Female Foundry Week 65: Up and up goes venture debt. To pay or not to pay? Founder salary guide. How to make a cold email be a warm intro. Series A valuations are picking up. Nothing Ventured. PODIM.
Welcome to The Week 65, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In The News
Vilnius-based Perfection42, co-founded by Simona Vasytė-Kudakauskė picks a €1.1m Seed round led by Open Circle Capital and CoInvest Capital for its AI solution targeted at gaming developers.
Paris-based VC fund Educapital, co-founded by Marie-Christine Levet and Litzie Maarek, closes its second, €150m fund, making it the largest fund in Europe dedicated to EdTech.
Spotlight
Up and up goes the demand for venture debt.
The recent SVB shake-up has highlighted the importance of liquidity and having cash on hand for many startups. Due to ongoing macroeconomic headwinds and dwindling capital availability, many startups have been racing to reach profitability in the recent months. As a consequence, startups that want to stay private today for longer and avoid dilution have been driving the demand for venture debt. This, in turn, has piqued the interest of many lenders who are willing to fulfil the demand, making the market more lender-friendly with higher rates, wider spreads, and better covenants and warrants. According to a recently published report, venture debt funding for startups has increased 2.6x since 2019 and is on the rise. However, due to the higher demand for venture debt, now rates are expected to rise further, and as capital availability becomes scarcer, lenders are also expected to look more closely at EBITDA and enterprise value to mitigate risk and potential losses. While some still believe that equity financing may be able to fill the void in early-stage venture funding, some growth equity funds are already stepping in to take advantage of this mouth-watering opportunity. Read full story ➯
Fundraising
To pay or not to pay? And then, how much? Founder salary guide.
Peter Thiel famously said that the lower the CEO's salary, the more likely the company is to succeed. While I agree that founder equity is a necessary factor in delivering that juicy exit all VCs are after, it is not the sole factor. The psychological welfare of a founder, particularly in terms of financial security, also plays a significant role. But setting your salary is a balancing act - on one hand, you want to put as much as cash as possible into growing your business, on the other hand, underpaying yourself is likely to hurt your business in the long run.
So what is a fair share of invested capital you should be taking home? The answer is: it largely depends on where you are, how many co-founders you have, what your business is, how far on the fundraising journey you are, and whether you are profitable. Unsurprisingly, from Series A onwards founder salaries are easier to set. At that stage, your location plays a key role. Series A+ founders earn €140k/year on average, UK-based founders (the highest-paid in Europe), however, earn €60k more on average - while founders from Central/Eastern Europe and the Baltics tend to earn 1/2 of that. What about the angel, Pre-Seed, and Seed round founders? At these stages, the average salaries tend to hover around €50-75k. I recommend this latest study that looks deeper into the numbers and this survey that itemises the key drivers. These are just estimates, always incorporate your circumstances into salary expectations - for sure, it’s hard to focus on building a billion-dollar business when there is no cash in your bank account.
How to make a cold email be a warm intro.
I receive about 5 cold founder emails per day. The emails I am talking about are from people I have never met and who, instead of dropping their decks in the Female Foundry Pitch Box, reach out to me directly. I don’t mind cold emails; I assume that not every founder has the necessary network to get a warm intro. Do I open them? Sure, I open probably 80% of them. Do I follow up with a call? I do it for about 5% of all emails. How much time do I spend reading a cold email? About 10 seconds.
To maximise your chances of receiving a response from investors, there are a few key things to keep in mind. Firstly, don’t waste your time contacting investors who don’t match your startup’s industry and stage. Secondly, make sure that your email subject line is clear and highlights how your startup aligns with the investor's investment thesis. You might use a subject line like "Pre-Seed B2B Lending Fintech with €10k MRR - Berlin - Exited Founder." Thirdly, keep the message concise and personal. Don’t start with generic “My name is..”. Instead, open up with a short comment on any relevant portfolio companies. Then in one sentence describe a problem you are solving, followed up with 4-5 bullet points sharing the key company highlights: show off your traction, product progress, any highlights on the team. Remember, numbers here will speak volumes. Finish off with key points on your fundraise: do you have a term sheet? Any commitments? Make sure to close by requesting a quick call (use Calendly), without sounding pushy. No response for a week? Don’t hesitate to send a gentle reminder - assume that all investors are busy. Above all, make sure that all your messages sound genuine and personal, you wouldn’t want to land in a junk box, simply because you sound like a spam.
Analysis
Series A valuations are picking up.
According to the recent research, in Q1 this year, the median pre-money valuations for Series A funding in the US have increased to $40m, and the trend is going upward. Last year, many companies chose to focus on maximising profitability and extending their runways rather than raising fresh funds, which led to an increased demand for startups with a proven market fit and a clear path to profitability. As a result, Series A funding has become the sweet spot for many VCs; Series A still provides the potential for high returns without being too early. Additionally, Series A rounds are also becoming smaller, the median size of a Series A round has dropped from $12m in Q1 last year to mere $6.9m in Q1 this year, providing VCs with more investment opportunities. Read full story ➯
From the Community
Nothing Ventured by Aarish Shah
Usually it is me interviewing founders and investors at the Three Point Zero podcast, this time, however, I took a guest seat at the Nothing Ventured podcast to talk with Aarish Shah about everything venture and my plans for Female Foundry.
It was so much fun, despite my 3-hours of sleep the previous night, and I really like what Aarish is creating at Nothing Ventured. Connect with Aarish here, if you are not following him already.
Podim x Female Foundry
Female Foundry is an official partner of the Podim conference in Maribor taking place on the 15-17 of May and we have 1 x €590 FREE pass 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: April 20, 10pm BST. T&C of Podim apply. I will announce the winners here next Saturday. Good luck!
Hiring
This week hiring:
Zinc ➯ Venture Acceleration Associate | Sifflet ➯ Product Manager | Doctorly ➯ Sales & Development Manager.
Founder & Investor Meetups
Tuesday, April 18, Paris ➯ Hackaton #HelloWomen | Wednesday, April 19, London ➯ How to get started Investing in 2023? | Thursday, April 20, Amsterdam ➯ Female Ventures Monthly Networking Drinks London ➯ Network with Investors, Entrepreneurs & Startups | Friday, April 21, Paris ➯ Women's leadership networking event.
Enjoy the rest of the weekend! See you next week.
Agata
Written by Agata Leliwa Nowicka, an investor, a startup adviser, 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.
♡
Thank you Eden, and Mariangela Cordella from Nauta Capital for sourcing our weekly meetups.