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Some people join startups to change the world, some join to escape corporate bureaucracy — while others join because they know there's a chance they could make a bucketload of money by cashing in on stock options down the line. But education around what stock options actually mean for employees is lagging in Europe. We dig into that below.

Elsewhere today, the EU is pushing to shield deeptech startups from foreign takeovers, Allianz has had an offer to acquire French insurtech Luko green-lighted and the UK government is being urged to stop incoming changes to rules around who can angel invest, which are set to drastically reduce the number of people (and women!) who can back startups.

— Sadia Nowshin, editorial assistant

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Equity education

Some people join startups to change the world, some join to escape corporate bureaucracy — while others join because they know there's a chance they could make a bucketload of money by cashing in on stock options down the line. 

But regulations across Europe mean options aren’t always as enticing as they could be, although some countries — like Germany — are trying to change that. 

Plenty of startup employees also don’t really understand what their options mean, or what they’re worth.

According to new data from equity management platform Ledgy, a third of startup employees in the UK and France don’t know their company’s latest valuation. Just 28% of startups in the UK have explained to employees how taxation on their equity works — compared to 49% of companies in the US. In Germany, only 50% of employees know what type of equity they’ve been granted.

Naël El Berkani, cofounder of equity compensation startup Easop, says some European founders might be less open about their startup’s valuation because they have less to gain than their peers across the Atlantic. 

The process in the US is more standardised than it is in Europe, he says, meaning when you grant stock options in the States, the strike price — the cost of exercising your options in order to become a shareholder — given to employees is set by reference to a third-party auditor report called 409a valuation. That price will be discounted compared to the price investors paid in the company’s latest round. 

“Founders have a tendency to overcommunicate on the exercise price because of the huge difference between the price employees pay compared to investors,” El Berkani says. 

That’s not the case across all of Europe. In France, for example, El Berkani says the exercise price employees pay is based on the same company valuation that investors took, sometimes with a slight discount. In Germany, strike prices are also set based on the latest fundraising valuation, according to Index Ventures. In the UK, you can offer stock option grants at a reduced strike price, without any tax penalty by getting a “fair market valuation”, which is recognised by tax authorities. 

“My gut feeling is that as a French founder you’d be more reluctant to share details about your company valuation,” El Berkani says. “In the US [...], you can show the significant discount and it looks like a gift. There’s no such incentive for founders to be transparent in Europe.”

This isn’t just a problem for early employees, who risk missing out on the reward of a big pay day after years of hustling. It’s also a problem for founders — more attractive equity packages could help them attract better talent.

“Only if founders can communicate the benefits transparently will this incentive have the necessary pull effect in the war for talent,” says Christoph Stresing, managing director of the German Startups Association. “Companies must inform and educate their employees about shareholdings and promote them [...] it’s in their own interest.”

If European startup employees took options more seriously — fought for, and exercised them — the whole ecosystem would benefit. They’d have more capital to invest — as angels, or to start their own thing.

If you’re a startup employee, I’d love to hear from you: do you care about your options? Did they play into your decision to take the job? Have you negotiated for more? And if you’re a founder, do you think options motivate your team? Get in touch. 

— Tom Nugent, newsletter editor

🛡 EU pushes to shield deeptech startups from Chinese takeovers. The European Commission has announced a package of proposals to make it tougher for investors in rival countries to take over EU startups developing critical tech — but it will take a while until any of them come into force.

• Concerned by the patchwork of approaches to China among EU countries, the Commission proposed that all 27 EU member states screen and potentially block foreign takeovers of tech businesses in AI, advanced semiconductors, quantum and biotech — including from entities based in the EU but “controlled from the outside”.
• Brussels also wants uniform EU controls on the export of dual-use technologies to countries such as China or Russia, and increased funding for EU universities and companies developing them — potentially creating an entire new funding scheme for dual-use tech in the next few years.

🇬🇧 The UK government is being urged to stop incoming changes to rules around who can angel invest, which are set to drastically reduce the number of people (and women!) who can back startups.

• If the changes go ahead, after January 31, there will be a 60% + reduction in the number of women able to invest on the basis of income in the UK.
• 300+ founders and investors have now signed an open letter calling on the chancellor to reverse the changes, which they say are “anathema to the trailblazing startup ecosystem that has been built today”.
• Here's what the changes mean — and why they could have a drastic impact on the UK's startup ecosystem.

🍄 Germany’s Infinite Roots has raised $58m to replace your morning fry-up with mycelium-based food. The Hamburg-based company grows mycelium cells — what mushrooms grow from — into products that offer an alternative to animal-based and plant-based food options, creating a third category of nutrition. Its Series B round is Europe’s largest raise for a mycelium company to date. 

• The round was led by the European Innovation Council (EIC) and Dr Hans Riegel Holding (HRH), a holding company of confectionery giant Haribo. 
• Founder and CEO Mazen Rizk says that the company can go from cell culturing to a final product in less than a week, and that the tech is ready to debut on dining tables.
• By contrast, cultivated meat — animal meat created by growing animal cells in a lab — can take between two and eight weeks to create, depending on the complexity of the product, according to the Good Food Institute. Both are still subject to regulatory approval.

