Startup Monday: Latest tech trends & news happening in the global startup ecosystem (Issue 125- March 24)

Welcome to Startup Monday, my weekly newsletter that recaps the week in the global startup ecosystem. To have this newsletter emailed to you, you can sign up here.

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Top startup news to follow this week:

1. Israeli VC fundraising hits 10-year low after 73% plunge in 2023

Despite the fundraising slowdown and reduced investments in new companies, Israeli funds still sit on a substantial $10 billion, with $2.38 billion earmarked for new investments and $7.7 billion reserved for existing portfolio companies

Israeli VC fundraising suffered a 73% decline in 2023, hitting a low not seen since 2015, the investor report jointly compiled by IVC, the Gornitzky law firm, and the accounting giant KPMG, has revealed.

Last year, 21 Israeli venture capital funds managed to secure an aggregate amount of $1.52 billion, marking not just a significant drop in dollar terms, but also a 66% decrease in the number of funds raising new capital. Notably, three VC funds accounted for 51% of the total capital, raising over $200 million each: Qumra Capital IV, TLV Partners V, and Viola Growth IV.

Israeli VC fundraising looks to have rebounded since the start of 2024, with Team8 ($500 million), Red Dot Capital ($250 million), Ibex Investors ($106 million) and iAngels ($70 million) raising a total of almost $1 billion.

According to IVC's measurement model of Israeli VC funds allocations and capital availability, 2023 concluded with $1.14 billion, reflecting the lowest Israeli VC fund capital allocation volume since 2015.

These figures underscore the limited availability of capital for local startups from Israeli funds, particularly as the volume of investment rounds in startup companies surged, partly due to the increased involvement of foreign funds in Israel. Consequently, a venture capital dollar in 2023 holds less purchasing power compared to 2015.

2. Frontline Ventures raises $200M targeting B2B startups straddling the Atlantic

Startups in Europe, faced with an ongoing economic slowdown in the region, continue to struggle on the fundraising front. Meanwhile, European VCs that are hedging their bets by growing their focus on startups that either have a global/U.S. play in mind — or are in the U.S. already — are seeing a lot of interest from LPs. TechCrunch has learned exclusively that Frontline Ventures has raised $200 million across two funds, named Frontline Growth and Frontline Seed, to keep making bets across the pond.

It’s not the only one: Giant Ventures in January closed two new funds totaling $250 million to invest in startups on both sides of the Atlantic.

Frontline already had a reputation for investing across both Europe and North America; its new funds will continue to follow that strategy, focusing specifically on B2B software companies. Following wider trend lines among other VCs in the region, the new seed fund will favor European ventures, while the growth fund will focus on U.S. startups.

Frontline believes that U.S. scale-ups, generally, have much better odds at succeeding when they expand their operations to the other side of the Atlantic. “Though it is a traditionally undervalued market, Europe accounts for over 30% of global revenues of top-performing B2B software companies at IPO,” Brennan O’Donnell — the co-lead of Frontline Growth with Stephen McIntyre — said in a statement.

“Traditionally undervalued” is well-worn phrase applied to Europe’s venture landscape. And stats detailing how funding has dropped off since 2021 do not help. However, things aren’t quite as bad as the headlines seem to state once you stop comparing recent investment trends to the boom times of 2021 and early 2022. Startups on the continent still raised more capital last year than they did back in 2019, according to a report by law firm Orrick. And Europe was the only major region to see investment levels remain above pre-pandemic norms — Asia and North America both fared poorly by that metric.

O’Donnell and his partners at Frontline have been vocal about Europe’s value as a market for some time?and have even corroborated it with some research of their own. Frontline wants to ensure that its U.S. companies don’t leave money on the table by not expanding to Europe when they should.

3. German climate tech VC raises ‘record-breaking’ €300M first fund

Berlin-based World Fund has filled its coffers with €300M, in what it claims to be the largest first-time fund raised by any climate tech VC in European history.?

