Female Foundry Week 76: In search of lost.. liquidity. Getting to “YES”. Venture valuations and capital flows. The positive tale of impact. Fundraising Roundup: June.
Welcome to The Week 76, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In the news
London-based Supercritical, co-founded by Michelle You, fetches a £10m Series A round led by Lightspeed for its carbon removal marketplace aimed at tech firms; UK-based EvaluAgent, co-founded by Michelle Dinsmore bags a $20m Series A round led by PeakSpan to build out software that evaluates call centre agents; Stockholm-based Campcation, co-founded by Johanna Raga Waronen, raises a SEK 11m Seed round led by Backing Minds for its booking site for Campsites & pitch ups; London-based Dexory, co-founded by Oana Jinga lands a £15m Series A round led by Atomico for its autonomous warehouse robot startup; Munich-based AIRMO, co-founded by Daria Stepanova and Harriet von Kügelgen raises a €5.2m Pre-Seed round led by Findus Venture to launch greenhouse emissions monitoring satellites into orbit; German startup FINDIQ, co-founded by Sina Kämmerling picks a €1m Pre-seed round for its service assistant for industrial machines; UK-based Material Evolution, co-founded by Elizabeth Gilligan, bags a £15m Series A round led by KOMPAS VC to scale production of its low-carbon cement; London-based 32Co, co-founded by Sonia Szamocki raises a £2.2m Seed round led by Balderton Capital, for its specialist healthcare platform; Helsinki-based Algorithmiq, co-founded by Sabrina Maniscalco, bags a €13.7m Series A round led by Inventure VC to reduce time and cost of drug discovery; London-based solar energy startup Glowb, co-founded by Sarah Chapman picks up a €1.4m Seed round led by Ada Ventures; Amsterdam-based Settly, co-founded by Marieke van Iperen, raises €6m in its first institutional round led by Mediahuis Ventures to transform the future of work.
Spotlight
In search of lost.. liquidity.
With virtually frozen IPO and M&A markets, and a high interest-rate environment, getting cash back has become a priority to many LPs that now prefer not to reinvest into many, even well-performing, VC funds if they cannot deliver sufficient liquidity. Tiger Global announced two weeks ago it was opening its entire portfolio to individual bids in search of liquidity after failing to attract buyers for about 30 portfolio companies packaged in a strip sale. Time will tell how successful Tiger is with its new strategy, but selling direct secondary stakes may give it a better chance for liquidity, as the range of potential buyers is larger than for the strip sale, and a better price on specific companies than on a portfolio of assets.
It is clear that DPI, measuring returns relative to investments, now outweighs other metrics LPs care about, and so, Tiger Global is not alone. According to the recent data, many funds that launched in 2016-2019 and are now entering their peak distribution years have been falling further and further behind the average DPI pace set by pre-2016 funds. What makes the situation even more sour is that only the best companies manage to attract buyers, and less attractive companies generate hardly any demand, even at steep discounts. When you think about it, if a company raised capital at 100x ARR in 2021, and current multiples now hover somewhere between 5x-12x ARR, founding team’s shares are virtually worth zero. There is a high chance that this company will never grow into its previous valuation and make it to exit, given the low motivations of equity-holding management teams.
And so, only the best-performing companies and those related to generative AI are currently hot. Therefore, while trading volume of secondaries has increased since last year, ..the activity is still driven by the top 50 to 100 company names. Read full story ➯
Fundraising
Getting to “YES”.
I spoke with a founder this week who spent, she said, over 8 hours on various commercial due-diligence phone calls, a thousand euros on legal fees and prepped potential new joiners on jumping onto her ship, only to find out that the VC firm she was talking to to lead her round was pulling the plug. No term sheet. When I asked whether she knew how their Investment Committee worked - she had no clue.
Understanding how decision-making process works at every VC firm you are pitching to (and getting some interest from) is an important, and often overlooked, aspect of closing your fundraising deal. There is no template here. The two VC firms I worked at had a completely different approach to arrive at their “Yes” or “No”. There is no right and wrong - ultimately, there is a limit how much value you can attribute to the process. BUT. Understanding how Investment Committee works and who is involved, how votes work at the very least can help you to be channeling your best efforts to the right people. Read this article to learn about all topics involved. Here is an interesting article on what else to bear in mind. A few reasons for getting “No".
So how do you find out what the decision process of every firms looks like? 1. Speak with investors (or interns 😉) that left the firm. - The decision-making processes, since its widely tied with firm’s culture and LP’s trust, rarely changes. 2. Ask directly when you are having the second, the third-time conversations (you might not get the same level of nuance). 3. Search the Internet, a few firms publish some data on their ICs these days, if you are lucky, you will get at least basic information to start with!
Analysis
Venture valuations and capital flows.
Before 2021, there used to be a constant relationship between funding and valuation. a 1% change in funding led to about two-thirds of a percent change in valuation. However, since late 2021, valuations have only been decreasing by 0.4% for every 1% decline in funding; this pricing discrepancy has since accumulated, resulting in valuations that are now 60% higher than expected based on capital invested. The biggest discrepancy between total invested capital and median pre-money valuations is greatest in the earliest stages and diminishes significantly in late stages - Series C and beyond. Will we see the positive outlook for investors wane for early-stage startups as well?
The positive tale of impact.
The recent report reveals that the strategy of combining financial goals with social or environmental impact has created a market that grew from $95bn in AUM in 2017 to $213bn by the end of 2022. Among all the asset classes, private equity generated the highest gross returns. 79% of investors surveyed globally said the performance of their investments met or exceeded their financial targets, while 88% said they met or exceeded their impact targets. PE investments have also accounted for the largest share of assets allocated by impact investors, illustrating the evolution of the strategy since its inception over twenty years ago. When it comes to the hottest sectors within impact, the report reveals that the energy sector attracted the largest share of impact capital, 17%, followed by financial services, 13% and healthcare, 9%. However, despite positive outlook, the report also shows that investors overall expect to slow their volume of impact investments next year. Family offices are the only exception, planning to boost their investments from $218m to $1.26bn next year.
From the Community
Community Fundraising Roundup: June
What a fantastic month June has been! Female founders from the Female Foundry community in Europe raised whopping €445.7m in June! This is almost 3 times more than €130.8m in May. Onwards and upwards!
Hiring
This week hiring:
Get Harley ➯ Commercial Director | Synthesia ➯ Sales Enablement Manager | Qualis Flow ➯ Product Designer.
See more jobs on the Female Foundry Job Board.
Founder & Investor Meetups
Monday, July 01, Paris ➯ She means business | Wednesday, July 03, Paris ➯ Afterwork entrepreneuriat féminin, Amsterdam ➯ Lunch and Research | Thursday, July 04, Berlin ➯ Pitch Competition @ DFS.
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Would you like to start your career in venture capital? Newton Venture Program has just opened applications for its new cohort! To apply, follow this link ➯ .
That’s it for this week. See you next Saturday!
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.