• revenue-based financing is an old product for a new type of customer
• hot startups are raising
• NATO will do VC investments.

 

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Observations

Revenue-based financing seems to have become a thing in Europe in the past couple of years. It is not exactly a novel financial product (it's like factoring 2.0), rather an adapted one to the 21st century, namely to the emerging tech startups that are de-risked by VCs and that need to grow super fast. Startup funding finally has picked up in Europe, so there's business to be made with these guys.

I first heard about RBF when a British VC announced this exactly two years ago - Forward Partners launched a financial product providing a 6% flat fee loan payable as a cut of the company’s revenues. That was in April 2020, dully noted by yours truly.

Then, a few months later, I learnt about some Spanish founders from Boston seeding their startup with VC money for selling the same product in the summer of 2020. 

Fast forward 20 months, there's a few dozens of such suppliers in Europe, some of which are VC-backed. RBF is a standard money product sold alone or part of a portfolio, somewhere in between bank loans, venture debt and equity. It's a product with little to zero differentiation but there's business to be taken away from traditional providers, particularly from the banks, and complements the VC business model fairly well. Therein lies the opportunity.

Banks are traditionally risk adverse and just the thought of having to do business with one can make a founder uncomfortable. And the RBF vendors differentiate exactly on what the banks cannot provide - a super fast process, little paperwork, data-driven decisions and no hard assets collaterals asking. Banks don't understand startup risks, money is money, there's always a cost of capital, but how you can access it, in what conditions, and what you get on top it, matters. Ask any VC about it, btw, they'd be happy to brag about what they can offer besides the money.

So there's a market to explore here and a bunch of Euro founders that jumped on it - data shows a yearly compounded growth rate of 60%+ for the next 5 years or so, leading to a global TAM of $42 billion.

More about the model and dynamics, as well as a list of 25 VC-backed European startups and their investors here.

Keep reading

 

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Cheat sheet and intel reports

The best fintech intel
This week we sent our monthly fintech update about what was important in Europe. You can access it from here for free for a week (Easter gift 💙)

You can subscribe for getting it in your inbox alongside access to the best source of Euro data and insights from here.

Recent intel pieces
• Lightspeed's first venture deal in the Nordics link
• fashion for the metaverse link
• Notes about the Euro VC market link

The most active investors in Europe in Q1
• in Europe (late stage | early stage | angel investors)
• in the Nordics
• in DACH (Germany, Austria, Switzerland)
• in France
• in the UK
• the Americans

The hottest 160 early stage startups from Europe

👇 Startups from these lists 👇 have already raised: Ark Capital, Causal, Climate X, Emitwise, Finary, Liveblocks, Zevoy etc

We have reviewed more than 2000 early stage deals made in 2021 and profiled 160 interesting startups that are in the market raising money now:

🇬🇧 UK (40 startups)
🇩🇪 Germany (35 startups)
🇫🇷 France (30 startups)
🇸🇪 Sweden (20 startups)
🇩🇰 Denmark (15 startups)
🇫🇮 Finland (10 startups)
🇳🇴 Norway (10 startups)


Note: the reports are available for Nordic 9 paying customers only. You can become one from here.

 

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Topic of the day

 

Notes

🇩🇰 The Lego metaverse. Lego got into a partnership deal with Epic Games for building a kid-friendly metaverse. Lego is a traditional company, which manufactures toys for a well-defined market category and with one of the best brands on the planet. If you run such a company and wonder what the next 50 years will look like, you simply look at a company like Epic Games (or Roblox for that matter) and want to adapt business towards that.

That's the main reasoning for the deal, doubled down by an 1 billion equity investment of the family office of the Kirk Kristiansen Family, the owners of Lego brand. I wonder if they explored a merger of sorts - Lego and Epic are of similar size, Lego did about 8 billion in sales last year while Epic did about 5 billion in 2020. The 1 billion dollars question is how exactly they materialise this business partnership - sure, building a or the metaverse that's kid-friendly sounds nice and trendy, and the vision seems right but does that mean Lego will launch its own standalone games? Will it have its toys implemented in Epic's gaming environments as NFTs or something? The practicality of it should be interesting to follow.

💲 James Anderson of Baillie Gifford says that the current sell-off in tech stocks is unlike anything he’s seen in his career.

🇪🇺 Tony Fadell who invests via Future Shape and is known as formerly with Apple in Jobs era, says that if you are a cleantech investor the best place to go is in Europe because of more progressive environmental regulation, more progressive companies and more progressive societies than most other parts of the world.

🇬🇧 Atomico announced the first 8 angels for its 2022 Angel Programme.

✈️ NATO said that it'd make available a €1 billion VC fund for high tech start-ups, 9 months after announcing that it's interested to fund startup R&D. The fund is multi-sovereign and will deploy money in dual use technologies that will complement DIANA, a network of more than 10 accelerator sites and over 50 test centres in innovation hubs across NATO alliance countries. The Bulgarian $100 million thingie announced last week is part of the program, which is HQ-ed in London and is seemingly led by the UK and Estonia as the hosts of the European part of DIANA. 

💪 Frontier is an advance market commitment to buy an initial $925M of permanent carbon removal between 2022 and 2030. It’s funded by Stripe, Alphabet, Shopify, Meta, McKinsey, and tens of thousands of businesses using Stripe Climate.

🪝 Accenture bought 60,000 Oculus headsets and now gives them to all new employees to encourage virtual socializing. 

☢️ Elon Musk made an offer to buy Twitter for $43 billion, Twitter's board blocked himwith a poison pill. What is a poison pill? If you were to read one thing about this saga, thisshould be it (non-paywall here) - that's better than any reality show.

🎹 The Steinway piano was the instrument of choice for 97% of concert pianists when performing with orchestras across the globe during the 2018–2019 concert season

🤡 Ghostwriters on LinkedIn are making $500–$700 an hour writing posts for high-powered execs and LinkedInfluencers.

 

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Readings

🇨🇳 Why China’s version of email marketing is so effective.

👀 Zapier: The $5B unbundling opportunity.

🙉 Chris Dixon in a good interview about a16z, web3 and whatnot. 

🤔 Spotify has a fake artist problem to deal with.

🤓 Gaming Spotify - How fans of the Brazilian musical artist Anitta gamed Spotify to ensure she topped its charts.

☔ CNN spent 300 million to launch a subscription service McKinsey said it'd get to 2m subs within a year. Ain't happening.

📱 The median Twitter user sends only 24 tweets a year.

😔 Why American teens are so sad.

 

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