Founded in 2021, World Fund invests in startups building tech to decarbonize industries from energy and buildings to transport and agriculture. It has already backed 15 early-stage companies, including SpaceForge, which manufactures materials in orbit, and Slovenian startup Juicy Marbles, which makes fake meat whole cuts.?

“We look for founders building companies and technologies with the potential to scale, deliver significant cuts in CO2 emissions, and power systemic change,” Danijel Visevic, managing partner at World Fund, told TNW. ??

Securing cash has been especially tough the last year or so, amid one of history’s biggest downturns in VC funding. This has pushed many promising startups off the edge. ?

4. Amsterdam-based OTB Ventures closes a new €170 million fund to fuel European deeptech innovation

OTB Ventures announced that it has closed a €170 million significantly oversubscribed fund, to build and scale Europe’s most promising early-stage deeptech startups. Fund 2 will be backed by the European Investment Fund (EIF), Isomer Capital, NATO Innovation Fund (NIF), Foundation for Polish Science, TDJ Venture, Snowflake co-Founder Marcin Zukowski and OnDean, the family office of the Founders of Relativity.

The dedicated Deep-Tech fund, which is the largest VC with roots in Central Eastern Europe, will invest in four core verticals across Europe; SpaceTech, Enterprise Automation & AI, Cybersecurity and FinTech Infrastructure. Mirroring the funding strategy of OTB Ventures’ Fund 1 and utilising the Partner’s strong track record for identifying winners in emerging technology sectors at an early stage, Fund 2 will be used predominantly for Series A investments, with a new up to 10% allocation for Seed funding to support the growth of promising ventures at their inception.

OTB Fund 2 will reserve more than 50% of its capital for follow-on investments to support additional funding rounds in the best-performing portfolio companies. OTB Ventures will continue to maintain meaningful minority stakes in its portfolio companies.

Adam Niewiński, co-Founder and Managing Partner of OTB Ventures, said: “We are thrilled to announce the successful closure of our latest fund, a testament to the enduring confidence our investors have shown in us. This achievement comes despite the market still being somewhat challenging, building on the proven success of Fund 1. Our new fund empowers us to further our mission of supporting disruptive DeepTech startups that are leveraging Europe’s outstanding tech talent pool – the biggest natural resource that our continent can offer.”

5. AI startup Cohere seeks $5 billion valuation in latest fundraising

March 20 (Reuters) - Cohere, an artificial intelligence startup that develops foundation models to compete with ChatGPT creator OpenAI, is in advanced talks to raise $500 million at a valuation of about $5 billion, according to a person familiar with the matter.

The Toronto-based company has seen its annualized revenue run rate grow to $22 million this month from $13 million in December as it launched new model Command-R, said the source, who requested anonymity to discuss confidential matters.

The startup founded by former Google researchers has pitched its growth potential to investors by building enterprise-focused AI models. Cohere, which currently has a partnership with Oracle (ORCL.N), opens new tab, also plans to make its models available on other major cloud providers.

Cohere was valued at $2.2 billion last June when it raised $270 million from investors including Inovia Capital, Nvidia (NVDA.O), opens new tab and Oracle. The new valuation it is seeking had not been reported previously.

6. Manchester-based AccessPay closes €22.1 million to expand bank integration solution to the US

AccessPay, a leading bank integration provider, announced that it has closed a €22.1 million funding round with a combination of equity and debt. The round was led by True Ventures, the Silicon Valley-based venture capital firm, with participation from Manchester-based investment firm Praetura Ventures, NatWest, Mastercard, Route 66 Ventures, and Beringea.

This latest round of capital will be instrumental in driving AccessPay’s focus on profitable growth while bolstering its commitment to increasing revenues in a sustainable manner. A significant portion of the funding round will be dedicated to AccessPay’s Research and Development (R&D) work, ensuring continued value creation for its enterprise customers. Notably, the company plans to further develop its capabilities in fraud & error prevention, bank statement data and reconciliation automation, and ISO 20022 data transformation, as well as to continue AccessPay’s rapid expansion in the US.

