Calling Zagreb Investors: Be featured in The Great TechCrunch Survey of European VC

TechCrunch is embarking on a major project to survey the venture capital investors of Europe, and their cities.

Our <a href=”https://forms.gle/k4Ji2Ch7zdrn7o2p6”>survey of investors in Zagreb will capture how Croatia is faring, and what changes are being wrought amongst investors by the coronavirus pandemic.

We’d like to know how the Croatian startup scene is evolving, how the tech sector is being impacted by COVID-19, and, generally, how your thinking will evolve from here.

Our survey will only be about investors, and only the contributions of investors will be included. More than one partner is welcome to fill out the survey. (Please note, if you have filled the survey out already, there is no need to do it again).

The shortlist of questions will require only brief responses, but the more you can add, the better.

You can fill out the survey here.

Obviously, investors who contribute will be featured in the final surveys, with links to their companies and profiles.

What kinds of things do we want to know? Questions include: Which trends are you most excited by? What startup do you wish someone would create? Where are the overlooked opportunities? What are you looking for in your next investment, in general? How is your local ecosystem going? And how has COVID-19 impacted your investment strategy?

This survey is part of a broader series of surveys we’re doing to help founders find the right investors.

https://techcrunch.com/extra-crunch/investor-surveys/

For example, here is the recent survey of London.

You are not in Croatia, but would like to take part? That’s fine! Any European VC investor can STILL fill out the survey, as we probably will be putting a call out to your country next anyway! And we will use the data for future surveys on vertical topics.

The survey is covering almost every country on in the Union for the Mediterranean, so just look for your country and city on the survey and please participate (if you’re a venture capital investor).

Thank you for participating. If you have questions you can email mike@techcrunch.com

(Please note: Filling out the survey is not a guarantee of inclusion in the final published piece).

Clue gets FDA clearance to launch a digital contraceptive

Clue, an early pioneer in the femtech category with a well-regarded period-tracking app that’s used by around 13 million people, is getting ready to launch a digital contraceptive which will offer users a statistical prediction of ovulation as a birth control tool.

A US launch of Clue Birth Control is slated for “this year”. The team won’t be more specific on the date yet.

Pricing will be “premium” — but they’re also keeping the exact cost under wraps for now.

The Berlin-based company is today announcing that they’ve gained FDA clearance for the forthcoming product, clearing the way for a US launch in 2021.

Europe is the next region on their launch list but the necessary regulatory clearances mean the roll out will be gradual, going market by market.

The startup has also recently made a number of operational changes — including to the leadership of the company — to reflect becoming a medical-device grade regulated entity in the US.

The short version is that founder and CEO, Ida Tin, has moved up to become chairwoman of the board, while Audrey Tsang (who was leading product) and Carrie Walter (formerly general counsel), are now Clue’s co-CEOs.

TechCrunch chatted to all three women — along with Clue’s chief medical officer, Lynae Brayboy — to get the lowdown on its latest news.

Clue Birth Control

Clue is not the first to market with an app offering a statistical prediction of fertility but unlike first mover, Natural Cycles — which gained FDA clearance back in 2018 — its product, Clue Birth Control, is being billed as “all-digital”; aka it will work without the user needing to take their temperature daily.

There’s also no need to track other bodily changes (such as monitoring cervical fluid). The method is based on women inputting a single data point regularly: The start date of their period.

This means it looks like a major step up in ‘ease of use’ vs the earlier-to-market rival — which Clue has achieved within similar efficacy margins (see below).

Clue’s algorithmic prediction is based on Bayesian modelling — with the app displaying a high risk window across a number of days of the user’s cycle, during which having unprotected intercourse could result in the woman getting pregnant. It shows a window of low risk when the opposite is true.

[gallery ids="2118831,2118832,2118830,2118829,2118828"]

The length of these windows is likely to change as the user inputs more data, with the risk-window starting out longer and typically shrinking as the app becomes more personalized to their individual cycle data.

“Bayesian modelling has been used in medicine for a lot of different applications. What that does is it takes population data and it puts that population data into an algorithm — which is a mathematical model — and [that] basically borrows from what has been found in the population in terms of cycling and ovulation,” explains Brayboy, who was appointed as Clue’s first ever chief medical officer last summer.

“Before we had a fertile window [i.e. displayed in the Clue period-tacking app to illustrate the stages of a cycle] — which is not a reliable, nor is it a tested, model of contraception. So now we’re using a bayesian modelling concept,” she says. “It personalizes over time. So as the individual puts in their cycle day one then we’re able to personalize the window of their high risk days vs their low risk days.

“[The high risk window] will start out long… Usually it’ll be 16 days within the cycle — but it’ll shorten over time. It probably won’t shorten to more than nine days.”

For the product to work as a contraception, users must either abstain from sex on high risk days or use additional protection (such as condoms). That’s why it’s a more involved method than some established birth control alternatives (especially vs an IUD; intrauterine device). On low risk days Clue users are relying on the app’s statistical prediction of their (low) fertility risk to not get pregnant.

Clue says the product has been shown to be 92% effective at preventing unwanted pregnancy under ‘typical use’ and 97% effective under ‘perfect use’ — referencing the standard research terminology for measuring contraception effectiveness (the latter meaning the product is used exactly as instructed every time the woman has sex vs ‘typical’ use which accounts for some usage slip-ups).

What those percentages mean in practice is that under typical use, eight couples out of 100 would be predicted to get pregnant over a year of use of Clue’s digital birth control. While — in the perfect use scenario — the failure rate would be three out of 100 over a year’s use.

(For comparison, Natural Cycles says its product is 93% effective under typical use and 98% effective under perfect use; while — per the Guttmacher Institute‘s US study — the pill is 93% effective under typical use and 99% effective under perfect use; and male condoms are 87% effective under typical use vs 98% effective under perfect use.)

Clue isn’t disclosing how many users it’s expecting to sign up — but the length of time it’s taken to bring the product to market suggests it’s confident Clue Birth Control will find a sustainable user base. (It’s been quietly working on the development since at least 2019 — but will only say the product has been “a long time” in the works when we ask.)

The extra time Clue’s taken to bring its digital contraceptive to market does look like time well spent. The statistical method underlying Clue Birth Control has, for example, undergone rigorous pre-market clinical testing — via a prospective effectiveness trial which reported results back in 2019.

“It’s been in development for a long time because work like this and proving the efficacy of something like this takes a long time,” says Tsang. “From a product perspective as well we want to make sure that these are experiences [that are] easy to understand and that matches the safety and efficacy of this type of product. So that as well.

“It takes a long time to make sure that we develop something that is also usability validated on that front and that we put that out with confidence and with an exact understanding of how well users will understand that.”

The ovulation prediction algorithm was put through a year-long, full-scale, representative (of the US population), independent clinical trial involving more than 700 women. This was conducted by researchers at the Institute for Reproductive Health (IRH) at Georgetown University in partnership with a third company, called Cycle Technologies — using a research app, called DOT (Dynamic Optimal Timing), for the purpose of the trial.

Clue says it acquired the assets of DOT — both the algorithm and the app — in summer 2019 and it’s that clinically validated technology which it’s implementing into its own app now, as Clue Birth Control.

“This was a ‘proper’, full scale clinical trial that was designed to be a clinical trial — rather than put a product out there, see if it works and collect the data,” says Walter. “This was done by academics. We then bought the algorithm and the app and we implemented the features of the app into Clue Birth Control which is a feature of Clue.”

“The clinical trial shows you both what the algorithm does and how the user interacts with the app. Because the algorithm is only part of the story — the main part is can a woman understand what’s going on, track and check and then act on the information,” she adds.

The FDA clearance process for Clue Birth Control involved scrutiny of the efficacy of the algorithm’s statistical predictions and also how Clue presents the information to users. So the whole package has been examined by the regulator. (To be clear the DOT app was not FDA cleared; rather Clue implemented that clinically tested algorithm in its own app and submitted the package for FDA clearance.)

