in 2022.

🇭🇺 Turbine, developing tools simulating cellular decisions that unlock novel oncology therapies, raised a $6 million series A extension from MassMutual Ventures.

• the initial series A round was closed at 20 million co-led by Mercia and MSD Global Health Innovation Fund in November 2022.
• MassMutual is one of the largest American insurance companies and that's its fifth deal in Europe this year, along 🇬🇧Griffin (neobank), 🇩🇪HelloBetter (mental health education), 🇦🇹nyra (mental health platform) and 🇬🇧Sikoia (API marketplace for fintechs). 

🇪🇸 Oliva, operating an employee mental health platform sold as a service, raised $6.4 million in a round led by Molten Ventures, joined by Stride and Alumni Ventures. Oliva was initially seeded by Moonfire and Stride VC.

🇩🇪 Cleanhub, operating a digital B2B platform that enables the large scale collection of plastic waste in coastal regions, raised $7 million series A round co-led by Integra Partners and Lakestar. It was initially seeded with $3.7 million in 2021.

🇪🇸 Rever, YC alum developing a Fintech and SAAS solution in order to help eCommerce to improve their return experience, raised $8.2 million seed from YCombinator, Mundi Ventures, Barlon Capital, Sequoia's Scouting Fund. 

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Please note that this is just a selection of interesting early stage transactions, all deals (many more!) are available here. Pro tip: use advanced trackers to learn about new deals by industry, country, stage or a specific set of investors.

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Other moves

🇳🇴 Norwegian grocery seller Oda discontinued operations in Germany, after closing down in Finland three weeks ago.

🇬🇧 Ocado is believed to be an acquisition target for Amazon.

🇬🇧 Babylon delisted from the New York Stock Exchange and formed a new company with the Swiss from MindMaze while wiping out all its existing shareholders.

🇸🇪 The Swedish gaming group Embracer Group disclosed that the rights to Lord of the Rings acquired last year had a purchase price of $395 million.

🇪🇺 Google launched an equity-free hybrid accelerator program for seed to series A, AI first startups based in Europe and Israel. 

🇺🇸 Dropbox launched a $50 million AI-focused venture fund.

🇺🇸 Amazon announced a $100 million generative AI-focused fund.

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AI radar

🇪🇸 Bdeo - visual intelligence for streamlining insurance
🇮🇹 Cardo AI - AI-based integrated platform helping institutional investors from the private debt market.
🇳🇱 Deeploy - responsible & explainable MLOps
🇩🇰 DemensAI - detecting dementia through speech recognition
🇫🇷 Greenbids - digital advertising AI
🇳🇴 Kindly - AI-powered chatbots built to automate support and drive sales 
🇳🇱 Neople - AI-enabled digital co-workers created to assist customer support teams.
🇸🇪 Norna AI - large scale data collection and analytics platform for merchandising within the fashion and accessories industry.

 

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Investors

Powder

🇬🇧 Illuminate Financial, a financial services-focused venture firm, has closed a $235 million fund, its third, to invest in early-stage businesses solving problems for financial institutions.

🇬🇧 TDK Ventures, the corporate VC arm of Tokyo's TDK, is raising $150 million for a London-based fund that will target North American and European energy-transition startups.

🇫🇷 Brighteye Ventures announced the final close of its second fund at €100 million to fund European edtech start-ups in their early-stages, investing in seed and series A rounds. 

🇫🇷 Supernova Invest announced the launch of a new €75 million seed fund.

🇸🇪 NEA Invest announced its third fund since 2017, closed at $68 million.

🇸🇪 Röko, investing in European startups with an operating profit between 2 and 10 million, also raised $66 million for a new fund.

🇬🇧 Boost Capital, founded by ex-Initial Capital Alvaro Alvarez del Rio, announced a first close of $30 million of an early stage fund to back 35-40 pre-seed and seed-stage UX-focused startups.