Anish Kapoor, CEO at AccessPay, said: “We are thrilled to announce the close of our latest funding round. For us, it reflects investor confidence in our vision and potential for long-term growth. I’m exceptionally proud of our success since the company was founded in 2012, especially considering the macroenvironmental challenges we have weathered over the years. This funding will play a crucial role for the latest stage of our evolution.”

Over the last couple of years, the AccessPay team has made several senior hires, and expanded geographically beyond the UK, including mainland Europe and the United States via partnerships with Sage and Finastra. This round of funding will provide AccessPay with the financial resources to maximise these strategic growth opportunities, including potential acquisitions to sustainably expand its market presence and offerings.

7. Billionaire Eduardo Saverin’s B Capital Raises $750 Million To Fund Late Stage Startups

B Capital—which has in the past backed Indian startups such as Byju’s and Meesho—said that the fund attracted both existing and new investors, including pension funds, family offices, high-net worth individuals, and sovereign wealth funds. The fund made its first investment through a secondary investment in U.S. based contract intelligence company, Icertis last June.

Founded in 2016 by Saverin, renowned investor Howard Morgan, and former Bain Capital executive Raj Ganguly, B Capital currently manages over $6 billion in assets across multiple funds that invest in companies ranging from seed stage to late stage. Previously, the firm closed $1.2 billion for the Growth III Fund last year and a $250 million early stage fund in 2022.

With a net worth of $16 billion, Saverin, a Brazilian native, topped the list of Singapore's 50 Richest when it was released last September. Despite being a venture capitalist, most of his wealth still comes from his small but valuable stake in Meta Platforms (previously Facebook), which he co-founded with Harvard classmate Mark Zuckerberg in 2004. Saverin has been a resident of Singapore since 2012 when he renounced his U.S. citizenship.

8. Saudi Arabia Public Investment Fund in talks with venture capitalists to create $40 billion AI investment fund

Saudi Arabia’s Public Investment Fund is in talks with venture capitalists to create a $40 billion investment fund to propel Saudi Arabia to a top leadership position in the field of artificial intelligence by 2030. The sovereign wealth fund manages nearly $1 trillion to drive growth in new sectors as the country pivots away from oil as their main source of revenue under the country’s master plan called Vision 2030.

Saudi Arabia?receives the majority of its revenue from oil sales, but as the world shifts away from using oil for transportation, heating, and cooking to counter global warming, revenues will decline. To counter this, Saudi Arabia created the Vision 2030 master plan in 2016 to rapidly drive innovation and growth across other sectors with the goal of becoming a world-leader in the respective fields by 2030.

The Saudi Data and AI Authority (SDAIA) was created in 2019 as part of this drive and currently has over twenty thousand AI and data specialists on board focusing on education, government, healthcare, energy, and mobility sectors. The SDAIA has rapidly digitized Saudi cities and government services to improve the people while establishing collaborative training programs to train more than 45,000 specialists. Accenture has also assisted with their build-out of national cloud systems and government data systems.

With six more years remaining until 2030, the PIF is preparing to spend four times the investment Microsoft has made in OpenAI ($1 billion in 2019, $10 billion in 2023) to achieve AI dominance. Despite a population half the size of the UK, the Saudi AI investment is also eight times what the UK and Microsoft UK are investing in AI (￡1.5B + ￡2.5B or $5B). One venture capitalist company the Saudis might partner with is?Andreessen Horowitz according to unofficial sources as reported by the NY Times and CNBC.

Critically, Saudi Arabia is actively closing the gender gap in tech. Whereas only 1 in 5 CS graduates are women in America, the SDAIA is committed to training 25,000 women by 2030 and more than half their technical workers are women. Saudi Arabia is also less burdened by AI laws, with fewer than America to impede rapid AI development.