“When you get FDA clearance as a medical device that is for a very specific product — you don’t then get to just take it away and tinker with it,” says Walter. “So I’m sure that there will be further iterations. This is iteration one of a new kind of birth control — but as of right now the thing that is going into our app is the thing that FDA saw and cleared. So the only piece… that we put significant creative work into was making sure that the usability interface is totally user tested and safe.”

Going forward, Clue’s business processes will be subject to ongoing regulatory scrutiny — a considerable switch for the startup that Tin describes as a “huge maturing process”.

“Another big part of the work that happened is to live and be a regulated company,” she tells TechCrunch. “That in itself is a very big change and a huge amount of work… So that’s another thing that has to happen. So one thing is what you put out in the market that users see but as a company you really have to operate in a completely new way — it’s a huge maturing process that we have gone through.”

“It feels like the baby can walk and talk and is actually more like a teenager and now it’s like leaving home — and I say you can do this!” she adds when asked what it feels like to see her femtech startup becoming FDA regulated.

Suitability

No method of contraception — except for abstinence — is 100% effective, of course. But just comparing the varying efficacy percentages of different contraception methods may not be super helpful given how personal birth control choices are.

A digital contraceptive certainly has a bunch of pros and cons that need to be considered. And Clue is being up front that its product is not suitable for everyone.

Top line: Clue says Clue Birth Control is only suitable for women, aged between 18-45, who have regular periods. (It also says: Users must also be able to track their period; check the app each day they have sex; and be prepared to use a condom or avoid sex that may result in pregnancy on high-risk days.)

Clearly there are various additional considerations beyond having a regular cycle that potential users should weigh up before signing up. Not least being comfortable with the stated degree of pregnancy risk.

That’s also true of all FABM (fertility awareness based methods) of birth control — including the old fashioned, non-digital/manual-tracking version (sometimes referred to as the rhythm or calendar method). But app-based products like Natural Cycles and Clue Birth Control are undoubtedly making FABM accessible to more women. Which means that communicating — and even enforcing — suitability is a key component of responsible product development in this category.

This is because the level of commitment and attention to detail required to act on changing fertility information makes FABM more complex than some birth control options. An IUD, for example, works without a woman needing to do anything once it’s been inserted. The pill is also more simplistic — in the sense that it only requires a woman to remember to take a tablet daily.

At the same time, it’s clear that hormonal contraception isn’t for everyone — or may not be accessible to everyone (Brayboy points to rising difficulty for US women specifically to access contraception as a relevant point here, for instance). And the convenience of an app-based form of personalised contraception has quickly convinced a new generation of women to try an alternative. (Natural Cycles’ reported some 1.5 million users worldwide last year.)

App-based convenience can invite missteps too, though. After its launch in Europe in 2017 Natural Cycles quickly attracted criticism over misleading and aggressive social media marketing. It was also investigated in Sweden after a hospital in its home market reported a number of unintended pregnancies from women who had been using the app. Although that probe confirmed the number of pregnancies was within the claimed margin of efficacy Natural Cycles agreed with the regulator to clarify the risk of its product failing.

So how digital birth control is presented is a vital consideration.

Clue doesn’t look like it’s taking any risks with how it communicates suitability for Clue Birth Control — prospective users have to go through an eligibility process which requires them to not just say they’re eligible but demonstrate eligibility by being able to provide key information, including about their own cycle.

If the user can’t show eligibility the app will “boot them out”, as Tsang puts it. She says they’ll also then be locked out for a period of time so they can’t just go back in and try different answers. While users whose cycle becomes too irregular for the product to work properly will similarly be prevented from continued use.

“There is a very detailed assessment process as soon as you try to sign up for Clue Birth Control,” she says. “It asks you a series of questions that really even in the questions themselves and how you answer — it’s like a question with a drop-down underneath it — even in how we’ve set those up it makes it so that users actually have to explicitly say that they are eligible. It’s not a true/false kind of situation. It’s ‘how are old are you’?… We ask these explicit questions so what that does is it actually draws the information out of the user in a way where we can be sure that they are actually eligible to use this feature as it is regulated to be used.”

“That process itself was scrutinized in detail by FDA,” adds Walter. “This is a device that you can use in the privacy of your phone — nobody else has to be involved in it — so it’s really important that that funnel is correct and so that is something that we talked about in a lot of detail.

“And one thing that you do need to be aware of is that you’re not going to be able to answer these questions unless you have some awareness of your cycle going in. Because you’ve got to know is your cycle typically this long or this long. What does your longest cycle look like? What’s your shortest cycle look like over the last 12 months?”

“The [FDA] clearance is related to the product as presented. The product — because it relies purely on one data input and statistical predictions — there’s obviously some level of… ‘irregularity’,” Walter adds. “If your periods are wildly unpredictable this isn’t going to work. What our science team says is… about 70-80% of currently cycling women fall within the bandwidth that could be covered by it.

“It’s 20-40 day cycles and 9 days or less of variation between them. So it’s not like you have to know to the day.”

“We know that it’s impossible to be perfect and so we make sure to tell people that typical use is 92% and so we don’t at all try to oversell ourselves. And that this is better than doing many things which are commonly done by users in the US,” says Brayboy.

“The pill and the IUD have very very defined risks,” she adds. “So we essentially explain that we are not as effective as those methods but our users potentially would have benefits because some of them cannot tolerate those methods for whatever reason.”

“Unfortunately a lot of people do rely on coitus interruptus and a lot of people do rely on condoms which are great but you have to use condoms every single time in order to be effective. And so those individuals might really benefit from having some idea of where they are in their cycle and it’s not only some idea — it’s a rigorously looked at algorithm that they can use in the privacy of their home,” Brayboy goes on.

“It’s really getting difficult… for a lot of American women to actually access birth control. One because of job loss; two because of a recent supreme court ruling in 2020 about opting out of contraceptive coverage. And so this is something they can do in collaboration with their healthcare providers but they don’t have to go out to a pharmacy and hopefully people will see that it’s easy to use. It really is easy to use. You never [don’t] leave your phone at home so you can’t lose this contraception.”

Another major consideration for users of digital contraception is that unprotected sex offers no protection against STDs (sexually transmitted diseases) — rates of which have been increasing in the US in recent years.

Clue therefore recommends its product for women who are in stable relationships — and/or are getting regularly screened, along with their partner/s — i.e. rather than for those who don’t know the sexual history of the people they’re sleeping with.

“It was sort of a premise from the beginning that we only want people to use this product for whom it’s really truly a good product,” says Tin. “It’s like we’re building this product because we think many people will benefit from it and we’ve seen many people needing it and so that’s the core. We want to be helpful. We don’t want people to use it for whom it’s not a good solution. And that’s how we’ve built it.”

Asked who the ‘perfect/ideal’ user for Clue Birth Control, Brayboy puts it like this: “This is someone who — as I envisage as a physician — potentially wants to get pregnant in the next couple of years but is not ready and does not want to use hormonal birth control for whatever reason and is already using condoms.

“So this is someone who wants to not get pregnant just now but is preparing, is planning — and they don’t want something that’s long acting.”

She also points out that many of the most effective methods of contraception (“like the levonorgestrel IUD or the Mirena”, which are ~99.9%) have draw-backs too — in that they have to be placed and removed from the woman’s uterus. They may also, she suggests, have a long term effect on the endometrium.

“So [Clue Birth Control] is something where if you decide okay in the next few years you want to get pregnant you absolutely can stop [following the regime] and you can get pregnant. And you also have a better idea of your cycles at the same time — so it gives you that added benefit,” she adds. “Again, our indication’s 18-45 but a lot of people who are in their late 20s and 30s would be ideal candidates for this.”

Tin also points to the “staggering amount of unwanted pregnancies” in the US and around the world — noting that many women currently still don’t use any birth control, for whatever reason. So an app-based fertility prediction might be an alternative that works for them.

