Sifted Summit day one kicked off with a clear message from Reshma Sohoni, founding partner of Seedcamp: Europe’s good on supply, good on capital, bad on demand.
“We’ve categorically solved the supply problem in terms of startups, in terms of role models and ambition,” she told the main stage audience. “Capital is solved mostly by our American friends coming over for later stages,” she added. But demand? “Demand was horrible 20 years ago, demand is horrible today.”
To solve that, European customers need to get their act together. “Over and over again we don’t have demand resilience, so our companies follow customers, and if their customers survive, they survive, so they’re mostly going to sell in the US […] Europe has a massive issue being a good customer,” Sohoni said.
Across the Atlantic, that isn’t a problem. Gautier Cloix, CEO of French AI agent startup H Company and a former exec at big data company Palantir, summed up the difference. “It took us three weeks to sign a contract in the US and 18 months in Europe,” he said of his time at Palantir.
Over coffee in the Sifted lounge after the panel one attendee, who helps startups raise money, shared that gripe. “Europeans don’t know how to buy tech,” they told me.
Arguably no sector captures the capital is abundant, demand is… errr… trickier than defence tech. Last year senior reporter Anne Sraders hosted a defence tech panel on a smaller side stage at Sifted Summit. This year she was given a prime slot on the main stage.
So far this year defence and dual-use startups have raised €3.5bn across 98 deals, according to Sifted data. That’s compared to €1.85bn raised last year across 70 deals.
February this year was a big turning point for European defence tech, after US vice president JD Vance called Europe out for not spending enough on security.
That was “a real wake up call for Europe”, Sille Pettai, CEO of Estonian state-backed LP Smartcap, which backs VCs which finance weapons, said on stage during that defence panel. “That’s when we saw interest from investors and a shift in mindset […] now we have more than 100 funds in the pipeline which consider doing something on defence.”
The challenges for those companies include matching the capital coming in with actually making money. “The question is how defence spending will reach the market in a couple of years in Europe,” Pettai said, “whether demand and revenues come along, or if it’s a short-term reaction […] I’m quite hopeful that this is just the beginning of building the European defence industry.”
Other challenges include the lack of a go-to market playbook. “There’s no-one who has a playbook in the way you might for a SaaS company,” Jack Wang, partner at Project A, said on the same panel. “There’s a lot of trial and error.”
Access to customers can also be difficult. “You have to find the one, two, three people in the military” who can procure your tech, Wang added.
“Accessing the customer is such a struggle,” Pettai echoed. “It’s not like there’s one front door for the end user, there’s no door usually […] you just need to know someone who knows someone.”
All of that said, there are a good number of companies in Europe cracking the customer conundrum — which you can read about in the second edition of the Sifted 250, a ranking of the 250 fastest-growing startups in Europe by compound annual growth rate (CAGR) in revenue over a three-year period, launched last night after the panels had concluded.
Some quick numbers: compared to last year’s cohort, average revenue per employee across the 250 companies has increased from €168k to €258k; average CAGR across the leaderboard has grown from 205% to 226%; and the number of thoroughbreds, companies generating more than $100m in revenue, on the ranking is up from four last year to 18 this year. Sifted Pro subscribers can read the full ranking exclusively here; for interviews with the top startups and analysis exploring the factors that have propelled their rise, read Sifted's research report.
Those financial metrics are becoming part of the conversation much earlier than they used to. “As a founder you need to pay attention to the investors you are talking to in terms of what they want, what they’re expectations are and the expectations of their LPs,” Mike Turner, partner at law firm Latham & Watkins, said on the opening panel.
“At seed and Series A, investors are backing great founders and the thesis they’re supporting, but the financial discipline and performance metrics going into the Sifted 250 are being brought into focus much earlier than they have historically.”
