Female Foundry Week 53: Rising wave of M&A. Why your “why” matters. Building investor pipeline. VC management fee model loosens up. How long do startups last?
Welcome to The Week 53, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where female investors and founders meet.
In The News
Madrid-based food-tech startup Velada, co-founded by Alex Papadopoulos, picks up a €1m Pre-Seed round from multiple investors including Jesús Mantas, a Global Managing Partner at IBM; Dutch healthtech startup Autoscriber, co-founded by Jacqueline Kazmaier, fetches a €1.2m Pre-Seed round led by UMO Labs and the Brabant Development Agency, to make medical consultations more human-centric; Berlin-based NOVO, founded by Julia Wadehn and Mona Hornung, gets backed by €100k from Antler to speed up energy renovation at scale.
Spotlight
Rising wave of M&A opportunities.
The M&A market, an exit route for many startups, remained sluggish at the end of 2022. But this is now changing. In the past few months of uncertainty, acquiring companies have adapted to market volatility by introducing new deal structures and minimising financing costs. Also, the ongoing possibility of a major recession, while causing financing challenges for startups, along with cheapening valuations and the market-wide lack of confidence in IPOs, has been providing dealmakers with a lot of new opportunities, consequently driving a recent M&A transactions pick-up. Spoiled with a raising number of exciting deals, dealmakers are becoming picky. As of this week, fintech and healthtech are the ripest categories for M&A. Read here ➯
Fundraising
Why your “why” matters.
No slick presentation or a hockey-stick chart has any meaning before you understand and are able to communicate why you are building your company. I am always surprised to meet founders that have never given this simple question any thought. I say, ‘surprised’, but honestly, for me as an investor (and a former founder) it is a huge turn-off. Because I know, without understanding why your business idea fires you up, you will struggle to know what you need to build and where you need to go with it. Without knowing your why you will struggle to bring people with you, employees, partners, customers, investors. ..and without knowing your why you will not have enough passion to survive the journey. As Elon Musk famously said: ‘Being an entrepreneur is like eating glass and staring into the abyss of death’. What is your why? Read here ➯
Building your investor pipeline.
Staying organised throughout your fundraising process is the key to not getting overwhelmed and securing funding. And that means building a strong pipeline of investors with a high volume of relevant and qualified leads at the top. ‘Relevant’, means investors that actually invest in your startup’s vertical, stage and geography, those that write checks of the size of your investment ask and those that still have not deployed more than 70% of their fund. Are you looking for a lead? Make sure that you check that too! To track the data, I recommend Airtable or Google Sheets. To learn more about investors, I would check AngelList, Crunchbase, PitchBook, Dealroom and Signal. Sifted recently published the lists of most active investors per an investment stage in Europe. Use Linkedin to get a better feel for fund’s investment thesis and its partners. How should you go about building your pipeline? I have created a couple of simple Google Sheets and Airtable templates to get you started. Do you want to learn how to build one from scratch? Read here ➯
Analysis
VC management fee model loosens up.
Sequoia Capital announced this week that it is cutting management fees for its new funds, quoting a slowdown in the VC activity as the key reason. Based on the revised fee structure, LPs who committed capital to Sequoia's crypto and ecosystem funds launched early last year, will be able to pay management fees based on capital deployed, rather than capital under management, that currently applies to other Sequoia funds. The move sends a clear message not only to Sequoia’s LPs, but also to the entire investment community - when times get tough, funds should adjust. However, Sequoia’s announcement might resonate less with emerging and micro fund managers that have already been struggling to make ends meet based on the traditional 2% management fee structure. Will other funds now follow? Read full story ➯
How long do startups last?
It is a hard and bleak truth: most startups fail. And a well-quoted ratio has been that only 1 in 10 startups actually survive the 4-year-mark. Here is a great article that explores numbers behind this statistic further. What’s less known, is that in reality, the 1/10 ratio is not static and changes depending on the economic context. According to the recent Pitchbook data, and consistent with the economic climate, the failure startup rates in the recent years have been kept low, very low. But that’s about to change. Recent valuation corrections are about to take a toll on startups - as cash from bridge financing dries up, investors expect the shutdown startup rate to shoot up in as early as Q2 this year, and continue into 2024. While the number of shutdowns is still low, high-profile closures are already on the rise. Read full story ➯
From the Community
Three Point Zero Podcast
Building products for customer support teams (as a solo founder) with Natasha Ratanshi-Stein, the Founder of Surfboard.
This week, I spoke with Natasha Ratanshi-Stein from Surfboard, who recently raised a €4.8m Seed round from Speedinvest alongside Fly Ventures and Seedcamp (see: Week 47) to make planning of customer service teams more collaborative.
In the episode, we talk about what it means to be a solo-founder and a VC investor-turned founder, why building relationships with investors ahead of fundraising matters, and why team planning comes with many problems to solve.
Hiring
Check Female Foundry Job Board, and join female-founded startups.
Luna ➯ Social Media Manager | Taina ➯ Marketing Executive | Olio ➯ CRM Manager | Peppy ➯ Marketing Operations Manager
I hope you all have had a good week! Enjoy the rest of the weekend!
Agata
Written by Agata Leliwa Nowicka, an investor, a two-time entrepreneur, and a founder of Female Foundry based in London.
Suggestions? Drop me an email.
Check femalefoundry.co for more fundraising tools and investor content. View other Female Foundry articles.