Brayboy notes that unintended pregnancy in the US is about 45% but can be as high as 69% in some ethnic groups, per figures from the American College of OBGYN.

“Unintended pregnancy is also hard to study because people don’t typically plan to become pregnant — and so it makes it difficult. But this [app-based FABM] is a way — also people could really think about how do I want to plan my family in the next couple of years? And so it really is a lovely way for people to start really thinking about becoming parents.”

The marketing for Clue Birth Control will reflect that it’s a “serious choice” people are making to opt for a digital birth control, per Tsang.

“We make sure that people understand that no form of birth control is 100% effective. And that this is a choice — and this is a serious choice that they make,” she says. “In our marketing we plan to help people make that choice — make a choice that’s right for them. And be transparent about the risks and how it works and what it means.”

“I would say that we don’t have huge plans to do social media and influencer marketing,” she adds. “But again we do have these standard operating procedures that make sure that we both speak about the labelling, we speak about our product in a way that reflects exactly what it is.”

Retooling to be regulated

The aforementioned changes to Clue’s leadership team are coupled with a wider retooling of its internal processes — reflective of its new status as a regulated company.

“Something that a lot of people aren’t aware of is that to be allowed to have a medical device on the market you have to operate a quality management system that covers your entire company. And as you know if you cover tech startups that’s not how tech startups tend to work!” says Walter. 

“Which is why it’s incredibly important if you’re going to use an app to make important life decisions about your health you want to make sure they’re building their product in a quality controlled way. And of course any app that you find out there on the market that is not a regulated medical device pretty much 100% will not be working in this way. And so one of the things that we had to do — and that we will be audited for once we have the product in the market — is to show that all of our processes, from design over software development, testing, user testing, all of these things are quality controlled every step of the way. So that’s the big change that we’ve gone through in the last two years.”

“It’s a really big change,” adds Tin. “And for us it’s been important to get the team along in a really good way — not lose who we are. We think of it as acquiring a new ninja skill — something new that we’re learning to do that we’re adding to who we are — so that we can still be user focused and maintain all the qualities that we care about and always have cared about but now doing it sort of at a higher level under this quality management system.

“I think it’s very well aligned with who we are because essentially a quality management system’s about quality and risk and care, essentially, for users — and we feel a lot of responsibility putting out a product that help people navigate really big, important things, like getting pregnant, not getting pregnant, so we feel good about making sure that our processes match that level of responsibility. So in that way it’s been easy to get the team along but I will say it’s been a huge amount of work.

“I don’t know how many thousands of pages of technical documentation that we have submitted etc. It’s really like a huge rehaul. So the fact that we can maintain still feeling like Clue while operating in a very new way I’m pretty happy about. Because we could also become very boring — big, corporate-ish — but that isn’t who we are and that’s important because of course we want to keep caring about users.”

For all the extra paperwork, Tsang says Clue’s mission as a company hasn’t — and isn’t — changing.

“It’s just very value-aligned. We’re here to put something out that’s high quality and where we have a clear procedure and clear processes for evaluating risk and mitigating risk. And that’s all completely values aligned with being a femtech company that empowers women to make healthy choices,” she says.

“Nobody is going to go out there and say well we play fast and loose with people’s health. Nobody wants to do that but it helps to have a third party watch you — and that’s what it means to be a regulated company. It means that there are democratically accountable government institutions looking over your shoulder and checking,” adds Walter.

“And I think if you’re looking at some of the criticism that femtech has come into recently — legitimately — because there are all kinds of apps out there that are completely unregulated, no one knows where they’re coming from, no one knows what their business models are, no one knows what they’re really doing. And this is a strong move in the opposite direction.

“We take the constraints that flow from that seriously… As Ida says we’re going to try not to lose our fun in the process.”

The team does also see wider opportunities flowing from being a regulated entity.

“I think this broadens our mission too,” says Brayboy. “Period tracking is really important in overall health but I think this allows individuals to use FABM in a modern way — and FABM itself can help individuals take in things in their cycles that might actually affect their fertility long term and also some diagnosis that might be important to speak with their physician about early, so they present to care early. So we hope to have that partnership with users and their healthcare providers.”

“We don’t have plans to do [comparative studies with other types of contraception] but what I’d like to say is that we have a post-market surveillance plan and we’ll be doing studies with collaborators — we’ve already started to collaborate with academia before Clue Birth Control came out so it’s something that we’ll continue to do,” she also says. “What we’ll be doing in future is we’ll be going to clinical meetings, and presenting and allowing people to collaborate with us. And I think that’s really important that our doors are open for physician scientists and scientists and contraceptive researchers to continue to look at us. And we want to do that because we’re all about science — we’re based on science. And I came to Clue because of that mission.”

“For us it’s also an ability to keep doing more and more advanced things with the data, if you like,” adds Tin. “Which of course is important because people have many needs that if you are to answer them it has to be regulated. It’s right that they’re regulated. Now we learn how to operate as a regulated company — we are operating as a regulated company — that gives us an ability to keep meeting these needs that are deeper.”

Walter also emphasizes the competitive advantage of being a consumer app that’s subject to regulatory surveillance as a medical device — in a sea of unregulated apps.

“A really important thing is that if you look at your average health and fitness app or whatever, their main KPI is let’s get a tonne of users through the door and make money off them. And I’m not going to say we don’t want a tonne of users through the door and to be profitable — we do want that. But because we are regulated we also have this post-market surveillance obligation that we will be audited on. That’s a KPI now. That’s not a nice to have. And I think that’s a big difference. And that’s something that consumers should think about when they’re using an app — like what KPIs are those people working to.

“And you might want to ask yourself what other apps is that developer putting out? Do they have 15 gaming apps and one period tracker? And what’s their business model?”

“And who’s leading the company,” Brayboy chips in. “Look around this Zoom room you can see that we have all potentially had periods and continue to have them and so have had to make these decisions and so I think it puts us in a very unique position because we have a level of empathy and understanding that really comes from a personal space.

“And I wanted to say on the global health [potential] — I’m really excited about that. And that’s another of the reasons why I joined the company because I started my career in the Republic of Mali in West Africa and I saw how difficult it was for individuals to get contraception and a lot of things that are culturally pushed to people in those areas. And so this to me really represents an exciting prospect… I think there’s just limitless possibilities in other countries — we haven’t really thought about the cultural practices and the tendencies that people want to use something that is hormone free.”

Asked about the new co-CEO structure, Tin says it’s a natural continuation of the collaborative leadership style she encouraged at Clue.

“The big two things that Clue is going to care about is being a regulated company and building a sustainable business and I could’t think of two better people than Carrie and Audrey to mind these two parts of the business… We have had a very collaborative leadership style at Clue, always, because that’s how I like doing things — and it feels again also like an upgrade. Now two people get to do this in a pair and I think that’s a really great reflection of what I think is the future of leadership. So on that level it’s also an expression of who we are to choose to have co-CEOs.”

“We’re new at this but it’s been really fun the last couple of weeks but at the heart of it are these values of being disciplined about being transparent,” adds Tsang. “Being collaborative and being equal. And it allows us to hold each other accountable for all of those things which are at at the heart of Clue’s values. So I completely agree with Ida — I’d love to see more leadership look like this moving forward and I personally have been enjoying it quite a bit.”

“Who needs another ‘hero CEO’,” adds Walter. “My starting point was that every conversation I have is actually better when Audrey’s in it — so let’s make my head conversations that way. Let’s upgrade the thinking process to a dialogue. And I think once you accept that most decisions are better made in some form of collaboration — let’s get real, right; we’re not that much of a genius that all of us don’t ever need to talk to other people — so once we accept that then the only question is how do you collaborate?

“As Ida said, we’ve always had a pretty collaborative management team but actually we found that — it’s like in the arts. Where are the most productive, most creative collaborations — they’re in really tight micro teams. And so let’s put that at the heart. And of course there’s a management team and of course there are other expertise and having Lynae in the company is wonderful and having the science component, and data science component, and all of this expertise, but I really like this generative heart of two. This dialogue as being the decision making process. There’s no reason to me why that wouldn’t make us more bold and more thoughtful.”

