Female Foundry Week 48: The great reset. Make TAM work for you. Managing pivots. Where will the next unicorns come from?
Welcome to The Week 48, 2022 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In The News
London-based Placed App, co-founded by Jennifer Johansson banks a £4m Seed round led by Praetura Ventures and Blackfinch Ventures to bring quizzes into the job application process; Edinburgh-based Hearing Diagnostics, co-founded by Dr Claudia Freigang, fetches a £1.1m Pre-Seed round led by Archangels to commercialise its hearing screening technology.
A venture capital firm, BackingMinds, based in Stockholm and co-founded by an all-women GP team, Sara Resvik, Sara Wimmercranz, and Susanne Najafi, raises a new €50m fund to back typically overlooked entrepreneurs. The fund will invest €500k to €3m into European startups.
Spotlight
The great reset.
Despite its losses currently doubling, Klarna announced this week it would become profitable in Q4 next year. Monzo also followed suit, issuing a similar statement on Thursday. After 14 years of profitability, Klarna started reporting losses for the first time three years ago due to increased competition in the BNPL sector, added costs of its aggressive international expansion, and tightened regulation. So why is the announcement such a big deal? Klarna’s announcement is not just a signal to its shareholders - its latest investors poured $800m of fresh capital into it in July - it is a beacon to the entire startup community that sends the message that no one has been spared from the recent shift in investor expectations. Now that venture markets are in retreat and public markets have been revalued, there is a strong expectation for all startups, early and late stage, to adjust to the new reality and prioritise profitability over growth - it’s time for the great reset, and Klarna’s announcement this week communicates just that. Here are a couple of articles on managing profitability in SaaS and the Rule of 40 that might be helpful. Read full story ➯
Fundraising
Make your TAM work for you.
I am sure you have all heard it: investors love huge markets. That’s right! A big market is a mouth-watering promise, a captivating prey, to investors - but don’t be swayed by it! A bigger total addressable market (TAM) will not necessarily make your startup more appealing. Actually, exaggerating the size of TAM might work against you. Your TAM, however you calculate it, will always be wrong. I really mean it - always. So instead of fixating on its current size, focus on understanding the process and levers that produced it and on its size potential, again making sure that you understand what has to go right to achieve it. Do you want to learn more about TAM, SOM, and SAM from an investor’s perspective? Read here ➯
When to pivot and how to pivot effectively.
Pivots are an integral part of finding a product-market fit and staying on top of the game for all startups. Pivoting is the rule, not the exception. Pivoting will often mean scrapping a staple product or a feature, or pursuing an entirely new market segment. Realizing when to pivot might be one of the most important skills you will need to develop as a founder. The key to a successful pivot is to identify it early and then act decisively. When it’s time to pivot? And how to do it effectively? Read here ➯ I also recommend this article analysing successful pivots and sharing tips for communicating pivots with clients and investors. In the latest episode of the Three Point Zero podcast, my guest Iris ten Teije, the co-founder of Mava, shares her story on how she managed to get her company (and all parties involved) through a major pivot successfully.
Analysis
Valuations of the biggest European startups hold up.
In the first three quarters of 2022, 40 European startups became unicorns. While the number of new unicorns has dropped in Q3 this year, with only 4 new companies reaching this status, and the size of funding rounds has shrunk, the value of Europe's unicorns has seen a significant rise from their levels last year. By the end of September, aggregate unicorn post-money valuations reached €466.2bn - up 40.7% from Q4 2021. What is also interesting, none of the companies that reached unicorn status this year did so by way of a public listing - companies are protecting their valuations and staying private longer. Read full story ➯
Where will the next wave of unicorns come from?
In the past few years, some of the most successful European startups have become breeding grounds for the next wave of promising entrepreneurs and startup talent. Since the financial crisis of 2008, more than 1,000 technology startups have been created in Europe and Israel by former employees of about 200 venture capital-backed unicorns in the region. Moreover, new data shows that 56% of businesses founded by ex-employees of the top European unicorns were founded in the same city. What companies are the biggest startup creators? Which startup hubs rank the highest on the list? Read full story ➯
From the Community
Three Point Zero Podcast: Managing pivots with Iris ten Teije, the co-founder of Mava.
This week, I spoke with Iris ten Teije, the co-founder of Mava, a customer support platform for web3 organizations. Mava was born out of a pivot from a fractional ownership platform linking NFTs to physical assets, which received backing from investors such as Seedcamp.
In the episode, we talk about successfully managing pivots, building thriving communities, and incorporating customer feedback into the product roadmap.
Hiring
Check Female Foundry Job Board, and join female-founded startups.
Shippr ➯ Account Executive (Brussels) | Outmind ➯ Customer Success Manager | Sequence ➯ Product Manager (London)
That’s it for this week. Enjoy your Christmas shopping!
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.
Another really useful newsletter, thanks Agata!