Female Foundry Week 45: FTX fallout. Convertible notes playbook. How to manage employee layoffs. Early-stage valuations are holding up. LPs turn to secondaries.
Welcome to The Week 45, 2022 Edition of the Female Foundry newsletter!
Female Foundry - where female investors and founders meet.
In The News
It has been a great fundraising week for female founders; Dutch startup Carble co-founded by Noura Hanna raises €300k round from Antler to reward deforestation-free farming; London-based AI-driven 3D printing startup TOffeeAM co-founded by Dr Audrey Gaymann picks £5 million in Series A round led by Presidio Ventures Europe; London-based enterprise loyalty platform Antavo, co-founded by Zsuzsa Kecsmar secures €10 million Series A round led by Euroventures; Carbon Re, also based in London and co-founded by Buffy Price bags €4.7 million round led by Plant A ventures for its AI-based approach to decarbonisation; Estonian-based Yaga founded by Aune Aunapuu fetches €2.2 million Seed round led by Startup Wise Guys; Swedish collaboration platform for construction industry Finch, co-founded by Pamela Nunez Wallgren picks up €2.5 million Seed round led by Inventure.
EQT Ventures raises $1.1 billion for Europe's biggest VC fund of 2022. Read full story ➯
Spotlight
FTX fallout: what comes next?
FTX, FTX US, Alameda Research and approximately 130 other FTX-affiliated companies have filed for Chapter 11 bankruptcy protection in the US on Friday. Once considered the industry leader, a crypto exchange FTX raised an $8 million Seed round in August 2019 and was valued at $18 billion in June last year after raising $1 billion from Paradigm, SoftBank and Sequoia Capital.
It is still unclear how much capital VC investors will receive after the proceedings but given that FTX and FTX US had raised about $2.4 billion in total from its investors, it is already speculated that the event could rank as the largest capital loss in the VC history. For comparison, Theranos raised roughly $1.1 billion from its investors. Read full story ➯
Fundraising
Improving cashflow with convertible notes.
Issuing a convertible note might be an efficient, non-dilutive way to improve cashflow and extend runway for a startup. The process of issuing convertible notes is usually faster than typical equity financing and does not result in additional board seats. Instead of getting their investment back with interest, convertible loan investors, who are effectively loaning money to the startup, receive back their capital in the form of equity once a valuation is assigned at the next fundraising round. Raising convertible notes, however, does not come without caveats - understanding them and their implications will allow you to make the best possible decisions for raising extra cash. Read full story ➯ I think that you might also find this template of a simple convertible note term sheet and the list of the key terms helpful.
Optimising runway: how to manage employee layoffs.
After Meta, Twitter, and Microsoft, Amazon announced this week it would strategically cut its operational costs after reporting significant loses in underperforming divisions (e.g. Alexa) and becoming the first company in history to record a $1 trillion loss in market value. It is estimated that there have been over 100,000 tech lay-offs in the US in 2022 so far. Employee salaries often form the biggest part of a company’s overheads, becoming the first target when striving to improve profitability or extending runway. But layoffs at a startup are particularly challenging because the team is small and the impact to the culture can be dramatic. How can you handle the process and deliver bad news? This article from Rebecca Knight outlines a sensible approach. Read full story ➯
Are you still hiring and want to scoop the best laid-off talent? I find this article ➯ useful for crafting a winning strategy.
Analysis
Late-stage valuations loom, early-stage valuations are holding up.
Q3 this year has been rocked by some of the most negatively impactful events this year, from drastically raising inflation, mass tech-staff layoffs to stock-market falls. However, despite the uncertainty in the investment ecosystem, valuations of early-stage deals seem to be holding up - the pre-money valuation reached a median of $10 million for Seed-stage deals and $45 million for Series B stage deals (up by 50% from the highest quarterly figure before 2021) in Q3 2022. The decline in startup valuations is most prevalent in late-stage rounds and most significant in this quarter - median valuation for late-stage companies (Series B onwards) was $71 million in Q3, down 29% from the Q1 this year. In the late-stage category, overall deal value fell to $23.9 billion in Q3, nearly $40 billion less than the Q3 2021 high. Read full story ➯
LPs turn their sights to secondaries market.
Secondary market returns outperformed the returns of other private capital classes by 15.1%, in Q3 this year, proving to be the most resilient category of asset allocation.
This performance is a result of an increased need of LPs for liquidity in the challenging market environment, that in turn is driven by a drastic decrease in valuations in public equity investments that has been dragging down the overall value of institutional portfolios. In the current volatile market, all sides of the secondary transaction, LPs and GPs are looking for liquidity strengthening the performance of the entire class. Read full story ➯
From the Community
TOKEN2049 is over. Here is a roundup of key ideas.
Female Foundry is an official Community Partner of TOKEN2049 and a London edition of this global event was packed with high-quality talks exploring the present and the future of the crypto world. The venue was filled to full capacity on the first day, and some of the key themes discussed included the bumpy road to regulation, the steady adoption of institutional users, the challenges and opportunities of building open metaverse and the increasing importance of DeFi in the mass adoption of crypto assets. Till next time (in Singapore).
Hiring
Check Female Foundry Job Board, and join female-founded startups.
Kaiko ➯ Event Marketing Officer | Ledgy ➯ Partnerships Manager | Olio ➯ Consumer Insight Manager
More female-founded startup jobs here.
That’s all for this week. Have a great rest of the weekend!
Agata
Written by Agata Nowicka, a founder of Female Foundry, a serial entrepreneur and an investor based in London.
Suggestions? Drop me an email.
Check femalefoundry.co for more fundraising tools and investor content. View other Female Foundry articles.
Agata: I have just amended the link to the Rebecca Knight article, you can access it here: https://hbr.org/2015/06/how-to-tell-someone-theyre-being-laid-off.