“I want to second this and maybe it’s also worth saying that I founded Clue together with a bunch of great guys — one of them my life partner, and in a way we have, for many years, also been a very closed pair,” adds Tin. “And working on understanding equality and living from that place and now it’s, in a way, just an even more clear part of the structure. It’s like a good next step on something we’ve been learning about — basically since the beginning of Clue.”

 

Klarna confirms new $31B valuation

Klarna, the Swedish buy now, pay later behemoth and upstart bank, has raised $1 billion in new funding at a post-money valuation of $31 billion. That sees the company retain the crown as the highest valued private fintech in Europe.

Backers of this round are said to be combination of new and existing investors, while Klarna claims it was 4 times oversubscribed. That’s likely prompted by reports the company is eyeing up a direct public listing and the current appetite for public tech stocks in general.

As a reference point, Affirm, which is viewed in the U.S. as one of Klarna’s most direct competitors, recently IPO’d. If you want further data points, read Alex’s Extra Crunch analysis of Klarna, Affirm and AfterPay’s most recent earnings.

In addition to confirming the new fund raise — which had been widely leaked given that there dozens of frenzied investors involved — Klarna is also announcing that the company will pledge 1% of the capital raised to a newly created initiative that focuses on “key sustainability challenges around the world”. The initiative will be formally launched April 22 on World Earth Day.

A very early mover in what is now widely called buy-now-pay-later (BNPL), Klarna has been built on the concept of giving consumers a way to buy things online without having to pay for them upfront, and without resorting to a credit card. It does this both by offering online retailer integrations where Klarna appears as an option at check out, and through its own “shopping mall” app, where users can browse all the stores that let you pay with Klarna.

On the back of this, the company hopes to foster a bigger financial relationship with its users as a fully-fledged challenger bank. It has a range of licensed banking services, such as savings and current accounts, in Sweden and Germany, with more countries to follow.

On the BNPL front, Klarna is active in over 17 countries, and has over 250,000 retail partners including Macys, H&M, IKEA, Expedia Group, Samsung, ASOS, Peloton, Abercrombie & Fitch, Nike and AliExpress.

The fintech has been backed by Sequoia Capital since 2010. More recent investors include Dragoneer, Bestseller Group, Permira, Visa, Atomico, Ant Group, Commonwealth Bank of Australia, Silver Lake, HMI Capital, TCV, Northzone, GIC (Singapore’s sovereign wealth fund) and funds and accounts managed by BlackRock.

Meanwhile, Klarna was founded all the way back in 2005 and has a fascinating story from startup to scale-up — a story that almost certainly has a few more twists and turns yet. If you need to catch up, check out this 8,000 word opus on the company for Extra Crunch.

Istanbul’s Dream Games snaps up $50M and launches its first game, the puzzle-based Royal Match

On the back of Zynga acquiring Turkey’s Peak Games for $1.8 billion last year and then following it up with another gaming acquisition in the country, Turkey has been making a name for itself as a hub for mobile gaming startups, and specifically those building casual puzzle games, the wildly popular and very sticky format that takes players through successive graphic challenges that test their logic, memory and ability to think under time pressure.

Today, one of the more promising of those startups, Istanbul-based, Peak alum-founded Dream Games, is announcing the GA launch of its first title, Royal Match (on both iOS and Android), along with $50 million in funding to double down on the opportunity ahead — the largest Series A raised by a startup in Turkey to date.

While Dream Games will focus for the moment on building out the audience for puzzle games with more innovative ideas, it also has its sights set on a bigger goal.

“We’re building this as an entertainment company,” CEO Soner Aydemir said in an interview, where he described Pixar as a key inspiration not just for size but for quality in its category. “What they did for animated movies, we want to do for mobile gaming. We are focusing on casual puzzle games first because everyone plays these, but we will also move forward with other genres. We want to be a huge interactive entertainment company that builds high quality games.”

The Series A is being led by Index Ventures, with participation also from Balderton Capital and Makers Fund. The latter two backed Dream Games previously, in a $7.5 million seed round in 2019. Index, meanwhile, is a notable VC to have on board: other successful gaming startups it has backed include Discord, King, Roblox, Supercell and Angry Birds maker Rovio.

Interestingly, this is not Index’s first investment in a gaming startup founded by Peak Games alums: in December it led a $6 million round for another Istanbul mobile casual puzzle gaming startup founded by ex-Peak employees: Bigger Games.

Dream Games is not disclosing its valuation with this round.

Dream Games raising $57.5 million ahead of launching any games — or proving whether they get any traction — may sound like a risky bet, but there is some context to the story that sets up the odds in this startup’s favor.

The founding team all come from Peak Games, the Istanbul gaming startup that was so nice, Zynga bought it twice — first, in the form of one small acquisition of some specific titles, and then the whole company some years later.

CEO Soner Aydemir is Peak’s former director of product who built the company’s two biggest hits, Toy Blast and Toon Blast. Ikbal Namli and Hakan Saglam were Peak’s former engineering leads. And Peak product manager Eren Sengul and an ex-Peak 3D artist Serdar Yilmaz round out the rest of the founding team.

(Aydemir notes that the team left and formed Dream Games in 2019, about a year before Zynga’s full acquisition.)

The other indicators that Dream Games is on to something are its metrics for its limited test run of Royal Match.

Royal Match — in which players are tasked with helping King Robert restore his royal castle “to its former glory” by rebuilding it through a series of match-3 levels and obstacles, with new rooms, royal chambers and gardens making up the different levels of the game — was launched first as a limited test on iOS and Android in the U.K. and Canada in July leading up to this launch. In that time, Aydemir said it saw 1 million downloads and 200 daily average users.

“We think the numbers are very promising compared to previous experiences,” he said.

While Aydemir likes to describe Dream as an “entertainment” company, there is a lot of technology going into the product, from the graphics and the mechanics of the puzzles themselves through to the data science behind them.

“If you want to create an iconic game, you need to combine engineering, art and data science together with high quality user acquisition and a strong marketing approach,” he said.

And he believes that when you focus on these it will inevitably lead to quality, which means you no longer have to focus on simply trying to find a hit.

“We don’t like that approach,” he said. “We don’t want to find a hit.”

That was also the mix that Index also wanted to back.

“Building iconic titles requires a harmonious mix of craft, science and flawless execution,” said Index Ventures partner Stephane Kurgan, who led the round together with Index’s Sofia Dolfe. “The Dream Games team has perfected this mix over many years of working together, and has put it on full display in Royal Match. We could not be more excited to work with them in their journey to build the next global casual champion.”

While Dream Games’ long-term ambition is to build out interactive experiences around different audiences and genres, Aydemir said that casual games, and puzzles in particular, have proven to be a huge hit with consumers.

The strength of that trend has up to now meant that puzzle games generally have proven to have more staying power than other genres in mobile games, which have soared in popularity but also somewhat fizzled out.

“Every year we see the bigger market of users growing by 20%,” he said. “It will remain for decades.”

Interestingly, the focus on casual gaming startups in Turkey seems like a perfect storm of sorts. Undeniably, the proven success of Peak has brought in more punters, but it has also shown the way to developers: you can build a successful and global consumer tech startup out of Turkey, and perhaps puzzles — which focus on shapes — are especially good at transcending different language barriers.. Alongside that, Aydemir pointed out that the country is strong on engineers and developers but slim on opportunities with bigger tech companies.

“Mobile gaming is a younger industry, so that presents an opportunity,” he said.

6 Copenhagen investors share their outlook on investing in 2021

While Denmark and Copenhagen don’t often come up as a destination for European startups, it has a thriving local tech scene that’s home to some of the better startup conferences. After all, who doesn’t want to visit Copenhagen?