Readers itching for a hot career in AI might want to start learning Arabic (with book like this at Amazon) before moving to sunny Riyadh.m-based Cemvision bags €10 million to lead the net-zero cement game Saudi Arabia’s Public Investment Fund is in talks with venture capitalists to create a $40 billion investment fund to propel Saudi Arabia to a top leadership position in the field of artificial intelligence by 2030. The sovereign wealth fund manages nearly $1 trillion to drive growth in new sectors as the country pivots away from oil as their main source of revenue under the country’s master plan called Vision 2030.

Saudi Arabia?receives the majority of its revenue from oil sales, but as the world shifts away from using oil for transportation, heating, and cooking to counter global warming, revenues will decline. To counter this, Saudi Arabia created the Vision 2030 master plan in 2016 to rapidly drive innovation and growth across other sectors with the goal of becoming a world-leader in the respective fields by 2030.

9. Stockholm-based Cemvision bags €10 million to lead the net-zero cement game

Cemvision, a Swedish company re-inventing cement, announced a €10 million seed round, led by Polar Structure and Backing Minds, and SF-based Zacua Ventures. The news comes soon after Cemvision announced its first official customer contract and is part of a plan to accelerate the company’s short-term momentum. This represents the largest known green cement seed round to date.?

Cemvision’s products offer an alternative to traditional Portland cement, reducing CO2 by more than 95% while retaining durability and performance. It is produced using raw materials recycled from industrial waste and kilns powered by green electricity at much lower temperatures. Cemvision’s cement builds early strength up to 5 times faster than Portland, allowing for increased productivity. The company was founded by three experienced leaders from global cement industry incumbents.

“This investment will accelerate our near-future operations, right before we make the next jump, which is not too far away. Having met and retained interest from VCs worldwide, we concluded some of the very best ones were right around the corner, and we are delighted to have them doubling down on Cemvision. Furthermore, Zacua’s global understanding of the green transition of the built environment is the most impressive we’ve ever come across,” said Oscar H?llén, CEO of Cemvision.?

The cement industry accounts for 8% of global CO2 emissions and is an estimated $400B market globally. Sweden, the leading climate tech ecosystem in the EU by investment volume in 2023, is up for this year too.?

Backing Minds and Polar Structure invest the lion’s share of the €10 million, with Zacua contributing an additional amount. BackingMinds is a VC investing in the blind spots of venture capital. The firm has made more than 20 investments in Europe including innovative technologies and circular business models solving the big global challenges.

”Cemvision is addressing a $400 billion market, precisely meeting the increased environmental and regulatory needs of the industry. With the overwhelmingly positive market response, we’re thrilled to keep backing the Cemvision team as they pioneer global sustainable construction,” said Susanne Najafi, founding partner of BackingMinds VC.

Polar Structure is a green transition partner in infrastructure development, providing the public and private sectors a way to develop, manage, and finance necessary investments to upgrade or build new, critical infrastructure. The firm’s other green transition portfolio investments include freight mobility unicorn Einride.

“We are constantly in search of innovations that can help us develop and scale the essential solutions required to achieve net zero emissions. Cemvision’s technology to produce fossil-free cement, backed by their exceptional team, exemplifies our commitment to such innovations,” added Tobias Emanuelsson from Polar Structure.

Zacua is an early-stage, sector-specific venture fund tackling the world’s biggest challenges in sustainability, productivity and urbanization. It has offices in San Francisco, New York, Singapore, Madrid, and Mexico City – and is led by partners with deep-running experience of investing in construction tech.

Commenting on the investment, Juan Nieto, General Partner, at Zacua Ventures, said: “Cemvision’s potential is nothing short of extraordinary – it’s poised to lead the net-zero cement game. With a top-notch team bringing serious industry chops and a fresh take on decarbonisation of cement, they’re primed to shake things up big time. We are beyond excited to take this journey together with the team and our esteemed co-investors.”

