EUVC Newsletter 24.02.24 | Hype, opportunity, shifting sands and EU's tightrope
Join us as we digest the week's news in European VC 📰
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Join us & the leading athlete investors in London, Feb 28th
We’ve partnered with our good friends at Players Fund to put on an evening dedicated to celebrating barrier-breaking women in sport, investing business on February 28th. Stay tuned for an upcoming ACT pod with Olympic gold medalist turned femtech founder Dame Jessica Ennis-Hill and host Chloe Dagnell.
In case you missed it, The Players Fund launched a VC firm last year with an athlete-led venture strategy. We are partnering to explore the narrative around the unique access, impact and insight athletes can provide for startups.
As an invite-only event, the evening will feature Dame Jess Ennis-Hill hosting a panel alongside some of The Players Fund's pioneering female athletes including Charley Hull (World No 7 Golfer), Chloe Chong (16 y/o F1 Academy Driver), Danielle Carter (WSL veteran & Lioness), and Dame Laura Kenny (5x Olympic Gold Medallist) in the presence of fellow athletes, investors and founders discussing the next generation of ‘athletepreneurs’.
Fund Modelling Workshop Sold Out Like Hotcakes! But Wait, There's More... 🚀
Our first fund modelling workshop with Marc Penkala sold out faster than hotcakes on a Sunday morning! Due to popular demand, we're serving up a second session. It's a quick, 2-hour deep dive ideal for VCs, fund managers, and anyone in the venture space. Grab your spot before it's gone again!
Highlights
🌍 Eastern Europe's VC Surge: The VC landscape in Eastern Europe is booming, with a 27.4% increase in investment volume in 2023. Poland is leading the charge with €466M in investments, emerging as a pivotal startup hub and signaling a shift in the global VC ecosystem towards the region.
🇪🇺 EU Recovery Fund Challenges: The EU's recovery fund is encountering implementation hurdles, highlighting the complexities of coordinating large-scale financial aid and the need for effective governance.
🔎 EU's Acquisition Oversight: The EU's heightened scrutiny of Big Tech acquisitions reflects a broader effort to foster competitive markets and encourage innovation, impacting the strategic decisions of both tech giants and startups.
🍏 Apple's Regulatory Challenge: Apple is facing a significant €500M EU antitrust fine, a move that underscores the stringent regulatory environment in Europe and the growing scrutiny on Big Tech's competitive practices.
🔄 Perpetual Innovation: The introduction of perpetual fund structures is reshaping the private markets, with giants like Blackstone expanding their reach and redefining fundraising strategies. This trend highlights a significant evolution in how firms engage with individual investors and manage assets.
💳 Financing Evolution: The evolution of subscription line financing (sublines) and platforms like Bridge are addressing the complexities of fund financing, influenced by rising interest rates and market dynamics. This shift underscores the changing landscape of borrower-lender relationships.
💰 Strategic Fundraising Shifts: The rise in deal-by-deal fundraising methods among PE firms indicates a strategic response to investor preferences and a dynamic market environment.
🇩🇪 Germany's VC Ascendancy: Munich and Berlin are emerging as vibrant hubs for VC activity in Germany, despite broader industry challenges. This development points to Germany's increasing role in shaping the European VC landscape.
📉 VC Manager's Dilemma: A significant proportion of first-time VC managers are struggling to raise subsequent funds, reflecting the post-boom challenges in the VC sector and the importance of proven track records and networks.
🚀 AI Frontiers: OpenAI's text-to-video model (Sora) and Google's Gemini Pro 1.5 showcase the never stopping rapid advancements in AI.
🔍 Resilient VC Valuations: Despite a decline in exit values, the European VC market remains resilient, with increased median pre-money valuations and a strong focus on sectors like AI and cleantech.
💸 Unicorns' Profitability Push: The emphasis on profitability among European unicorns, particularly in the fintech sector, underscores a maturing startup ecosystem and evolving investor expectations.
📊 Equity Portfolio Edge: The debate around all-equity portfolios outperforming diversified strategies is gaining traction, fueled by bullish market conditions and a reevaluation of traditional investment approaches.
🤖 Combating Deepfakes: Major tech firms' commitment to tackling political deepfakes reflects a collaborative effort to mitigate AI-generated misinformation, emphasizing the industry's proactive stance on maintaining content integrity.
📱 Apple's Compliance Efforts: Apple's strategies to comply with the EU's Digital Markets Act are under close examination, reflecting the delicate balance between regulatory demands and business interests.
Read the deep dive below.
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Beyond the Hype
The infusion of artificial intelligence (AI) across various digital domains signifies more than just a technological leap; it heralds a paradigm shift in how we conceive business models, innovation, and the very essence of competitive advantage. The spotlight on foundational models by behemoths like OpenAI, Anthropic, and Google underscores an industry-wide acknowledgment of AI's transformative potential. Yet, the true marvel lies not in the singularity of these models but in their diverse applicability across sectors, from creative copywriting ventures like Jasper and Writer.com to groundbreaking biotech research accelerators like AlphaFold.