A highly educated population, great universities, excellent healthcare and great transport links to Europe make the city as good a place as any to start up a company.

Amongst our investors, we found the trends they were most interested in included sustainable supply chain logistics, esports and gaming, enterprise SaaS, climate tech, deep tech hardware, agritech and edtech. And many said they are interested in the future of work and the transition to different ways of working.

Companies they are excited by included: Afresh Technologies, Seaborg Technologies (nuclear reactors), Labster (virtual science labs), Normative.io (social and environmental impact measurement) and DEMI (connecting with chefs).

In general, investors said they are focused on their home ground but are also spreading their wings to the “New Nordics” (Nordic and Baltic) region. Some are also investing in large European and North American hub cities.

The “green shoots” of recovery they see are appearing in anything digital that comes with a community, as well as among startups that are able to leverage the pandemic to generate new business models that are faster than incumbents.


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We surveyed:


Sara Rywe, associate, byFounders

What trends are you most excited about investing in, generally?
Software and tech (I’m personally extra excited about the “future of work,” fintech, and “future of food”).

What’s your latest, most exciting investment?
Digitail (a veterinary software provider solving the gap between the ever-growing expectations of millennial pet parents and the experience offered by veterinarians with their current tools).

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I would like to see more founders with global ambitions in the “uniquely transformative” software category (the same way Airbnb transformed the hotel industry and Uber transformed the taxi industry). Many startups we see today are building a feature instead of a full solution and their vision is about making industries incrementally better. So, here’s a callout to all of you Nordic or Baltic visionary founders out there: Write me!

What are you looking for in your next investment, in general?
We always look for competent, visionary and passionate founders building products that people love. As an industry-agnostic VC, we keep our eyes open for a range of different opportunities.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Some of the current trends that I see include:
Fintech: salary advances, factoring, sustainability reporting and measurements.
Food tech: alternative protein, pet food, food waste.
Future of work: virtual offices, collaboration, productivity tools.
If you decide to enter any of the above-mentioned industries, I therefore encourage you to really be thoughtful in how you differentiate yourself and/or how your team is better suited to execute on the mission.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
<50%. We invest across the Nordics and Baltics and I’m covering Sweden, Norway and Denmark.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Denmark is very well positioned to succeed in sustainability and energy (many good talents coming from e.g., Vestas and DTU), consumer goods (there’s a large history in the country around building brands such as Lego, Carlsberg, etc.), and biotech (Novo Nordisk among others playing a big part). Moreover, software scaleups such as Peakon, Pleo, and Templafy are really leading the way for a new generation of tech startups to thrive in Denmark. When looking at Danish founder particularly, I’m very excited to see companies such as Qvin revolutionizing healthcare for women by using period blood as an opportunity for a noninvasive blood test.

How should investors in other cities think about the overall investment climate and opportunities in your city?
They should be very excited! Just look at what we’ve seen in 2021 so far:
Exits: Peakon $700 million exit and Humio $400 million exit.
Large rounds: Public.com raising $220 million, Vivino raising $115 million and Labster raising $60 million led by Andreessen Horowitz

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Somewhat. We already see a lot of innovation outside of Copenhagen in cities such as Aarhus and Odense.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
One industry that has been hit hard by COVID-19 is of course travel and hospitality. The flipside of this is that we see a lot of innovation due to that. Examples from our own portfolio include:
AeroGuest — a platform that allows for a “touch-free” travel experience (skipping lines and reception desks, direct online room booking, etc.).
BobW — a new type of sustainable travel accommodation bringing the best of both worlds: “home meets hotel.”

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID-19 has not impacted our investment strategy massively and we have the same focus as before (investing in software and tech). With that said, we are happy to see some industries getting an uplift in these difficult times, such as sustainability and impact.
The biggest worries of our portfolio company founders have been around volatility and uncertainty. Since the first lockdown our advice has been simple: You can’t control the outcome. We’ve therefore worked together to ensure that they have some proper scenario planning in place and that we think creatively of how to mitigate eventual negative effects on their business.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Tame — one of our portfolio companies — expanded their event platform to also include virtual events, which made it really take off in COVID times.
Corti — another portfolio company of ours — could in less than four weeks build a product for helping fight COVID-19 with artificial intelligence.
Both of these companies are good examples of how “adapting their products” due to the pandemic led to great results.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
The sudden rise of awareness around impact and ESG among VCs! Several great conversations have been held on how to improve our ways of working.

Who are key startup people you see creating success locally, whether investors, founders or even other types of startup ecosystems roles like lawyers, designers, growth experts, etc. We’re trying to highlight the movers and shakers who outsiders might not know.
Some of the extraordinary founders that I look up to from Denmark include:
Jakob Jønck (Simple Feast), Andreas Cleve and Lars Maaløe (Corti), Sara Naseri and Søren Therkelsen (Qvin), Niels Martin Brochner, Jarek Owczarek and Viktor Heide (Contractbook), Jacob Hansen, Esben Friis-Jensen, Jakob Storm and Christian Hansen (Cobalt) among others.
There’s also a range of great investors in Denmark including Helle Uth, Christel Piron, Alexander Viterbo-Horten and Anders Kjær amongst others at PreSeed Ventures and Daniel Nyvang Mariussen with his team at Bumble Ventures. Also, the Danish tech ecosystem would not be what it is without all the work that Vækstfonden does.

Mads Hørlyck, associate, Maersk Growth

What trends are you most excited about investing in, generally?
Supply chain/logistics including sustainable supply chains.

What’s your latest, most exciting investment?
Afresh Technologies.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
In general there are still plenty of opportunities across various parts of the supply chain. We have no particular specific preferences as such at the moment.

What are you looking for in your next investment, in general?
Digital solution to drive efficiencies across one or more subparts of the supply chain, both upstream and downstream focus.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Freight forwarding has been maturing in Europe and North America with several large startups in both regions. However, the market is still large but it requires a strong new model as it’s also low margins.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Less/little focus on Denmark. Main priority in large European/North American hubs.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Startups with the medical and supporting functions tech are doing well. We are excited about Onomondo in the Danish scene — also a portfolio company of ours.

How should investors in other cities think about the overall investment climate and opportunities in your city?
As an upcoming opportunity. Several tech hubs have been created and there is a general good environment including state-backed loans/pre-seed investments and fairly many angels to get going.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
We don’t expect any significant changes to the founder-environment in Denmark (too little country).

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
We see an increased focus on our investment area: Supply chain/logistics as people throughout the pandemic have been much more exposed to and dependent on flexible and reliable supply chains. All the way from supply resilience, supply chain visibility, fulfillment and to last-mile delivery. Consumers have the power to drive changes in supply chains.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Sales conversion rates decreasing/pipelines drying out. Advice is, like everyone else, to minimize cost and extend runway by getting as close to profitability as model allows. Based on this funding needs can be discussed.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, we have seen some startups being able to leverage the pandemic over incumbents due to their more flexible and digital structure.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
We have yet to see a default wave both globally within our investment area but also in general in Denmark.

Henrik Møller Kristensen, associate, Bumble Ventures

What trends are you most excited about investing in, generally?
Some of the trends we’re excited about are (1) the growing market of digital media and entertainment, in particular esports and gaming, (2) enterprise SaaS, e.g., related to the future of work, (3) climate change solutions, e.g., deep tech hardware and software, and (4) e-commerce businesses, in particular digital native vertical brands and direct-to-consumer cases.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Products and services to satisfy the needs of the aging population. The number of elderly people will be growing significantly over the next decades, establishing a growing market for products and services to satisfy the needs from this demographic change and reduce the pressure on societies.

