OpenAI as usual

Good morning Dom,

Today we're bringing you the European side of the OpenAI drama. That is... are the startups over here that use the ChatGPT maker's AI models for their businesses freaked out and reconsidering their reliance on the company? Scroll on for that.

Elsewhere, the long awaited UK spinout report on the country's research commercialisation practices is out, and it's a "significant victory" for founders, downrounds are spreading across European tech and there's finally a profitable European micromobility startup.

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OpenAI as usual

The big story in tech right now is the sudden and mysterious ousting of OpenAI’s CEO Sam Altman — and the ensuing drama that has seen the company’s lead investor Microsoft hire him and his right hand man, Greg Brockman.

Amid the craziness, a few questions are bubbling up: What happens to OpenAI if most of its talent leaves? And are the myriad startups that rely on OpenAI’s models for their businesses worried about the mess?

We asked a few startup founders whether they’re reconsidering their reliance on OpenAI as the media shitstorm plays out, and the handful that we polled said they are not.

Joel Hellermark, founder of Stockholm-based Sana, told Sifted that his AI startup uses “various LLMs” but that OpenAI will continue to be its “main provider”. Stanislas Polu, cofounder of Paris-based AI startup Dust, said that the capabilities of OpenAI’s models “are hard to find elsewhere” and that his company will “continue relying on them”.

Sifted also understands that some startups building products with LLMs have been increasingly migrating to using OpenAI’s models via Microsoft’s cloud provider Azure, and that Altman’s move to work in-house at Microsoft will likely accelerate that shift.

Have a different perspective on the matter? Let us know; hit reply.

— Tim Smith, senior reporter

🇮🇹 Italy’s biggest insurer turns to tech investing. Italian insurer Generali has launched a €250m fund of funds — and has already backed Speedinvest, Dawn Capital and Mundi Ventures. It's also got its eyes on investing directly into startups, Sifted understands.

🛴 "We have learnt from the legacy players" — UK-based e-bike startup Forest sees itself as part of the second generation of mobility startups on the continent, and it's something of a rarity in the sector: it's profitable.

🎓 UK spinout review “significant victory” for academic founders. The long awaited, independent, government-commissioned report was tasked with tackling what some investors have described as "decades of bad practice" from universities.

It recommends more standardised equity terms, clearer timeframe expectations for founders when it comes to spinning out and increased public funding for proof of concept funds.
The report also recommends that UK Research and Innovation — a public body that funnels research and innovation funding to academics — should ensure all PhD students that it funds can attend entrepreneurship training and have the opportunity to intern at local spinouts, VC firms or tech transfer offices.
“Founders will own more of their spinouts and will be free to focus on building breakthrough companies, rather than negotiating with TTOs,” says Nathan Benaich, the founder of Air Street Capital. “Today’s review is a significant victory for founders and the UK’s science and tech ecosystem.”

⛑️ Redundancies at UK healthtech Peppy. The employee healthcare benefits platform has cut about 17% of staff over the past two months, according to Dealroom, and confirmed it has made layoffs to Sifted. It comes less than a year after Peppy raised a $45m Series B and announced it was doubling down on the US market.

🐀 Can tech ever replace animal testing? Products that can make their way into the lungs — like hay fever sprays and perfumes — need to be rigorously tested before they're put in the hands of humans. But, currently, most of that testing at the earliest stage happens on rats and pigs. And that causes problems.

Alongside ethical concerns, animal testing can be very expensive. It is also a shot in the dark, with one report finding that 92% of drugs that are tested on animals later fail in human clinical trials.
UK-based spinout ImmuONE — which is building a miniature model of the human lungs — is trying to get around those concerns. It's one of a small but growing number of European startups working on solutions that could one day remove the need for animal testing. Zurich-based InSphero and Lithuania's Vital3D are also both working on tech-based alternatives to animal testing.
But, until we get to a world free of animal testing, there are two main hurdles: investor support, and regulation.

Bar chart showing the % of downrounds across all deals in European tech

Are you a founder hoping for a valuation bump? You might want to hold that thought. More than a fifth of VC raises in 2023 have been downrounds — and they're at their highest level for nine years — as startup valuations continue to fall, according to a new report from market data platform PitchBook.

Valuations at tech companies at Series E and above have been the worst hit so far in 2023, tumbling 26.1% on the figures from 2022. But early-stage valuations are also bearing the brunt of the downturn.
Unicorns also brought in just €3.9bn across 34 deals so far in 2023 — falling from €22.3bn across 88 deals in 2022.

🔥🔥

Lyon-based RED Horticulture has raised €17m in Series A funding to help make greenhouses more energy efficient with its LED solutions. The round was led by the European Circular Bioeconomy Fund.

Swedish software company Eliq, which creates customer engagement tools for utility companies, has raised €10m.

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Manchester, UK-based SeeChange Technologies, which has developed an AI platform for retailers, has netted an £8m Series A. Investment was led by TriplePoint, and includes participation from Runa Capital and True Capital.

UK-based healthtech Doccla, which is a provider of virtual wards, has raised €5m from Bertelsmann Investments, the global venture arm of Bertelsmann Corporation.

Finland's Linio Biotech has raised €4.2m for its injectable tissue product that helps heal skin.

Ireland's Zerve, which is building collaborative software for data scientists, has raised $3.8m in a round led by Elkstone Ventures.

UK-based Phare Health, which develops AI tools to help hospitals better understand the state of their finances and track cashflows, has raised a £2.5m seed round led by General Catalyst.

The UK's University of Sheffield spinout and bioplastics maker Floreon has bagged a £2m Series A. Investment came from Northern Gritstone.

Madrid-based LUGGit, a startup that specialises in picking up, storing and delivering luggage, has raised €1.8m in a round led by GED Ventures Portugal and Caixa Capita.

UK-based refurbished electronics marketplace Reboxed has raised £1.6m to tackle electronic waste with its recommerce platform. ACF Investors led the round.

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