💰 The European Innovation Council’s €20m grant scheme for Ukrainian startups finally kicked off yesterday, after more than a year delay. The scheme was put on hold due to prolonged evaluation — and suspicion of a conflict of interest during the process. The grant scheme will be managed by a pan-European consortium led by Poland’s FundingBox Accelerator. The open call for grants will launch today at 10 AM. 

• €12m of the €20m provided by the EIC will be distributed to 200 Ukrainian deeptech startups in the form of non-refundable grants. The remaining amount will be used for support in attracting new investments, promoting Ukrainian projects, training entrepreneurs and facilitating their access to international markets, as well as integrating the Ukrainian and European innovation ecosystems.

💸 In its months-long quest for a buyer, Luko finally has its dénouement: an offer from German insurance giant Allianz to acquire the startup for €4.3m — and which retains all of the company’s 112-strong workforce — has been green-lighted by the French commercial court overseeing the case.

• The offer is just a fraction of the $75m raised by Luko to date, from high-profile investors like Accel and Speedinvest.
• It's about a third of the value of a first deal that would have seen UK insurer Admiral acquire the startup’s French portfolio for €14m — but which fell through when fresh audits of the business raised new accounting concerns.

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🇫🇷 Every year, Eurazeo VC Alexandre Dewez publishes a comprehensive, data-heavy, 100-page-long report about the state of French tech that compiles pretty much everything you might want to know about startup and VC trends in the country — and he does it in his spare time. Looking back at 2023, the latest iteration of the report starts with data that is now well-known: with €6.8bn raised, French startups experienced a 41% YoY decline in fundraising. 

• That saw the country lose its place as the second best funded tech ecosystem in Europe to Germany — which it had leapfrogged in 2022. Paris, however, remains the second largest European tech city for funding for the fourth consecutive year, trailing London.
• Foreign VCs have slowed down investments in the country, but there is a longer-term upward trend in the number of international investors backing companies in the country. More than half of the amounts raised by French startups in 2023 originated from abroad — that’s less than in 2021 and 2022, but compares to 34% in 2018. Seedcamp, Speedinvest and Sequoia are the most active foreign VCs in the country.
• Overall, France is aligned with the trends that could be observed across Europe last year. Dewez counted 420k layoffs on the continent in 2023 — twice as many as 2022 — and 761 startup bankruptcies, a 60% increase from the previous year. He anticipates that 57% of Europe’s VC-backed startups will have to raise in 2024 because they have less than 18 months of runway.

— Daphné Leprince-Ringuet, French tech reporter 

Oslo-based Calluna Pharma, which is a clinical-stage immunotherapy company, raised €75m in Series A funding from investors including Forbion, Sarsia, p53 and Investinor.

Berlin-based Packmatic, which is a B2B digital packaging marketplace, raised €15m in Series A funding. EQT Ventures led the round and was joined by investors including HV Capital and xDeck.

London-based IMU Biosciences, which is an immune-powered precision medicine developer, raised £11.5m in Series A funding. Molten Ventures led the round and was joined by investors including LifeX Ventures.

London-based Ozone API, which is an open banking API platform, raised £8.5m in Series A funding. Gresham House Ventures led the round.

Turku, Finland-based CardioSignal, which specialises in smartphone tech for heart disease detection, raised $10m in Series A funding. DigiTx Partners led the round and was joined by investors including Sandwater and Maki.vc.

London-based OpenDialog, a conversational AI platform, raised €7.3m in Series A funding. AlbionVC led the round and was joined by investors including Dowgate Capital.

Berlin-based deeploi, an IT-as-a-Service provider, raised €6m in seed funding. Atomico led the round and was joined by Cherry Ventures.

Hague, Netherlands-based Spotr.ai, which is building an image-driven asset management database, raised €4.5m in funding from investors including EDF Pulse Ventures, Volta Ventures and InnovationQuarter.

Modena, Italy-based Axyon AI, which provides predictive artificial intelligence and deep learning solutions for corporate asset managers, raised €3.9m in funding. Montage Ventures led the round.

Hague, Netherlands-based Naq, which is an automated compliance platform, raised €3m in funding from investors including No Such Ventures.

London-based Concrete4Change, an advanced materials company that captures and then mineralises CO2 in concrete, raised £2.5m in seed funding. Zacua Ventures and Counteract led the round and were joined by the Goldbeck family office.

Limburg, Netherlands-based Verdify, which offers personalised online meal inspiration for individuals, raised €2.4m in funding from investors including Goeie Grutten Impact Fund, Oost NL, Koppert Cress and De Smaakmaker.

London-based Metris Energy, an AI-powered solar energy platform for commercial properties, raised £2m in pre-seed funding. Octopus Ventures and Aenu VC led the round.

Aarhus, Denmark-based Coana, an application security startup that helps companies identify security vulnerabilities, raised $1.6m in pre-seed funding. Sequoia led the round and was joined by investors including Essence VC.

Amsterdam-based Sirius, which is developing an AI "sustainability twin" for the metals and mining industries, raised €1.2m in pre-seed funding from investors including Fund F, BlackWood, WEPA Ventures and Techstars.

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