Weekly update #35
Up to 1st July, 2024.

Weekly update #35

Michele Mattei Michele Mattei

Michele Mattei

Fintech expert | Manager | Investor | Advisor

Published Jul 1, 2024
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Welcome to this edition of the weekly newsletter. The idea behind this activity is to gather all the information in the startup ecosystem in one place, with a special focus on the fintech market.

Before jumping to the main piece of content I’ve read this week, a quick note from my side. On Tuesday 2nd I will be the guest of Agicap to talk about banking connectivity and how PSD2 ties in with the ERP industry. You can register for the live broadcast here.

Coming back to us, I’ve been reading a very interesting report this week, about what seems to be one of the most discussed topics recently: European VC and Deep Tech investments.

The report is “Deep tech - The opportunity and the strategies: A perspective for European VCs” written by the well known strategy consulting company McKinsey & Company . In the report, the consulting company made a very interesting study on the last 5 years of investments made by VCs, comparing traditional tech and deep tech, with a specific focus on European VCs. Here are my main takeaways.

Let’s start from the basics. There is a clear trend showing that Deep Tech-focused funds have outperformed traditional tech funds since 2003, with a weighted net IRR of 16% compared to 10%. Although Europe has had fewer Deep Tech-focused funds closing and reporting IRR, their expected performance should align with historical US benchmarks. This is due to (A) similarly favorable regional characteristics for Deep Tech, and (B) comparable net IRR performance for broader tech funds.

The second take away is a common misconception in the industry. Many operators think that Deep Tech is niche and lacks the scalability of traditional SaaS or marketplace models. However, data reveals that Deep Tech ventures have a higher proportion of scaling to unicorn status compared to traditional tech ventures, with a 0.8 percentage point higher ratio of unicorns per startup. This is because Deep Tech involves novel scientific and engineering breakthroughs, typically targeting large, untapped total addressable markets (TAMs) with significant growth potential.

Another very common misconception is that Deep Tech has lower capital efficiency. In reality, while Deep Tech ventures typically require up to 40% more funding to generate revenue compared to regular tech ventures (reaching EUR 5 million), this gap is narrowing over time. Despite the higher initial funding requirements, Deep Tech ventures show higher capital efficiency, likely due to a significant share of non-dilutive funding sources, such as government grants and hybrid debt.

European Deep Tech is increasingly gaining significance both regionally and globally. On the global stage, Europe's share of Deep Tech funding has risen from approximately 10% to 19%, with expectations for further growth. Regionally, Deep Tech funding has become a more substantial portion of overall European venture capital tech funding, growing from around 10% of regular tech funding in 2010 to 44% in 2023.

But still, European Deep Tech ventures are receiving an increasing share of funding from US-based venture capitalists throughout their funding stages, starting at 8% in Pre-Seed rounds and rising to 27% in Series C+ rounds. Many VC funds in the EU have less than EUR 300 million in assets under management, which creates challenges in providing adequate funding and scaling up Deep Tech companies. Therefore, there is a clear need for larger VC funds in Europe.

Before jumping to the latest news, a quick request from my side. I will start a small series of podcasts to interview fintech founders and VC managers active in the ecosystem. If you want to be part of it, feel free to drop me a line on Linkedin!

Anyway we saw some very interesting news in the market this week. While a new bank drama is going on in the US about Evolve Bank & Trust and the potential data leak, Klarna announced the divestment of Klarna Checkout, Chime acquired Salt Labs, a Chime Company for $173 million aiming for next year for its long awaited IPO. At the same time Nubank acquired Hyperplane to enhance data intelligence capabilities, while in the meanwhile partnering with Lightspark to introduce payments through the Bitcoin Lightning network. In the VC ecosystem, Luxembourg-based fintech VC MiddleGame Ventures raises $52 million, achieving the first milestone of its $150 million target. Ironspring Ventures raises $100 million to invest in industrial verticals, while Kevin Hartz closed its second oversubscribed fund in three years for A* capital. In the italian ecosystem, the fintech startup Muffin raised a $2.3 million pre-seed, and we saw two different acquisition: TXT GROUP acquiring I MILLE for $8 million and TeamSystem acquiring 61% of Change Capital . Finally, some very interesting funding rounds from fintech startups like Ximple , Cadana , Kanastra , LoopFX , Retorna , Bling , Rainforest , CheQ , Gynger and many others.

But let's take a closer look at the main news of the last seven days:

Closed deals

Recommended by LinkedIn

Our TechCrunch Guest Article!
Conrad Egusa 9 years ago
Why data analytics is The Next Big Thing
Piotr Smolen 7 years ago
Par Equity's £100m Plan to Boost Northern Tech – DIGIT…
DIGIT.FYI 9 months ago

Insights on the VC industry

News on the market

A special look in the Italian market

And here some useful resources for everyone involved in the ecosystem:

Events you don’t want to miss

You have a cool event you want to mention or to sponsor? Feel free to send me a DM.

Startups raising funds

  • Fantalegends - a Fantasy Football free-to-play mobile game that aims to provide an enjoyable and safe experience, user-centered, with more than 2k daily active users. Raising $1M.

  • PopulaRise - The platform that allows companies of every dimension to promote themselves on social media through the collaboration with their clients. B2B2C SaaS. Raising $1M.
  • Bitcoin People - Fintech company focused on crypto payments between corporate and cross countries. B2B, SaaS. Raising $500k. Round closed!
  • Tutornow - Edtech that provides an online tutoring platform for students with learning disorders. Raising $500k to $1M.
  • Recivu - Fintech  startup trying to digitize the receipt flow by getting rid of papers. Looking for $150k in SAFE, already $50k committed.
  • Weagle - B2B Tech startup that provides the very first browser designed for company, with total security for sensitive data. Raising $6 millions for their seed round.

  • Reach Finance - Reach is the fintech platform for wealth accumulation for the Y&Z generations, they provide users with the tools to build wealth such as a budget tracker, a financial plan and a systematization of investments. Looking for $700k, with already $500k committed.
  • wrapp.ai - A fintech startups that offers a virtual accountant and CFO that can help SMEs scale globally. Looking for $1 million, $750k already granted from public funds, looking to close the last $350k.
  • Shoppy Code:Gift card platform that offers a points based loyalty program. They share part of the profits coming from marketing budgets with their customers. Raising $500k.

You want to be present in this list? Feel free to shoot me a DM on Linkedin.

Take also a look at the last edition of the newsletter, Weekly update #34

Finally I am exploring partnerships with the newsletter. So this edition is sponsored by Notion , which is offering a 6-months free plan of its plus product to all founders submitting an application for their startups program.

In order to redeem the free trial, submit an application using this link https://ntn.so/michelemattei, select Michele Mattei as partner and include the following partner key: STARTUP4110P62416. I really hope it will be helpful for many founders out there!


Weekly update on Fintech Weekly update on Fintech

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