Inflation, acquisitions, and expansion: A comprehensive VC landscape analysis

Reflecting on the European VC and startup landscape, I’ve noticed some significant newsworthy developments. One standout example is evroc, a new Swedish startup that has set its aim on the data center industry in Europe, which is currently heavily dominated by American companies, notably by Amazon Web Services. Moreover, a UK-based ElevenLabs has shown that money is still accessible when you have a promising product.

Looking to the other parts of the world, the situation is challenging for the US startups in need of financial backing, as rising interest rates due to inflation and the collapse of the main money lender in Silicon Valley have created a difficult environment for those looking to extend their runway. Funding has also decreased in Asia, especially India is seeing a noticeable downturn in VC investments when compared to last year. Moreover, relevant news from the international platform comes from Getir, who are pulling out of Spain as they plan to lay their focus on profitability instead of growth, which has clearly been their focus so far and has not been going the way the grocery delivery giant imagined.

Read about these topics and more below.

Last year the US Federal Reserve started increasing interest rates as a means of battling inflation. This made it unattractive for VCs to borrow money and ultimately sent many VCs to the sidelines. These rising interest rates and the collapse of Silicon Valley Bank earlier this year have been the main reason for the US tech downturn and have led to a significant decrease in venture capital funding deals. The downturn is reflected in the decline of the tech-heavy Nasdaq stock index and major tech companies, including Amazon, Meta, Alphabet which have implemented layoffs.

What does this mean for startups? Mainly that they may be forced to raise funds at a lower valuation or risk running out of money. The share of startup fundraising deals categorised as “down rounds” has increased, and preliminary data for this year suggests the trend will continue. Startup founders are concerned about the negative impact on their shares’ value and long-term prospects. Well-known firms like Tonal, Klarna, and Stripe have already experienced a decrease in their valuations.

According to data compiled by PitchBook and the National Venture Capital Association, startup funding deals reached a five-year low in the first quarter, with a total of $37 billion raised by startups.

India has experienced significant growth in its startup ecosystem over the past decade. The country has become one of the fastest-growing startup hubs globally, with several cities serving as hotspots for entrepreneurial activity, including Bangalore, Mumbai, Delhi, and Hyderabad. However, the downturn has also affected Indian startups with the first half of 2023 only having $1 billion in investments to show – a 60 % decline when compared to June 2022.

It is expected that the current funding trends will continue throughout the year, but the total amount of venture capital is unlikely to exceed the $24 billion mark seen in 2022. Additionally, the dominant trend in funding is a higher volume of activity in the early-stage investment category, although the value of these investments is lower. Notably, there have been very few large deals in the first six months of the year, with transactions surpassing $100 million being rare.

Not very surprisingly, In terms of sectors, cleantech received the highest funding traction in several months, followed by fintech and ecommerce. This was primarily due to a single significant traction in each of these categories.

Visa, the global leader in digital payments, has announced its acquisition of Pismo, a techfin company based in Brazil, for a cash amount of $1 billion. Pismo specializes in cloud-based platform-as-a-service (PaaS) solutions, offering a range of financial services such as core banking, payments, digital wallets, marketplace, and financial asset management.

What is Visa now able to enhance with Pismo? The payment giant will now extend in banking and issuer processing capabilities, including debit, prepaid, credit, and commercial cards. These services will be delivered through cloud-native APIs. Additionally, Pismo’s platform is a door-opener for Visa in connecting its financial institution clients to emerging payment systems like Brazil’s Pix, which offers instant payments.

Pismo has established itself as a key player in the Latin American market, but also has a strong presence in Europe, the US, and Southeast Asia.

The acquisition comes after Pismo’s successful $108 million Series B funding round in 2021, led by SoftBank Group, Amazon, and Accel. Following the acquisition, Pismo’s founding members and management team will continue to lead the company. The deal is expected to close by the end of 2023, pending regulatory approvals and standard closing conditions.

Although Visa’s purchase price of $1 billion is lower than the rumored $1.4 billion offer made earlier this year, it is still  the largest fintech exit in Latin America since Nubank went public in late 2021 and the largest disclosed startup exit so far this year.

Getir Wants to Get Out

According to sources within the company and local media, Turkish grocery delivery company Getir has announced its intention to exit the Spanish market, leading to a mass redundancy process. Approximately 1600 employees are expected to lose their jobs.

Discussions with unions have begun, and the redundancies will impact couriers, dark store staff, and office employees. The decision to exit Spain comes as Getir faces challenges generating sufficient revenue from its dark stores. Last week, Getir also announced plans to exit France and filed for bankruptcy in the country. The company’s workforce of 1,800 employees in France is uncertain about the possibility of redundancies.

The speedy grocery sector as a whole has faced difficulties in achieving profitability due to inflation and limited venture capital funding. Consolidation has been prevalent, with Getir acquiring companies like Blok, Weezy, Gorillas, and Frichti. Despite previous talks of acquiring German rival Flink, negotiations reportedly fell through.

When approached for comment, a Getir spokesperson stated that the company has initiated the collective redundancy process in Spain and will explore all alternatives during negotiations before making further comments.

Swedish Startup Plans to Take on AWS, Seeks $3 Billion

If there is a sector that is known for setting itself ambitious goals, it’s the startup scene. But even for these benchmarks, the plans that the Swedish serial entrepreneur Mattias Åström has for evroc sound almost unbelievable.

The Swedish startup evroc, supported by EQT Ventures and Norrsken VC, intends to generate and allocate 3 billion euros ($3.2 billion) within the next few years to commence operations of two “hyperscale” data centers, so basically hubs where companies, organizations and cloud service providers can manage their data, run software applications, and deliver services over the internet. These can include things like websites, mobile apps, email services, and online storage.

