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Future of Capital Allocation

Your weekly newsletter on the fast-evolving world of investing

 
The week's developments in investing & technology, explained | 30.11.23

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Despite VCs' stormy forecast, this week offered several rays of hope. Funding for EU tech startups grew by 18%, compared to pre-pandemic levels, and Europe's new founder count exceeded that of the US. Moreover, the UK venture capital scene has seen a consistent rise in deal values for three consecutive quarters, reaching a peak of £5.3bn in Q3.


Meanwhile, the 2023 Euroscape Report highlights AI as this year’s key catalyst for cloud startups. The tech is responsible for over 60% of new cloud unicorns, and $100m+ in funding rounds across Europe and Israel. Plus, the UK is raising the bar in ethical investment with anti-greenwashing rules: banning asset managers from using indistinct 'sustainability' labels in their fund marketing.


Read on for more, including expert advice on how to perfectly time your exit strategy, and why AI is the leading choice of long-term investment among European investors.

 

—Charlie and the Research & Intelligence Team


 

The investment ecosystem


🏦 Funding for EU tech startups halved to $45bn in 2023, but there’s a silver lining: early-stage investments demonstrated remarkable resilience. Growth in funding continued to outpace pre-pandemic levels by 18%, and Europe's new founder scene overtook the US in numbers.

 

📈 The UK's VC landscape is a mix of highs and lows. Deal values have climbed for three consecutive quarters – peaking at £5.3bn in Q3 – new Pitchbook data shows. However, the total deal count is declining, with a drop to only 590 deals in Q3.

 

🌱 UK clamps down on financial greenwashing. New anti-greenwashing rules will ban asset managers from using nebulous 'sustainability' labels in fund marketing. Firms will be required to choose from four defined fund labels, and ensure they apply to at least 70% of their assets.


 

Chart of the week



Corporate VCs have tightened their grip on AI market valuations, accounting for 89.7% of total deal value in 2023. Despite this, they were only involved in 26.7% of transactions, selectively focusing on high-potential deals.


 

How AI is transforming investing 

 

🤖 AI is the leading choice for long-term investment among European investors: Despite recent economic headwinds, nearly 70% of fund managers reported an increase in their clients' “risk appetites” for thematic equities, with over a quarter citing AI as their top investment theme.


📈 GenAI is leading the charge in Europe's SaaS sector revival: GenAI has been the fuel firing up cloud startups this year, according to the new 2023 Euroscape Report. It's behind over 60% of new cloud unicorns and reeled in a major $100m+ in funding rounds, across Europe and Israel.


Startups


🗣 It’s time for plain talk in tech investments: Northzone's Molly Alter has called for a “jargon detox” in VC, to prevent investor-founder miscommunication. She categorises jargon into two camps: efficient and lazy. Here's how to tell them apart.

 

🤔 Looking for exit strategies beyond IPOs? IPOs can be alluring for founders chasing lofty valuations and company control, but for many, the wallet-goring costs are still a dealbreaker. In such cases, M&A and pre-IPO offer alternate routes to cash out early – without needing to break the bank.

 

Jobs



 

Noteworthy deals


  • Pika, a startup developing an AI-powered video editing and generation software, has raised £43.3m in a funding round led by Lightspeed Venture Partners.

  • Candex, a procurement management startup, has raised £35.5m in series B funding led by Goldman Sachs. 

  • France-based Indy, an accounting platform for freelancers, has raised £34.6m in series C funding led by BlackFin Capital Partners.

  • London-based PhysicsX, a startup working on various engineering-centered AIs, raised £27.6m in series A funding led by General Catalyst.

  • Dutch-Swiss biotech startup Cradle has raised £18.9m in a series A funding round led by Index Ventures.


 

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Disclaimer: This content is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice.

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