Female Foundry Week 57: The rise of Zombie funds. Minimum Viable Process. The slippery road of liquidation preferences. All eyes on early-stage funding. EU-Startups Summit.
Welcome to The Week 57, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In The News
Sweden-based Rekonnect, co-funded by Brandy Xu, picks a €415K Pre-Seed round led by Curus to help medtech companies comply with requirements of MDR; London-based Skin + Me, co-founded by Rachel Jones, raises a £10m Series B round led by Octopus Ventures to provide personalised skin treatments; Dublin-based Spectrum.Life, co-founded by Sarah O’Neil, bags a €5m Series A round led by Act Venture Capital to improve employees' health and well-being at work; Berlin-based Beazy, co-funded by Julia Besson, picks a €1m Seed round led by BTQ Ventures to streamline content production for creative economy.
The European Tech Champions Initiative launches a new €3.75bn Fund of Funds to deepen Europe’s scale-up venture capital markets and bridge a funding gap for scale-ups wanting to raise €50m, consequently, aiming to improve the chances of success of the European startups on the global scale. Read here ➯
Spotlight
The rise of Zombie funds.
High interest rates, slashed tech company valuations, and fears of incoming recession, have been making it difficult for VC firms to raise new funds in the past few months. This happens during every recession. As a consequence of the shifting LP mindset, who have become picky when it comes to their cash allocation, it is now expected that over the next few years, hundreds of VC firms will gain a “zombie” status - they will manage their existing investment portfolio, but will be incapable of raising their next fund to back new companies, and eventually wind down. Maelle Gavet, the CEO of Techstars, predicts that the portion of zombie VCs in the US might even reach 50% in the next three years. The European VC ecosystem might get less affected, due to its strong ties to government LP capital. So watch out: can’t see any deals done? No new hires? You might have come across a zombie fund! Read full story ➯
Fundraising
A Minimum Viable Process.
I regularly come across founders that see their Minimum Viable Product as an “imperfect” version of a fully-fledged product. They map their MVP “launch” on their roadmaps. They tell me about the features that “didn’t make it” to their MVP. They want me to imagine what user-experience of their MPV would look like “if only they had more funding”. What’s wrong with their thinking? See, a Minimum Viable Product is not really a product, it is a process. The key objective of an MVP is validation of your customer adoption that can be only achieved by repeatedly stress-testing your key assumptions and putting the number of iterated versions of your MVP in the hands of your users. Your specific market/customer will define how much “building -> measuring -> learning” you need to do before committing to a certain course of your product. One thing for sure is that your MVP is unlikely to be “viable” at your first attempt.
The slippery road of liquidation preferences.
The latest research points that liquidation preference multiples over 1x are on the raise. According to Carta, 6.4% of deals in Q4 2022 were over 1x, and the trend is growing. Why does it matter? Liquidation preferences dictate who gets paid first when your startup exits (this can be a sale, an IPO or the winding down of your company). 1x means that before you get your cash, you need to pay back 1x the capital put in by your investors. 2x means you need to return 2x their investment before you get a cent from your exit. And in this case, if your startup sells for less than 2x of your investors’ capital, your investors take all the cash and you are left with nothing. 1x has been a norm for the past years, but this is now changing and is definitely one thing in term sheets to look out for. Read full story ➯
Analysis
All eyes on early-stage funding.
Investor appetite for early-stage investments remains strong compared to later-stage deals. Despite slow market conditions, pre-seed deals are being fuelled by a wave of emerging and micro-funds that raised during the bull market and still have not fully deployed their capital. But it is Seed-stage deals that have been gaining the most popularity, especially among several multi-stage VCs, with some known later-stage VCs raising dedicated seed funds. Why is that? Seed-stage startups are currently attractive targets. They carry less risk than Pre-Seed deals, and compared to the later-stage startups that scaled during the ‘grow-at-all-costs’ times, they can adapt their business models to current market conditions and efficiently streamline their costs. Read full story ➯
From the Community
EU-Startups Summit x Female Foundry
Female Foundry is an official partner of the EU-Startups Summit in Barcelona taking place on the 20-21 of April and we have 2 x €600 FREE General Entry tickets to give away to the Female Foundry Community!
To get a 20% promo code on all ticket types, respond to this newsletter. To enter the FREE ticket draw, submit your interest below. Deadline: 25 Feb 10pm BST. T&C of EU-Startups Summit apply. I will announce the winners here next Saturday. Good luck!
Hiring
This week hiring: XbyX - Women in Balance ➯ Content Manager | Vira Health ➯ Executive Assistant | Peppy ➯ Senior Project Manager
For more listings, check Female Foundry Job Board.
Founder & Investor Meetups
Wednesday, February 22, London ➯ Making Space For Women Wednesday, February 22, Berlin ➯ UX to Boost your Startup Wednesday, February 22, Stockholm ➯ Lean Startup vs. Design Thinking Thursday, February 23, London ➯ Women in Business Networking Thursday, February 23, Stockholm ➯ Ace Your Next Investor Meeting Friday, February 24, Stockholm ➯ ChatGPT & GPT-3 for Startups.
That’s all for today, enjoy your 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.
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Thank you Eden, and Mariangela Cordella from Nauta Capital for sourcing our weekly meetups.
Hey! I tried replying to the Newsletter to get the 20% promo code but the email bounced back. Is there another way to request it?