The advent of generative AI in content creation, represented by companies like Jasper and Writer.com, showcases a pivotal transition from manual to intelligent, automated content generation. This leap is not just about efficiency gains; it's a redefinition of creative processes, where AI becomes a collaborator rather than a mere tool. The implications for industries reliant on content are profound, with potential for enhanced creativity, scalability, and personalization.
In the realm of biotech, AI's role as a catalyst for rapid innovation is epitomized by DeepMind's AlphaFold. By deciphering complex protein structures, AlphaFold exemplifies how AI can shorten research timelines, thereby accelerating the path from conceptualization to breakthroughs in treatments and therapies. This integration of AI into biotech research processes could well be the harbinger of a new era of medical advancements, potentially reshaping healthcare paradigms.
Unveiling Opportunities
The Venture in Eastern Europe Report boasts a vibrant ecosystem characterised by robust growth, significant transactions, and emerging hotspots like Poland and Romania. The surge in investment volume, alongside a notable rise in late-stage investments, paints a picture of a region on the cusp of a startup renaissance, fueled by a blend of innovation, entrepreneurial spirit, and strategic capital infusion.
The predominance of follow-on investment rounds in Eastern Europe's VC landscape underscores a maturing ecosystem where existing ventures are scaling new heights, attracting continued investor confidence. This trend, coupled with a healthy appetite for secondary shares, indicates a dynamic market that balances risk with the promise of high-growth opportunities.
The narrative of ElevenLabs' meteoric rise to unicorn status within a mere two years is emblematic of the potential that lies within Eastern Europe's startup ecosystem. It's a testament to the region's ability to not just incubate innovative ideas but to rapidly scale them into globally competitive ventures, challenging the conventional geographies of tech dominance.
Shifting Sands of Private Markets
The evolution of private markets and asset management, particularly through the lens of perpetual fund structures and global expansion strategies by entities like Blackstone, reflects a sector in flux. As traditional fundraising models adapt to the exigencies of a dynamic economic landscape, the industry stands at the crossroads of innovation and tradition.
The rise of perpetual fund structures marks a significant pivot in how firms approach capital raising and investment lifecycle management. This model not only offers the promise of sustained capital inflow but also aligns closely with long-term investment philosophies, potentially altering the fabric of asset management businesses.
Blackstone's strategic focus on tapping into the global wealth opportunity, particularly through expanding its international footprint, illustrates a proactive approach to harnessing cross-border capital flows. This global outlook not only diversifies risk but also opens up a plethora of investment opportunities, underscoring the increasingly interconnected nature of today's financial markets.
EU's Big Tech Tightrope
The European Union's stance on Big Tech, particularly in the context of antitrust investigations and legislative measures like the Digital Markets Act, embodies the delicate balance between fostering innovation and curbing monopolistic practices. The case of Apple's €500 million fine for alleged anti-competitive behavior exemplifies the EU's resolve to ensure a level playing field, even as it navigates the complexities of digital market regulation.
Apple's tussle with the EU over its music streaming services and app store policies serves as a critical test case for the bloc's digital strategy. The impending fine and the regulatory scrutiny underscore the challenges and controversies surrounding Big Tech's dominance and the EU's efforts to safeguard market competition and consumer rights.
Apple's efforts to comply with the EU's Digital Markets Act, amidst criticism from rivals like Meta and Microsoft, highlight the intricate dance between regulatory compliance and market dynamics. As Big Tech companies grapple with new rules, the unfolding scenario underscores the broader implications for digital innovation, competition, and consumer choice in the EU's single market.
Links & Resources
Venture in Eastern Europe: Why Romania?: The report offers a detailed overview of the venture capital market in Eastern Europe, highlighting key deals and trends in 2023.
Financial Times: Brussels set to fine Apple: An article detailing the European Union's decision to fine Apple for antitrust violations related to its music streaming services.
Germany: VC Hiring Hotspot: This piece explores Germany's emerging significance in the venture capital sector, particularly in cities like Berlin and Munich.
Should You Put All Your Savings into Stocks?: Discusses the recent performance of the stock market and explores the viability of an all-equity investment portfolio.
EU's Next-Generation Recovery Fund Challenges: An analysis of the challenges facing the European Union's recovery fund and its implications for future growth.
Apple's Regulatory Challenges in the EU: Covers Apple's efforts to comply with the EU's Digital Markets Act and the criticism it faces from competitors.
2023 Annual European VC Valuations Report: A comprehensive report on the performance of the European venture capital market in 2023, highlighting trends in exits, valuations, and sectors like AI and cleantech.
Europe Venture Capital Unicorns and Profitability: Focuses on the current emphasis on profitability among startups, particularly VC-backed unicorns in Europe.
In case you missed it: this week we featured one of the judges of the European VC awards 💥👀
The European VC Awards are about community and collaboration, and your involvement is key. Nominate before February 28th, and you’ll join in our raffle for a free ticket to SuperVenture. Your nominations will help shape the awards & ensure they truly represent the best of European VC.