What are you looking for in your next investment, in general?
We highly value team and traction. We are looking for exceptional founders with strong competencies in engineering, product and commercial, preferably with years of experience from the industry they are entering with a new solution. We prefer some indication of product-market fit. We like methodical revenue growth driven by paying customers, rich cohort grids and controllable funnels that proves a robust core business. We don’t like products that are still 2-3 years away from monetization. This means that we will miss the next Facebook, but we are okay with that.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Traditional social media and apps that require millions of users before being able to turn on the business model. SaaS marketing tools also seem crowded.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Next week we will announce our first investment outside Denmark. This is our first step toward being present not only in Denmark, but in the Nordics.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Well-positioned industries in Denmark are medtech, fintech, gaming and clean tech. We’re excited about GamerzClass, Pie Systems, LeadFamly, Omnigame, Organic Basics, Cap desk, Roccamore, Too Good To Go, Pleo, Tradeshift, SYBO, Unity and more. Exceptional founders are Victor Folmann from GamerzClass, Sunny Long from Pie Systems, Frederikke Antonie Schmidt from Roccamore and Christian Gabriel from Capdesk.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Historically, there has been a need for more capital and talent to keep successful growth-stage startups in Denmark and not have to move to foreign countries to attract talent and capital. However, the investment climate is getting better. Greater access to capital and talent go hand in hand, and what is really changing the investment climate for the better is founders of successful Danish startups turning back to Denmark and reinvesting in the startup community.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think we’ll see more attraction to remote work in the future. However, I believe it is important for startups to be close to other great like-minded startups, founders, advisors and investors, not only virtually but in real life. Establishing a great network and personal relationships are very important factors to succeed and remote is not suited very well for that in my opinion.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
The travel and hospitality industry look weaker and we’ll see a shift toward lower demand due to remote work and sustainability issues. On the other side, gaming, e-commerce and digital products and services are growing as you will have more people online behind the screens.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
We are still happy to invest despite COVID-19. Gaming has, for example, been positively affected by COVID-19, however, many startups are also struggling due to COVID-19. The best a startup can do is to manage the runway, have close dialogue with their investors, cut costs and try to pivot to the changes. Look for opportunities, not boundaries.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Not yet. Only a few of our portfolio companies are negatively affected by COVID-19.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
Investors are willing to make new investments and help out struggling portfolio companies. Founders are keeping their heads high and making the best out of the new circumstances. In some cases it actually stimulates new innovations.

Benjamin Ratz, partner, Nordic Makers

What trends are you most excited about investing in, generally?
Energy and the transition to a fossil fuel society, data as governance and the changing role of education.

What’s your latest, most exciting investment?
Seaborg — building modular, small and safe nuclear reactors.
Labster — virtual science labs that help students all over the world immerse in science and STEM.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Improving the public sector.

What are you looking for in your next investment, in general?
Views on how and if the world has permanently changed in behavior due to the pandemic.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Micromobility, teledocs.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
100%.

What are companies you are excited about (your portfolio or not), which founders?
Willa. Corti.

How should investors in other cities think about the overall investment climate and opportunities in your city?
A lot of founders leaving success stories of the region.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come?
No but we expect the cities to produce more.

Mark Emil Hermansen, associate, Astanor

What trends are you most excited about investing in, generally?
Food and agrotech.

What’s your latest, most exciting investment?
DEMI.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I’d love to see more food tech companies that “get food” — the human element of it that is. Too many startups focus only on the technology, less on the fact that it should be deeply human centered. This is so prevalent that I instinctively stay away from startups dubbing themselves as “food tech” — food is not tech and tech is not food and therein lies the challenge and the prize. Here’s a read that kind of sums it up.

What are you looking for in your next investment, in general?
Anything that reminds me of these first lines from “On The Road”: “They danced down the streets like dingledodies, and I shambled after as I’ve been doing all my life after people who interest me, because the only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones that never yawn or say a commonplace thing, but burn, burn, burn …”.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
DNVB.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
25% local (DK is still immature from a startup standout — yet the opportunity is that the VC footprint is small and relatively unsophisticated).

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Companies: Online communities such as DEMI.
Founder: Erez Galonska of Infarm.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Tons of opportunity if you have access to the right deal flow/pedigree.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Communities that transcend digital (like Tonsser and DEMI).

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Worries: Uncertainty and recruitment strategy.
Advice: Survive and prepare.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Anything physical that has retail footprint. Anything digital that has a community footprint.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
That everyone’s pumped for what’s about to come (post-COVID) and the realization (or hope?) that nothing will be as before.

Who are key startup people you see creating success locally?
Kasper Ottesen, Highbridge (legal).
Kasper Hulthin (entrepreneur and investor).
Christian Tang-Jespersen (investor).

Eric Lagier, managing partner, byFounders

What trends are you most excited about investing in, generally?
Future of work, productivity improvement platforms.

What’s your latest, most exciting investment?
Normative.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Future of recruiting.

What are you looking for in your next investment, in general?
Passionate founders, solving big problems to build a better tomorrow.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We are focused on the New Nordics (Nordic and Baltic) region having shown the biggest growth potential in Europe.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Climate tech, health tech, fintech. Normative, Corti, Lucinity.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Copenhagen is booming and there is now a strong foundation of experienced founders building really transformative companies.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No — but I expect to see much more diverse teams with a priority on remote first.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
An acceleration of online, remote, e-commerce and general faster pace of transactions.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COvid-19 is a giant accelerator of future trends. Those founders that have adapted best will be the winners of tomorrow.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Absolutely.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
How founders persevere in these times of massive change.

Who are key startup people you see creating success locally?
Jakob Jønck, founder, SimpleFeast; Kristian Rönn, founder, Normative; Andreas Cleve and Lars Maaløe, founders, Corti.

Sources: Lightspeed is close to hiring a new London-based partner to put down further roots in Europe

Lightspeed Venture Partners, the well-known Silicon Valley venture capital firm that has backed the likes of DoubleClick and Snapchat, is in the midst of hiring a second London-based investment partner as it looks to put down further ties to Europe, TechCrunch has learned.

According to multiple sources, Paul Murphy, whose investments include Tier, Hopin, Klang and Bunch, is being hired away from Northzone, the European VC firm that’s probably best known for being an early backer of Spotify. The signing is still in progress but could be announced in the next few weeks. Murphy has been at the Northzone for three years and was promoted to general partner in late 2019 when the firm raised a new $500 million fund in late 2019.

I’ve reached out to Murphy and Lightspeed for comment and will update this article if or when I hear back.

Prior to VC, Murphy co-founded Dots, the mobile games company in New York. He also built and invested in various companies at startup studio Betaworks. (Notably, Murphy helped launch Giphy in the U.S., which Lightspeed ended up backing and later sold to Facebook for $400 million). Before that, he held several roles at Microsoft in the U.S., U.K. and India. He also holds a BS in Computer Engineering from Virginia Tech and an MBA from The IE Business School in Spain, according to the Northzone website.

Meanwhile, the fact that Lightspeed is formally putting more people on the ground in Europe should come as no surprise to close watchers of the ecosystem here. TechCrunch first heard rumors that the Menlo Park-based VC was recruiting a partner in London as far back as August in 2019. That saw Rytis Vitkauskas join the U.S. as its first partner in London the following September, according to LinkedIn. Should Murphy’s recruitment be confirmed it would signal a significant expansion of a Lightspeed London “office,” and confirmation that the VC is doubling down in the region.

Those rumors in late last 2019 coincided with news spreading that another Silicon Valley VC heavyweight, Sequoia, was also doing the same — along with talk of other U.S. VC firms — as European tech companies continue to create more value than ever before. Sequoia’s own plans were finally announced in November, including that it had poached Luciana Lixandru away from rival Accel Partners.

Has a startup finally found one of food science’s holy grails with its healthy sugar substitute?

A little less than three years ago at the Computer Science Museum in Mountain View, Calif. the founders of a young company hailing from Cambridge, England addressed a crowd of celebrities, investors and entrepreneurs at Y Combinator’s August Demo Day promising a revolution in food science.

Over the years, the event has become a relatively low-tech, low-budget showcase for a group of tech investors and billionaire industry insiders to take a look at early stage businesses that could be their next billion-dollar opportunity.