10. Paris-based Greenly bags €48 million Series B to become the global reference in carbon management

Leading carbon accounting startup Greenly has announced a €48 million Series B funding round led by Fidelity International Strategic Ventures, two years after a successful €21 million Series A. This latest fundraising effort establishes Greenly as a global leader in a market poised for massive adoption, spurred by new regulations like the EU’s Corporate Sustainability Reporting Directive and the recent US requirement for public companies to report their greenhouse gas (GHG) emissions.

In addition to Fidelity International Strategic Ventures, this funding round welcomes new investors such as BGV (Benhamou Global Ventures), Move Capital, Hewlett Packard Enterprise and HSBC, while existing partners like XAnge and Energy Impact Partners reaffirm their resolute support for Greenly. Brian Halligan, Co-Founder and Chairperson of HubSpot, also participated in the round, contributing his extensive experience to further Greenly’s mission.

This funding will enable Greenly to extend its global reach and solidify its position as the go-to comprehensive Climate Suite, facilitating a transition from an outdated model where climate expertise was a low priority for companies, externally sourced, to cultivating in-house climate knowledge and implementing effective reduction strategies that make companies excel in the new world of the Energy Transition.

Alexis Normand, CEO and co-founder of Greenly, said: “Soon, monitoring GHG emissions will become as routine as overseeing financial health. Irrespective of size, industry, or geography, it is essential that all companies have the tools to effectively manage their emissions. This Series B will give us tremendous thrust to make it happen sooner. Greenly’s goal is to enable businesses to navigate more swiftly into a new era, where long-term value is synonymous with sustainable growth. We’re here to simplify carbon management, making it a fundamental aspect of every organization’s core practices. Our focus extends beyond regulatory compliance; we’re fostering a profound transformation towards sustainability within corporate cultures. Our technology is designed to be both precise and user-friendly, inviting everyone to be part of this critical movement.”

This capital injection will elevate Greenly’s status as a global reference in carbon management, thanks to its one-stop-shop for corporate environmental initiatives. Beyond compliance with Greenly CSRD or SEC reporting mandates, its Climate Suite allows companies to budget decarbonization and reduce emissions in line with international frameworks like SBTi.

Founded in 2019, Greenly’s new Climate Academy supports organizations’ need to build in-house climate expertise, offering certification programs for managers on broad climate strategies, as well as specialized knowledge in legal compliance, detailed accounting methodologies, and sector-specific eco-design.

Product managers and Greenly solutions partners now enjoy an integrated Life Cycle Assessment (LCA) Builder, disrupting product level emission tracking by offering free LCA templates to a community of eco-designers. Greenly Cloud helps IT departments reduce data center related emissions, while Greenly Sustainable Procurement plugs into purchasing softwares to ensure suppliers actively contribute to low-carbon roadmaps.

Commenting on Fidelity’s investment, Erik Mostenicky, Principal at Fidelity International Strategic Ventures, said: “We’re excited to support Greenly as they strive to make emissions management accessible to all. In a short space of time, the Greenly team has developed an impressive platform and range of services that extend beyond mere emissions compliance monitoring. Their offerings empower companies to manage their emissions, proactively engage with suppliers and become part of a greener energy transition. Bolstered by strong regulatory tailwinds, Greenly is well-positioned to lead the global shift towards comprehensive carbon and greenhouse gas emission management. Their efforts mark a significant step towards universal corporate sustainability, and we’re proud to be a part of this transformative journey.”

Fidelma Russo, Executive Vice President & General Manager, Hybrid Cloud & Chief Technology Officer, at Hewlett Packard Enterprise, added: “Achieving sustainability targets in hybrid IT environments can be complex and daunting endeavors for even the most sophisticated enterprises. HPE’s investment in Greenly aligns with the commitments we’ve made to our customers to help and support them on their sustainability journeys. We’re excited to partner with Greenly in providing the tools necessary for businesses to monitor, track, and minimize their carbon footprint within their IT infrastructure.”