Entrance of the Slush 2023 event at Messukeskus Expo and Convention Centre in Helsinki, Finland
The event saw over 13,000 participants, including 5,000 startup founders and operators, in addition to around 3,000 investors managing a combined total of $3 trillion in assets. These included executives from technology companies such as OpenAI, Doordash, Stripe, Duolingo, Mistral AI, Monzo, and venture capital firms such as Sequoia Capital, Lightspeed Venture Partners, Accel, Thrive Capital, Spark Capital, Atomico and others.
Indian unicorn Lenskart made an appearance with its cofounder and CEO Peyush Bansal having a discussion with SoftBank Investment Advisers’ Sumer Juneja.
From left: SoftBank’s Sumer Juneja in conversation with Lenskart’s Peyush Bansal at Slush 2023
Also Read: Lenskart is planning to open 300-400 stores in Southeast Asia
Over the last two days, ETtech spoke to over a dozen executives and investors on the sidelines of the event to delve into how the startup and technology community in Europe has shaken things up in the ongoing winter – both seasonal and in terms of funding.
According to early-stage venture capital firm Atomico, which has backed startups such as Stripe, Klarna and Skype, total capital invested into European tech startups is estimated to plummet to $45 billion in 2023, 55% lower than 2021, when investment volumes crossed $100 billion for the first time in the region. It is also lower than the $82 billion in investments that the region saw in 2022.
“The reality for startup founders looks drastically different from what it did a few years ago. Suddenly, building enduring companies is more important than explosive growth. Now perhaps more than ever, startups need to be built on first principles, and founders should prepare themselves for the long-haul,” Eerika Savolainen, CEO of Slush, said.
Those at the event – looking to network, partner and in some cases, even raise funds – did not disagree, but said this was the time to build.
AI takes the cake
“What you’re seeing in terms of the fall in funding is caused by the inflated valuations that later-stage companies got during the cheap money scenario…and that’s not something specific to Europe but has been seen across the world,” a Munich-based investment banker visiting Slush said.
“To set some context here, investors have also moved focus away from high-cash-guzzling, hyper-growth-generating consumer companies to those that are really building frontier technologies in deeptech areas such as quantum computing, chip design, semiconductors, and new energy and sustainability spaces…something that Europe has a proven track record of building,” he added.
Atomico partner Tom Wehmeier said the focus on climate, healthcare and sustainability was also evident from funding patterns. “European talent wants to solve humanity’s toughest challenges…sustainability, climate, health are the top themes for job movers this year…we also see capital following talent in the same direction. This year, startups operating in the carbon and energy sector captured 27% of all capital invested. This made it the single-largest sector in absolute funding levels overtaking usual suspects like fintech and software,” Wehmeier said.
Artificial intelligence, though, was the top theme for early-stage investors, he added.
In June this year, Paris-based Mistral AI raised around $113 million in seed funding – making it the largest capital raise at that stage. The round was led by Lightspeed Venture Partners, and saw participation from investors based in France, Germany, Italy, Belgium and the UK. These include Redpoint, Index Ventures, JCDecaux Holding, Rodolphe Saadé, Motier Ventures, La Famiglia, Headline, Exor Ventures, Sofina, First Minute Capital and LocalGlobe.
From left: Arthur Mensch, cofounder and CEO, Mistral AI; Paul Murphy, partner, Lightspeed Venture Partners
A Finland-based venture investor backing companies in the deeptech and AI spaces said that what sets Europe apart is the availability of talent. “There’s a large pool of engineers across Europe, including in Nordic countries like Finland and Estonia, who are currently working for US-based companies on the ground in Europe. It is inevitable that as capital starts flowing in…and the larger companies take mentorship roles, these people will start spinning out into forming new companies,” she said.
(The correspondent was in Helsinki on the invite of Business Finland)
AI in focus
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ETtech Deals Digest: Funding crunch continues
As 2023’s penultimate month comes to an end, the funding winter for Indian startups shows no signs of abating. New-age tech companies raised a total of $409 million in November across 63 rounds, according to data from market research firm Tracxn.
Overall funding for the month was down 40% in terms of value compared to a year earlier, when startups raked in $682 million from 136 rounds.
Sequentially, funding activity was down 28%, with $568 million being raised in October across 93 rounds.