Sharing the stage with other innovation-minded budding entrepreneurs the Cambridge scientists boasted of a technology could produce a sweetener that would mimic not just the taste of sugar, but the caramelization and stickiness that makes sugar the go-to additive for the bulk of roughly 74% of packaged foods that are made with some form of sweetener. Their company, Cambridge Glycoscience  could claim a huge slice of a market worth at least a $100 billion market, they said.

Now, the company has a new name, Supplant, and $24 million in venture capital financing to start commercializing its low-cost sugar substitute made from the waste materials of other plants.

 

The bitter history of the sweetest ingredient

Sugar came into the human diet roughly 10,000 years ago as sugarcane, which is native to New Guinea and parts of Taiwan and China. Over the next 2,000 years the crop spread from those regions to Madagascar and eventually took root in India, where it was first refined in about 500 BC.

From there, the sweetener spread across the known world. By the first century AD Greek and Roman scholars were referencing its medicinal properties and, after the Crusades, sugar consumption traveled across Europe through the Middle Ages.

It was a welcome replacement from Europe’s mainstay, honey, and the early artificial sweeteners used by the Romans, which contained near-lethal doses of lead.

The cold climates of Northern Europe proved mostly inhospitable to sugarcane cultivation so the root took root in the more temperate South and the islands off of Europe’s southern coast.

Those regions also became home to the first European experiments with agricultural slavery — a byproduct of the sugar trade, and one that would plant the seeds for the international exploitation of indigenous American and African labor for centuries as the industrial growth of sugar production spread to the New World.

First, European indentured servants and enslaved indigenous people’s powered the production of sugar in the Americas. But as native populations died off due to the introduction of European diseases, genocidal attacks, and back-breaking labor, African slaves were brought to the new colonies to work the fields and mills to make refined sugar.

Sugar hangover

The horrors of slavery may be the most damning legacy of industrial sugar, but it’s far from the only problem caused by the human craving for sweeteners.

As climate change becomes more of a threat, fears of increasing deforestation to meet the world’s demand — or to provide cover for other industrialization of virgin forests — have arisen thanks to new policies in Brazil.

“Conventional cane sugar is heavily heavily water intensive,” said Supplant co-founder Tom Simmons in an interview. That’s another problem for the environment as water becomes the next resource to be stressed by the currents of climate change. And species extinction presents another huge problem too.

“The WWF number one source for biodiversity lost globally is cane sugar plantations,” Simmons said. “Sugar is a massive consumer of water and in contrast, there’s big sustainability pitch for what we do.. the raw materials are products of the current agricultural industry.”

And the quest for sugar substitutes in the U.S. has come with related health costs as high fructose corn syrup has made its way into tons of American products. Invented in 1957, corn syrup is one of the most common sweeteners used to replace sugar — and one that’s thought to have incredibly disastrous effects on the health of consumers worldwide.

The use of corn syrup has been linked to an increasing prevalence of diabetes, obesity, and fatty liver disease, in the world’s population.

MELBOURNE, AUSTRALIA – APRIL 08: In this photo illustration, products containing high sugar levels are on display at a supermarket on April 8, 2016 in Melbourne , Australia. The World Health Organisation’s first global report on diabetes found that 422 million adults live with diabetes, mainly in developing countries. Australian diabetes experts are urging the Federal Government to consider imposing a sugar tax to tackle the growing problem. (Photo by Luis Ascui/Getty Images)

Looking For A Healthier Substitute

As Supplant and its investors look to take the crown as the reigning replacement for sugar, they join a long line of would-be occupants to sugar’s throne.

The first viable, non-toxic chemically derived sugar substitute was discovered in the late 18th century by a German chemist. Called saccharine it was popularized initially during sugar shortages caused by the first World War and gained traction during the health crazes of the sixties and seventies.

Saccharin, still available in pink Sweet n’ Low packets and a host of products, was succeeded by aspartame (known commercially as Equal and present as the sugar substitute in beverages like Diet Coke), which was supplanted by sucralose (known as Splenda).

These chemically derived sweeteners have been the standard on the market for decades now, but with a growing push for natural — rather than chemical — substitutes for sugar and their failures to act as a replacement for all of the things that sugar can do as a food ingredient, the demand for a better sugar has never been higher.

Supplanting the competition 

“Not everything that we back is going to change the world. This, at scale, does that.” said Aydin Senkut, the founder and managing partner of Felicis Ventures, the venture firm that’s one of Supplant’s biggest backers. 

Part of what convinced Senkut is the fact that Supplant’s sweetener has already received preliminary approvals in the European Union by the region’s regulatory equivalent of the Food and Drug Administration. That approval not only covers the sale of Supplant’s product as a sweetener, but also as a probiotic with tangible health benefits he said.

So not only is the Supplant product arguably a better and more direct sugar replacement, as the founders claim, it also has health benefits through providing increased fiber in consumers who use it regularly, Senkut said.

“The European FDA is even stricter than the U.S. FDA,” Senkut said. “[And] they got pre-approval for this.”

Senkut and Felicis invested in Cambridge Glycosciences almost immediately after seeing the company’s presentation at Y Combinator.

“We became the largest investors at seed,” Senkut said.

Its selling points were the products extremely low glycemic index and its ability to be manufactured from waste plant fibers, which means that it ultimately can be produced at a lower cost, according to Senkut.

What’s the difference? 

Supplant differs from its competition in a number of other key ways, according to company co-founder Tom Simmons.

While companies like the Israeli startup DouxMatok or Colorado’s MycoTechnology and Wisconsin’s Sensient work on developing additives from fungus or tree roots or bark that can enhance the sweetness of sugars, Supplant uses alternative sugars to create its sweetener, Simmons said. 

“The core difference is they’re working with cane sugar,” according to Simmons. “Our pitch is we make sugars from fiber so you don’t need to use cane sugar.”

Simmons said that these other startups have been approaching the problem from the wrong direction. “The problem that their technology addresses isn’t the problem the industry has,” Simmons said. “It’s about texture, bulking, caramelization and crystallization… We have a technology that’s going to give you the same sweetness gram for gram.”

There are six different types of calorific sugar, Simmons explained. There’s lactose, which is the sugar in milk; sucrose, which comes from sugarcane and sugar beets; maltose, found in grains like wheat and barley; fructose, the sugar in fruits and honey; glucose, which is in nearly everything, but especially carbohydrate-laden vegetables, fruits, and grains; and galactose, a simple sugar that derives from the breakdown of lactose.

Simmons said that his company’s sugar substitute isn’t based on one compound, but is derived from a range of things that come from fiber. The use of fibers means that the body recognizes the compounds as fibrous and treats them the same way in the digestive tract, but the products taste and act like sugar in food, he said. “Fiber derived sugars are in the category of sugars, but are not the calorific sugars,” said Simmons.

NEW YORK – DECEMBER 6: Packets of the popular sugar substitute Splenda are seen December 6, 2004 in New York City. The manufacturer of sucralose, the key ingredient in the no-calorie sweetener, says demand is so high for the product that it will not be able to take on new U.S. customers until it doubles production in 2006. Splenda has been boosted by the popularity of the low-sugar Atkins diet. (Photo Illustration by Mario Tama/Getty Images)

Trust the process? 

Supplant’s technology uses enzymes to break down and fragment various fibers. “As you start breaking it down, it starts looking molecularly like sucrose — like cane sugar — so it starts behaving in a similar way,” said Simmons.

This is all the result of years of research that Simmons began at Cambridge University, he said. “I arrived at Cambridge intending to be a professor. I did not arrive in Cambridge intending to start a business. I was interested in doing science, making inventions and stuff that would reach the wider world. I always imagined the right way for me to do that was to be a professor.”

In time, after receiving his doctorate and beginning his post-doctoral work into the research that would eventually turn into Supplant, Simmons realized that he had to start a company. “To try and do something impactful I was going to have leave the university,” he said. 