🇱🇺 Expon Capital announced the first closing of a Digital Tech Fund seed-stage fund at €14 million.

🇩🇪 Robin Capital, a solo GP venture fund led by Robin Haak (ex-Revaia), held a €3 million first close for a debut fund focused on seed in Europe.

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On the move

🇩🇪 Marius Oesterschlink moved on from being an investor for DN Capital to the Berlin-based numa in order to become head of strategy and analytics. numa has raised more than 70 million from VCs, including from DN, and sells SAAS for short rentals providers. 

🇪🇸 Marc Clemente and Jaime Novoa were promoted to partners positions at K Fund, both with six years with the company. 

🇬🇧 IQ Capital also promoted Archie Muirhead and Alex Wilson to partner positions after both have spent four years with the firm.

🇩🇰 Margrethe Vestager, Danish politician overseeing digital competition across the EU, is looking to pivot to a top job at the European Investment Bank.

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Exits

🇩🇪 HTGF, Phoenix Ventures and Nordic Alpha Partners from Denmark exited from Wiferion, acquired by Tesla for an undisclosed amount. Wiferion is a German wireless charging manufacturer founded in 2016.

🇨🇭 Alpana Ventures, Swiss Entrepreneurs Fund, Redalpine and Occident Group exited from Swiss Lunaphore, acquired for an undisclosed amount by US-based Bio-Techne. Lunaphore is a spatial biology startup working on cancer research and has raised more than 70 million since 2014.

🇫🇮 Mosaic Ventures, Lifeline Ventures and LocalGlobe exited from embedded finance platform provider Arex Markets from Finland, acquired by the UK-based Bankable for an undisclosed amount. Arex has raised 11 million since 2016.

🇸🇪 Iternio, the company developing ABRP, a consumer-facing app that calculates the best route for EV drivers, was acquired by US-based car producer Rivian for an undisclosed amount. Iternio was founded in Lund in 2014 as a hobby project by Bo Lincoln.

🇸🇪 Söderberg & Partners sold Sweden-based mortgage-as-a-service seller Stoer to Norwegian competitor Stacc.

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Also notable 

🇩🇪 Rocket Internet’s Oliver Samwer is set to earn €260 million dividend payout after consolidating control over one of Europe’s top venture capital groups.

🇬🇧 Synova, a London-based mid-market private equity firm, sold a passive minority stake to Americans from Bonaccord Capital Partners in a pan-European push, following a recent strategic partnership with Singapore-based GP stakes firm Asia Heritage.

🇺🇸 Sequoia launched Sequoia Atlas, an interactive tool that provides insight into engineering and other tech talents across Europe.

🇺🇸 PayPal sold $43 billion worth of BNPL loans originated in Europe to KKR.

🇫🇷 PyratzLabs, French startup studio fully specialized in Web3, launched a “VC as a service” service for corporates, family offices and Blockchain Foundations.

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Closing reads

• OpenAI is reportedly considering launching an App Store-like marketplace in which customers could sell AI models they customize for their own needs to other businesses.
• Softbank's Masayoshi Son joined everybody else on the AI bandwagon and wants to save the world with it by flooding the market with money. Put out a nice presentation for it.
• ​2023 benchmark report - the impact of Europe's macroeconomics on VC investment.
• ​Sequoia vs. a16z vs. Greylock understanding of the LLM stack.
• ​Over 60% of new venture capital managers are choosing Delaware as the domicile for their firms and funds.
• The new Dutch Housing Act will allow municipalities to force homeowners to sell their homes only to people with a lower to middle income.
• Also the Dutch - the government is proposing a cap on the number of students from outside the European Economic Area in some subjects and forcing universities to offer at least two-thirds of the content of standard bachelor’s degrees in Dutch. The world is de-globalizing at a fast pace.
• French President Emmanuel Macron said there was a complete consensus at a summit of world leaders in Paris to reform global financial bodies like the World Bank and International Monetary Fund.

 

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