- SearchVentures
- Posts
- Fewer founders are creating startups
Fewer founders are creating startups
Early-stage startups are declining, why investors said no to an AI startup unicorn, and more...
SearchVentures
November 27, 2024
Early-stage Startup Decline in Europe
Fewer founders are creating startups in Europe, leading to a significant drop in early-stage deals by the end of 2024.
What's driving this trend?
This Week’s Trends
Early-stage startup decline in Europe
The AI startup before the trend
Nortvolt’s bankruptcy filing and more
Read Time 4 minutes
The Startup Trend
Drop in early-stage rounds
Early-stage startup deals in Europe (under $15 million) have been forecasted to be just over 4000 by the end of 2024 — the lowest number since 2015.
> The total number of early-stage startups in Europe has dropped from 41,000 in 2023 to only 35,000 this year.
> The trend is mostly due to the reporting lag — where round announcements are often significantly delayed by six months to a year according to Atomico.
💡On the contrary, the number of late-stage deals has increased in Europe with 10 more $100 million+ rounds being raised than last year as of September 2024.
Startup Feature
The AI startup that came before the trend
Founded in 2022 by Mati Staniszewski and Piotr Dąbkowski, ElevenLabs was one of the first startups to create hyper-realistic AI voices. The startup is now valued at $1.1 billion, but its initial pitches to investors were met with repeated rejections.
Finding Their Voice
When ElevenLabs launched in 2022, startup investors were not paying much attention to AI. Venture Capital was pouring funds into blockchain projects and chasing metaverse dreams, leaving little room for startups focused on less trendy technologies.
“When we pitched to investors in 2022, most of them were still focused on crypto and the metaverse. There was no real interest in AI.”
Rather than waiting for the market to catch up, Staniszewski and Dąbkowski decided to bootstrap the initial stages of building their idea. They were confident that industries like media and entertainment would soon see the use-case for their AI model. That conviction paid off in early 2023 and ElevenLabs secured $2 million in pre-seed funding.
By mid-2023, AI startups had started to gain traction following the launch of ChatGPT and OpenAI. Capitalizing on this momentum, ElevenLabs closed a $19 million Series A round led by Andreessen Horowitz and notable investors like Nat Friedman (former GitHub CEO) and Mustafa Suleyman (DeepMind co-founder).
“We went from one rejection to another, to suddenly having the perfect timing for investors to take an interest in the use-case of AI.”
Sponsored by Long Angle
Long Angle: A Vetted Community for High-Net-Worth Entrepreneurs and Executives
Long Angle is a private, vetted community for 30-55 year-old entrepreneurs and executives with a net worth of $5M to $100M.
Engage in confidential discussions, live meetups, peer advisory groups, and get access to curated alternative investments.
No membership fees.
From Rejection to Unicorn
While most AI startups burned cash to chase rapid growth, ElevenLabs took a disciplined approach. Rather than chasing speculative markets, the founders concentrated on industries where their technology had immediate demand.
By January 2024, ElevenLabs reported annual recurring revenue of $25 million, which increased to $90 million by October—a 260% increase in just nine months. With this ElevenLabs had turned profitable, and investors were now knocking on their door.
“We were creating a product that had an immediate use-case, not one that would be useful in 5 or 10 years from now”
As the AI market slowly matured and venture capitalists became more cautious, ElevenLabs stood out with its clear path to profitability and efficient scaling. By January 2024, the startup raised an $80 million Series B round, pushing its valuation to $1.1 billion and cementing its status as a European AI unicorn.
Unlike its peers, ElevenLabs built its success not on hype but on results. Its scalable business model, combined with a proven market need, turned a startup that once struggled to secure funding into one of the most promising names in AI.
Headline News
This Week In Startups ✍️
Founders
> Northvolt’s CEO resigns as the company files for Chapter 11 bankruptcy in the US after months of trying to secure fresh capital from investors.
> Monzo has appointed two new CFOs including one who helped oversee the IPO of Brazilian challenger bank Nubank.
> Solaris, one of Germany's most high-profile fintechs, is now urgently seeking €100 million and is also exploring a possible sale of the business.
Investors & VCs
> Here is Sifted’s list of all the new first-time European VC funds of 2024 as of November 14.
> €1 billion Nato Innovation Fund’s founding and managing partners depart a year after launching the fund.
> Atomico has released a special tenth-anniversary edition of its annual ‘State of European Tech’ report.
SearchVentures Premium
Access insights on over 41,000 European startups
Here are the latest startups open for investors
How Was Today's Newsletter?If this issue was a startup, how would you rate it? |
Cheers,
Odin Lund & Hari Mohandas
Reply