In some ways, Supplant operates at the intersection of all of Simmons’ interests in health, nutrition, and sustainability. And he said the company has plans to apply the processing technology across a range of consumer products eventually, but for now the company remains focused on the $100 billion sugar substitute market.

“There’s a handful of different core underlying scientific approaches in different spaces,” he said. The sort of things that go into personal care and homecare. Those chemicals. A big drive in the industry is for both less harsh and harsh chemicals in shampoos but also to do so in a way that’s sustainable. That’s made form a sustainable source but also biodegradable.”

Next steps 

With the money that the company has now raised from investors including Bonfire Ventures, Khosla Ventures, Felicis, Soma Capital, and Y Combinator, Supplant is now going to prove its products in a few very targeted test runs.* The first is a big launch with a celebrity chef, which Simmons teased, but did not elaborate on.

Senkut said that the company’s roll out would be similar to the ways in which Impossible Foods went to market. Beginning with a few trial runs in higher end restaurants and foodstuffs before trying to make a run at a mass consumer market.

The feedstocks for Supplant’s sugar substitute come from sugar cane bagasse, wheat and rice husks, and the processing equipment comes from the brewing industry. That’s going to be a benefit as the company looks to build out an office in the U.S. as it establishes a foothold for a larger manufacturing presence down the line.

“We’re taking known science and applying it in the food industry where we know that it has value,” Simmons said. “We’re not inventing any brand new enzymes and each part of the process — none of it on their own are new. The discovery that these sugars work well and can replace cane sugar. That’s someone that no one has done before. Most sugars don’t behave like cane sugar in food. They’re too dry, they’re too wet, they’re too hard, they’re too soft.”

Ultimately the consumer products mission resonates highly for Simmons and his twenty person team. “We’re going to use these hugely abundant renewable resources produced all around the world,” he said. 

*This story was updated to include Bonfire Ventures and Khosla Ventures as investors in Supplant.

Brandwatch is acquired by Cision for $450M, creating a PR, marketing and social listening giant

Online consumer intelligence and social media listening platform Brandwatch has been acquired by Cision, best known for its media monitoring and media contact database services, for $450 million, in a combined cash and shares deal. TechCrunch understands Brandwatch’s key executive team will be staying on. The move combines two large players to offer a broad range of services from PR to marketing and online customer engagement. The deal is expected to close in the second quarter of 2021.

Cision has a media contact database of approximately 1 million journalists and media outlets and claims to have over 75,000 customers. Brandwatch applies AI and machine learning the practice known as ‘social listening’.

Along the way, Brandwatch raised a total of around $65 million. It was Series A-funded by Nauta Capital, followed by Highland Europe and then Partech.

IN a statement, Giles Palmer, founder, and CEO of Brandwatch said: “We have always built Brandwatch with ambition… Now is the time to take the next step – joining a company of significant scale to create a business and a suite of products that can have an important global impact.”

Abel Clark, CEO of Cision said: “The continued digital shift and widespread adoption of social media is rapidly and fundamentally changing how brands and organizations engage with their customers. This is driving the imperative that PR, marketing, social, and customer care teams fully incorporate the unique insights now available into consumer-led strategies. Together, Cision and Brandwatch will help our clients to more deeply understand, connect and engage with their customers at scale across every channel.”

Brandwatch has been on an almost case-study of a journey from fundraising to acquisition to a merger, but less characteristically for a well-funded tech company, it did much of it from its home-town of Brighton, on the southern coast of England.

The financing journey began for Giles Palmer, with Angel funding in 2006. In 2010 Brandwatch raised $1.5m from Durrants, a marketing and PR firm, and Nauta Capital. In 2014 it raised $22 million in funding in a Series B round led by Highland Capital. That was followed by a $33M Series C financing led by Partech Ventures in 2015.

With the war chest, it went on to acquire BuzzSumo in 2017, a content marketing and influencer identification platform, for an undisclosed sum. And in 2019 Brandwatch merged with a similar business, Crimson Hexagon, creating a business with around $100 million in ARR. It also acquired the London-based SaaS research platform Qriously.

Brandwatch was recently named a leader in Forrester’s guide for buyers of social listening solutions.

Berlin’s MorphAIs hopes its AI algorithms will put its early-stage VC fund ahead of the pack

MorphAIs is a new VC out of Berlin, aiming to leverage AI algorithms to boost its investment decisions in early-stage startups. But there’s a catch: it hasn’t raised a fund yet.

The firm was founded by Eva-Valérie Gfrerer who was previously head of Growth Marketing at FinTech startup OptioPay and her background is in Behavioural Science and Advanced Information Systems.

Gfrerer says she started MorphAIs to be a tech company, using AI to assess venture investments and then selling that as a service. But after a while, she realized the platform could be applied an in-house fund, hence the drive to now raise a fund.

MorphAIs has already received financing from some serial entrepreneurs, including: Max Laemmle, CEO & Founder Fraugster, previously Better Payment and SumUp; Marc-Alexander Christ, Co-Founder SumUp, previously Groupon (CityDeal) and JP Morgan Chase; Charles Fraenkl, CEO SmartFrog, previously CEO at Gigaset and AOL; Andreas Winiarski, Chairman & Founder awesome capital Group.

She says: “It’s been decades since there has been any meaningful innovation in the processes by which venture capital is allocated. We have built technology to re-invent those processes and push the industry towards more accurate allocation of capital and a less-biased and more inclusive start-up ecosystem.”

She points out that over 80% of early-stage VC funds don’t deliver the minimum expected return rate to their investors. This is true, but admittedly, the VC industry is almost built to throw a lot of money away, in the hope that it will pick the winner that makes up for all the losses.

She now plans to aim for a pre-seed/seed fund, backed by a team consisting of machine learning scientists, mathematicians, and behavioral scientists, and claims that MorphAIs is modeling consistent 16x return rates, after running real-time predictions based on market data.

Her co-founder is Jan Saputra Müller, CTO and Co-Founder, who co-founded and served as CTO for several machine learning companies, including askby.ai.

There’s one problem: Gfrerer’s approach is not unique. For instance, London-based Inreach Ventures has made a big play of using data to hunt down startups. And every other VC in Europe does something similar, more or less.

Will Gfrerer manage to pull off something spectacular? We shall have to wait and find out.

Calling Czech VCs: Be featured in The Great TechCrunch Survey of European VC

TechCrunch is embarking on a major project to survey the venture capital investors of Europe, and their cities.

Our survey of VCs in the Czech Republic and Prague will capture how the country is faring, and what changes are being wrought amongst investors by the coronavirus pandemic.

We’d like to know how the Prague, and the broader Czech, startup scene is evolving, how the tech sector is being impacted by COVID-19, and, generally, how your thinking will evolve from here.

Our survey will only be about investors, and only the contributions of VC investors will be included. More than one partner is welcome to fill out the survey. (Please note, if you have filled the survey out already, there is no need to do it again).

The shortlist of questions will require only brief responses, but the more you can add, the better.

You can fill out the survey here.

Obviously, investors who contribute will be featured in the final surveys, with links to their companies and profiles.

What kinds of things do we want to know? Questions include: Which trends are you most excited by? What startup do you wish someone would create? Where are the overlooked opportunities? What are you looking for in your next investment, in general? How is your local ecosystem going? And how has COVID-19 impacted your investment strategy?

This survey is part of a broader series of surveys we’re doing to help founders find the right investors.

https://techcrunch.com/extra-crunch/investor-surveys/

For example, here is the recent survey of London.

You are not in the Czech Republic, but would like to take part? That’s fine! Any European VC investor can STILL fill out the survey, as we probably will be putting a call out to your country next anyway! And we will use the data for future surveys on vertical topics.

The survey is covering almost every country on in the Union for the Mediterranean, so just look for your country and city on the survey and please participate (if you’re a venture capital investor).

Thank you for participating. If you have questions you can email mike@techcrunch.com

(Please note: Filling out the survey is not a guarantee of inclusion in the final published piece).