Downrounds are on the up, so are founders raising on the down-low? | The ambition for one-person unicorns | An LLM for biotech
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Good morning there,

 

In days gone by, hamming up the PR around a recent fundraise was an absolute must for a startup. But times could be changing.

 

According to a new PitchBook report on European startup valuations, the number of companies raising downrounds is on the up. Some of the eye-watering valuations many startups picked up during the heady days of yesteryear have begun to get washed away with the downturn. And that means founders might be a little more hesitant to go on the PR offensive. Sifted’s Orlando Crowcroft digs into that below.

 

Elsewhere today, we cover a $35m raise for a startup building an LLM for biotech, look at reports of a potential big round for Monzo and ask if a solopreneur could use AI to build a billion-dollar business.

 

— Kai Nicol-Schwarz, reporter

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The big story

Silence of the rounds

 

Your typical Sifted journalist receives a steady stream of emails a day from companies wanting to announce how much money they’ve raised. But could those days be coming to an end? 

 

A recent PitchBook report suggests that the number of companies raising downrounds — fundraises that result in a lower valuation than the previous round — increased from just over 14% in 2022 to around 21% in 2023. It warns that this trend is set to continue and, as a result, more companies are likely to keep schtum about how much they’ve raised. 

 

It could also mean that founders will look to cut costs rather than raise more money at a lower valuation, says Navina Rajan, senior EMEA private capital analyst at Pitchbook. It is either that, or look to venture debt — an expensive option given current interest rates. 

 

“Several high profile and smaller companies have started cost cutting processes to scale back overheads, cash burn and increase profitability,” she tells Sifted. 

 

Among the many other insights in the report — which I’ve written about in more detail here — is that 2023 saw a continued exodus of nontraditional investors in VC; they made up 43.5% of total VC funding in 2023, the lowest level since 2015. 

 

These are the people that flocked to the industry in 2021 when times were good, and ran for the hills when times were, um, terrible, bad, more challenging. So what does that mean for VCs? Well, despite what some may say publicly about tourists, they tend to be very good for an economy. VCs may be missing them now they are gone. 

 

“For European VC’s, fewer nontraditional investors all add to fundraising pressures felt last year,” says Rajan. “Many nontraditional parties made their exits during the years of hyped valuations, leaving less capital for the LPs to allocate to venture funds.” 

 

Elsewhere in the report, the few bright spots in terms of fundraising were cleantech and AI. But aside from headline raises from Mistral and Aleph Alpha, the report notes that, for both early-stage and growth-stage startups, valuations have been muted. As for cleantech, which my colleague Freya Pratty-Williams will dig into more in Thursday’s climate tech newsletter, the late-stage funding squeeze is not going anywhere. 

 

Do those findings resonate with you? Are you a founder who recently raised money or is looking to raise on the sly? Do you agree the drop off in nontraditional investors is a bad thing? Founders raising later-stage rounds, are you worried? Let me know. 

 

— Orlando Crowcroft, commissioning editor 

The news

🧠 Top execs from French AI unicorn Owkin have raised $35m for a new startup they created just a few months ago, confirming earlier reporting by Sifted. Called Bioptimus, the new company intends to build a large-language model (LLM) — the same technology powering ChatGPT — for biotechnology. 

  • The model will be trained on complex biological data such as organs, tissues, cells, molecules and atoms. The objective? Nothing less than “to capture the laws of biology that have hitherto remained too complex to be properly understood,” according to founder Jean-Philippe Vert, who is Owkin’s chief R&D officer and an ex-Google researcher. 

✈️ Electric plane startup Heart Aerospace is laying off up to 70 people (close to a third of its workforce) according to local media in Sweden. The “change in focus” comes weeks following Heart’s $107m Series B. 

  • The Swedish startup, backed by Bill Gates’ Breakthrough Energy, EQT Ventures and Norrsken VC, already has 250 orders for its 30-seater hybrid planes — which it hopes to have in the air by 2028.

💸 Spanish digital real estate startup Tiko has acquired local proptech Housell. The acquisition will see the two Spanish businesses form one of the biggest online real estate companies in Iberia by number of homes in its portfolio and geographical presence. 

  • As part of the deal, it is understood that Aviv Group, the housing subsidiary of the German publishing empire Axel Springer and Housell’s largest shareholder since 2019, will get a minority stake in Tiko. 

💷 UK fintech Monzo is nearing a fresh round of funding that would value the company at close to £4bn, according to the Financial Times. The paper reports that the round could be finalised as soon as the next two weeks, and the neobank could raise up to £350m. 

Elsewhere

🦄 Could AI usher in an era of one-person unicorns?

 

⚡️ How to use AI to supercharge your work.

 

💪 Masayoshi Son wants to turn SoftBank into an AI powerhouse. (Bloomberg)

On the agenda

🔥 On February 27, we’ll be showcasing five of the leading European early-stage fintech startups currently fundraising at our Pitch event, exclusively for Pro subscribers. RSVP.

 

💸 On March 13, Amy Lewin will bring together a panel of experts from Octopus Ventures, FaceIt, Latham & Watkins and Bloom to discuss what's in store for M&A activity and how startups can prepare. RSVP.

Deals

Paris-based AZmed, which has developed an AI-powered diagnosis tool for radiologists, raised €15m in Series A funding from investors including Maison Worms, Techstars and Tempact Ventures.

 

Copenhagen-based spektr, which has developed a platform that automates due diligence processes, raised €5m from investors including Northzone, PreSeed Ventures and Seedcamp. 

 

Dresden, Germany-based Altavo, an AI-based speech rehabilitation tool, raised €5m in Series A funding. Occident led the round and was joined by investors including Novalis Biotech, Beteiligungsmanagement Thüringen, TGFS Technologiegründerfonds Sachsen, High-Tech Gründerfonds, Saxonia Systems Holding and TUDAG TU Dresden.

 

Badhoevedorp, Netherlands-based EST-Floattech, which develops battery systems for the maritime sector, raised €4m from investors including the Energy Transition Fund Rotterdam, Rotterdam Port Fund, PDENH, Ponooc and Yard Energy.

 

Berlin-based Embea, an embedded life insurance platform, raised €4m. Atlantic Labs and astorya.vc led the round.

 

Oslo-based Looping, which specialises in reusable transport packaging, raised €2m. Norselab led the round and was joined by investors including MP Pensjon.

 

Coimbra, Portugal-based Connected, which aims to deliver internet connectivity from space, raised €2m in pre-seed funding. FundBox, Shilling VC and Iberis Capital led the round and were joined by investors including Amena Ventures and Octopus Ventures.

 

Livorno, Italy-based 3DNextech, which is helping to advance additive manufacturing and 3D printing for the plastics industry, raised €1.5m. Eureka! Venture led the round and was joined by investors including Toscana Next.

 

Munich-based Silencio, which is developing a network of sensors to combat noise pollution, raised $1m. Borderless Capital led the round and was joined by investors including Moonrock Capital and Master Ventures.

 

If you’d like to submit a deal, get in touch. 

 

For more deals, analysis and M&A insight, become a Pro subscriber to receive our weekly Deals newsletter.

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