Female Foundry Week 67: VCs are getting greener. How to sell your startup. Do you want to break even? Measure APE. The secondary market grows in size—and complexity. Tech.eu Summit.
Welcome to The Week 67, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In The News
London-based Perci Health, co-founded by Kelly McCabe and Morgan Fitzsimons, raises a £3.4m Seed round led by Octopus Ventures for its digital cancer support platform; Munich-based Tanso, co-founded by Gyri Reiersen, picks up a €4m Seed round led by Capnamic Ventures for its carbon accounting solution; Reykjavik-based Paxflow, co-founded by Soffia Thordardottir, bags a $2.2m Seed round led by Brunnur Ventures for its activity operator management software; London-based Hived, co-founded by Murvah Iqbal, picks up a £10m Series A round led by Planet A Ventures to decarbonise the logistics industry; Oxford-based HydRegen, co-founded by Holly Reeve and Sarah Cleary, fetches a £2.6m Seed round led by Clean Growth Fund for safer and more efficient chemical manufacture; Bratislava-based CulturePulse, co-founded by Maja Roknić, bags a $1m Seed round led by Zero Gravity Capital develop Al that can analyze human emotions; Barcelona-based Top Doctors, co-founded by Lorena Bassas Vivó, raises a €8m of 'non-dilutive' funding from Mars Growth Capital and Liquidity Group for its platform improving access to medical specialists.
Spotlight
VCs are getting greener.
Twenty-three of some of the most prolific US VC firms, including Tiger Global and Union Square Ventures, announced this week they were teaming up to ‘define, facilitate, and realise net zero-aligned pathways for early-stage startups’ to combat the climate crisis by hitting net zero for their firms’ operations by the end of the decade and helping their portfolio companies to set achievable net-zero targets by 2050. The group that calls itself the Venture Climate Alliance, or VCA, and is the first of its kind, draws attention to the role VC firms play and the responsibility they bear in preventing climate change.
As much as committing to a net-zero objective at the earliest stages of company building in theory makes sense, many capital-constrained early-stage startups may find it difficult to afford carbon accounting and other offsetting expenses, balancing sustainability goals with their investors’ profitability expectations. Realistically, for the venture industry to be ambitious on climate, LPs also need to be on board. Meanwhile, after two outstanding years, funding for climate tech slowed down dramatically in Q1 2023, sowing doubt as to whether the sector is as recession-proof as it seemed. Read full story ➯
Fundraising
How to sell your startup.
This week, I caught up with a founder who has been considering selling her startup. As the fundraising pressure grows, many founders are contemplating selling their ventures. How many? Half of all startup founders expect their startups to get acquired. As I shared last week - Series A is the most popular point for startup acquisitions, with Pre-seed and Seed stages also seeing a fair amount of M&A. What are the key reasons to sell? 1: Your company is not doing well. 2: Your company is doing exceptionally well. 3: You have taken your company as far as you can. 4: You have received a purchase offer.
But before you picture those zeros in your bank account, know that selling a business is not an easy, nor a quick process - I’ve been there. If you are serious about it, form relationships with potential buyers early, build trust, understand their processes, and key due-diligence requirements well before formal discussions take place. Before you meet with potential buyers, know your non-negotiables, write down three things that you will stand by firmly - define your BATNA. Also, keep your cool, don't just agree on the first offer. Remember, if you’re having a conversation with potential buyers, it means that you have leverage; think Zuckerberg rather than Andy Rubin. Also, don’t expect to get your cash quickly! On average, it takes 6-12 months to sell a business, so plan accordingly - hot deals are quicker to close, so think how you can make your business more attractive. Do you want to better understand an M&A process? Check this and this article.
If you want to break even: measure APE.
There are a number of metrics you might find useful to assess your startup’s efficiency. However, if you are a founder of a software company, around 70% of your costs are likely going to relate directly to your employees. Understanding and managing your employee cost base is the key to making your business more efficient. APE, or annual recurring revenue (ARR) per an employee is a simple metric that enables you to assess that. The level of your APE will depend on your vertical, location, company and growth stage. The higher the APE, the better. Google has an APE of $1.7m, Meta’s APE is $1.4m. Here are some benchmarks you may find helpful. But focusing only on having a high APE will not get you closer to profitability. Managing your breakeven APE, total expenses / employee, will do. Breakeven APE has gone from around $180k 10 years ago to $250k today, with some companies being above $300k. Automating repetitive tasks or simplifying your employee perks might help you to lower your breakeven APE. Read full story ➯
Analysis
The secondary market grows in size—and complexity.
Once reserved mainly to distressed sellers and ‘zombie funds’, in recent years, secondaries have become one of the fastest growing asset categories in the private markets, going from $20bn in annual volume in 2008 to well over $100bn in 2022. Today, secondaries involve the bluest of blue-chip LPs and GPs. According to the recent report, in 2022, only 50% of all LP portfolio transactions involved first-time sellers. But as much as LP interest in secondaries is not new, increasingly, GPs are also looking to get in on the GP-led secondary action by using continuation vehicles (CVs). And as the secondaries space is getting crowded with both LP-led and GP-led deals, the nature of these transactions differs greatly, from levels of diversification and return expectations to due diligence considerations and processes. Read full story ➯
From the Community
TechEU Summit x Female Foundry
Female Foundry is the official partner of TechEU Summit taking place on the 24th of May in Brussels and we have 1x €600 investor pass and 1x €600 startup pass to give away to the Female Foundry Community!
To enter the FREE ticket draw, submit your interest below. Deadline: May 04, 10pm BST. T&C of TechEU Summit apply. I will announce the winners here next Saturday. Good luck!
Ticket draw: Impact Shakers Summit | 5th of May 2023 | Brussels
The complimentary tickets winners are: Hannah (dbjed7) and Zina (hf4gck). You can view the draw here. Congratulations! I will get in touch with you shortly.
Hiring
This week hiring:
Top Doctors ➯ Key Account Manager B2B | mbiomics GmbH ➯ Scientist Nucleic Acid & DNA Origami Research | Little Journey ➯ Operations Assistant (HR & Finance).
Founder & Investor Meetups
Tuesday, May 2, Stockholm ➯ Can innovation improve well-being at work? | Wednesday, May 3, Online ➯ Networking for Female Entrepreneurs Berlin ➯ Techstars + ABN AMRO Fund my Fintech | Thursday, May 4, London ➯ Pitch with Fundraising Experts London ➯ Women in Business Networking.
Enjoy your Sunday and hopefully a bit of sunshine ;-) See you next weekend.
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.
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Thank you Eden, and Mariangela Cordella from Nauta Capital for sourcing our weekly meetups.