The demand for data in Europe is rapidly increasing. However, the majority of cloud services are provided by a small number of American companies known as hyperscalers or operators of large-scale data centers, the most prominent one being Amazon Web Services (AWS).

What’s evroc’s unique selling point? The startup plans to maintain data within Europe and therefore under the safety of European data protection laws. The American companies have proven time and time again their leniency when it comes to data protection – just ask Meta, who got slapped with a billion dollar fine recently due to data protection violations. Evroc has secured initial funding and aims to construct eight hyperscale data centers, establish three software development hubs, and employ over 3,000 individuals by 2028.

“This is an incredibly ambitious undertaking. We will need to consistently raise funding over the next five years,” Åström stated in an interview with Reuters.

Another USP is what Åström calls the “eco load balancer,” which will relocate data processing among its data centers based on the availability and affordability of renewable energy in different locations.

Åström explained, “When there is sunshine in Spain, we will shift data processing to Spain, and when there’s wind in the Netherlands, we will relocate data processing there.”

Evroc plans to initiate a pilot center in Stockholm next year and commence the search for suitable locations for a data center in northern and southern Europe.

British Voice AI Company Lands $19 Million in Series A Funding

UK-based ElevenLabs – a research company specializing in voice technology –  are currently working on developing software that can convert text into speech, specifically designed for publishers and creators. Their innovative tools offer various options for generating speech, including using synthetic voices, replicating existing voices, or even creating completely new artificial voices that can be customized based on preferences for gender, age, and accent.

In January 2023, ElevenLabs introduced its Beta platform to the market. Since its launch, the company has gained a significant user base, with over 1 million registered users. These users have utilized the platform to generate an impressive volume of audio content, amounting to more than 10 years’ worth of material.

The versatility and usefulness of ElevenLabs’ platform have attracted attention from various creative industries and sectors. Independent authors have found value in creating audiobooks through the platform, while developers have utilized it to give voices to characters in video games. The platform has also proven valuable in assisting visually impaired individuals by providing access to online written content in an auditory format. Additionally, it has powered the world’s first AI radio channel, showcasing its broad application and potential impact across different domains.

The round was led by Nat Friedman, Daniel Gross, and Andreessen Horowitz (who is taking a board seat) with participation from Credo Ventures, Concept Ventures, and angel investors including Mike Krieger, Brendan Iribe, Mustafa Suleyman, Aravind Srinivas, Guillermo Rauch, Tim O’Reilly, Creator Ventures and SV Angel.

Volt Raises $ 60 million for APAC Expansion

Things are looking good for Volt. Not only did the e-commerce giant Shopify name them as their payment partner on June 14, now the Swedish payment provider has also successfully landed significant funds for their Asia Pacific expansion.

Volt intends to use the fresh money to enhance product development in its current markets in Europe, the UK, and Brazil. The funding round was led by venture capital firm IVP, as stated in the release.

Volt CEO Tom Greenwood expressed excitement about the partnership with IVP, emphasising the company’s progress and vision for real-time payments worldwide. He mentioned that Volt remains “focused and humble” as they embark on the next chapter.

In addition to its existing markets, Volt has plans to enter the Australian market later this year and has aspirations to expand into the United States market. The press release highlights the company’s product development goals, which include expanding its network of acceptance and global reach, incorporating cash management into its product suite, and significantly strengthening its product and engineering teams.

In regard to the partnership, IVP Partner has also stated that they see Volt as “well-positioned to redefine the future of payments globally” considering the projected value of A2A payments in eCommerce transactions to reach $757 billion by 2026.

Recycling Startup Secures Seed Funding

A deep tech startup named DePoly has secured $13.8 million in seed funding to support its innovative chemical recycling technology. The Swiss-based company specializes in processing complex plastic streams, such as contaminated and mixed plastics, and converting them back into high-quality raw materials without any loss of quality.

DePoly’s process focuses on PET plastics and polyester textiles, breaking them down into their main chemical components, which are then sold back to the industry for the production of new items. The company currently operates a pilot plant with a capacity of 50 tons per year, serving industries such as packaging, textiles, fashion, and post-industrial streams.

DePoly is also constructing a showcase plant with a capacity of 500 tons to demonstrate its technology at a commercial scale. The company has already attracted five customers, including fast-fashion brands, sporting goods brands, packaging users, and resin producers. DePoly’s approach differentiates itself by operating at room temperature and standard pressure, eliminating the need for washing, pre-sorting, and pre-melting of plastics.

The technology enables the recycling of PET and polyester materials that would not typically be processed by conventional recycling systems. DePoly’s mission is to contribute to a circular economy for plastics by enabling the removal of plastic waste and providing access to sustainable chemicals for the production of new items.

The trends observed since the beginning of the year have persisted through 2023.

For one, Getir’s exit from Spain shows us once again the fast dynamic of the grocery delivery industry and that profitability over growth is the way to go this year – even though the shift came a tad bit too late for Getir in this case, the business strategy is definitely the right one, not only in dynamic sectors like grocery delivery.

Moreover, Pismo’s $1 billion exit (despite only being founded in 2016) shows us that Fintech is still unparalleled in the current venture capital environment and is showing no signs of slowing down.

Last but not least, the collapse of the Silicon Valley Bank and the rising interest rates put up a big question mark in which way the US tech industry will develop in the next six months and of course raise the question of how that situation will affect other tech environments internationally. While this may seem like quite a negative outlook, let’s not forget however that products with potential have and always find money for funding, as is the case with DePoly.