Sequoia plants more seeds

’ello, it’s Mark in London. Silicon Valley’s most storied venture firm is making bets on European AI. But first...Three things you need to k [View in browser]( [Bloomberg]( ’ello, it’s Mark in London. Silicon Valley’s most storied venture firm is making bets on European AI. But first... Three things you need to know today: • TSMC hits $500 billion value as investors [clamor for AI, chips]( • Arm courts Intel as the anchor investor in its [upcoming IPO]( • An Apple downgrade pushed bullish analyst ratings to a [two-year low]( “Figuring out where things are going” After Sequoia Capital [split itself into three]( last week, the flagship firm is much smaller. It’s also writing smaller checks. Sequoia Capital — now separate from its counterparts in [India and China]( — more than doubled its seed-stage financing in Europe and the US last year, it said. The increased emphasis on very young companies is part of a larger rush toward artificial intelligence newcomers, and away from the messiness of older startups. That trend has held steady so far this year. In Europe, Sequoia is backing companies with no sales and few staff — tactics more common at smaller funds. This effort includes two recent unreported deals: Co:Helm, a London startup targeting health insurance; and Guided Energy, a Parisian company working on electric vehicle fleets. Both tout their AI capabilities. In fact, half of Sequoia’s new investments this year in the US and Europe are in companies considered “AI-native,” partner Luciana Lixandru said in an interview. Backing such startups early “makes sense,” she said. There’s the massive upside if they succeed, and less clarity on how business models will materialize once the AI frenzy quiets. “Candidly,” Lixandru said, “we’re still figuring out where things are going.” Sequoia isn’t the only venture fund doing this in Europe, where late-stage funding has slowed as public markets have stumbled. The total value of early tech investments in Europe (funding rounds of less than $15 million) have held steady between $4 billion to $5 billion a quarter since 2021, according to data firm Dealroom. Meanwhile bigger deals (funding rounds of more than $100 million) have all but disappeared, falling from $16 billion in the first quarter of 2022 to less than $3 billion this year. Many older startups are seeing sharp cuts in valuations. With scant attractive big deals, venture capitalists are piling into AI upstarts. “It’s feast or famine,” one seasoned London investor said. Sequoia, which set up offices in Europe in 2020, makes small investments from Arc, its seed fund program. The typical check size ranges from $500,000 to $1 million. Other European early-stage investors could be elbowed out by the funding rush. But Oliver Holle, managing partner at Speedinvest, a seed firm based in Austria, said he only sees US funds in one out of every 10 potential deals. Europe is a hodgepodge of markets. Good seed investors need boots on the ground everywhere, said Thomas Schneider, a partner with Isomer Capital, an investor in several European early-stage funds. He doesn’t think Silicon Valley giants can handle the minutiae of startup life across the continent “Will they take the phone call at midnight?” Schneider asked. “I don’t think so.” Lixandru disagrees. She spoke about the firm’s strategy from Helsinki, where she was escorting eight startups to meet two of the country’s most successful founders. The idea is to give hands-on tutoring in what Sequoia calls “company-building.” In many cases, the first check is the easy part. —[Mark Bergen](mailto:mbergen10@bloomberg.net) The big story Layoffs and AI are changing tech’s once-invincible job market. A look at who’s unemployed, who should be worried and who’s [more valuable than ever](. One to watch [Watch the Bloomberg Technology TV interview]( with Databricks CEO Ali Ghodsi on storage systems for AI. Get fully charged Influencers in the video-game industry are evolving from playing games to [making them](. Tech Mecca San Francisco is dealt another blow as mall operator [gives up](. Databricks said it generated $1 billion in annual revenue and has diversified its business with [new products and tools for AI](. 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