Female Foundry Week 82: Big Bang goes silent. Don’t flop on a no shop clause. Where are new startups? Female Foundry x TechChill Milano.
Welcome to The Week 82, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In the news
Basel-based KetoSwiss, co-founded by Dr. Elena Gross, picks €4.4m to drive development of migraine fighting food; German startup Kraftblock, co-founded by Susanne König, bags a €20m Series B round led by Shell Ventures for its sustainable high-temperature energy storage systems.
Spotlight
Big Bang goes silent.
WeWork announced Q2 earnings this week noting ‘a substantial doubt of continuing as a going concern’, which in other words means - pre-bankruptcy. What started as a Big Bang, with glossy brochures, fancy coffee machines, designer furniture ..and $46.7bn valuation - at its peak, WeWork was reported to be opening one office location every two days, has now gone silent.
The appetite for co-working spaces has been steadily slowing but the real reason for the fall of WeWork might lie in the fact that it had never really wanted to be viewed as a boring real estate leasing company (which it was). Real estate companies don’t raise significant ($18.5bn in the lead-up to its failed IPO, to be precise) venture capital and scale fast, but technology companies do.
And so, from its early days, WeWork was a technology company (except it wasn’t). Its IPO prospectus made numerous references to the uniqueness of WeWork’s “technology infrastructure”, even though it reported no direct revenue from it (and its profit margins were 15% 🤷🏻♀️) - but it was enough for 34 investors with a total of $18.5bn of capital to fall for it, and here we are.
WeWork is not the only Big-Bang-Goes-Silent company that made headlines this week. Hopin, a famed pandemic-era unicorn, that was once valued at nearly $7.8bn and whose success fuelled a few of European VC firms’ fundraises, has just sold its virtual events unit for mere $50m.
But it’s not all lost - at least not for everybody.
Despite Wednesday’s announcement, by Friday, WeWork was the second most traded stock by retail investors, entering a ‘meme stock’ status with a surging stock price despite bad news. Let’s also not forget, Adam Neumann, who exited WeWork to clear the way ahead of its SPAC two years ago, and walked away with $2.1bn from stock sales and cash settlements - most likely worth more than all his investors and employees combined. Johnny Boufarhat, the founder of Hopin, had already cashed $195m by selling his shares on secondary markets AND still owns 36% of the company. Whoop.
Fundraising
Don’t flop on a no shop clause.
Fundraising has changed and if you are one of those founders who raised 12 or 18 months ago and is currently fundraising, this time round you might need to speak with many more investors to gain good fundraising traction - fundraising time has never been more precious!
While in general a term sheet is ‘non-binding’ and meant to only demonstrate serious interest from potential investors, there are a few terms that can be binding in nature, and ‘exclusivity’ is one of them. Actually, roughly two thirds of all term sheets have some sort of ‘exclusivity’, that requires you to not talk to other investors for a specific time period after you have signed the term sheet and while the investors are conducting their due diligence, baked in them. A 30-45 day exclusivity period should be sufficient to do that. If this is not the case, negotiate! I know that investors are more cautious right now and want to take ‘longer’ to arrive at an investment decision, coming up with all sorts of excuses. Don’t fall for them. The opportunity cost of adding another week or so of not speaking to other investors is too high right now. A 60+day exclusivity period would be a red flag to me.
Apart from the duration, watch out for any penalties and make sure that the clause clearly specifies the terms on which the exclusivity period ends. You do not want to be turned down by one investor AND penalised for speaking to another! ➯ Read more.
Analysis
Where are new startups?
The pace of first-time investments has slowed down significantly - 2023 is currently on track for the lowest annual total in almost a decade, and the data released this week points that, as VCs make fewer new investments, new startup formation in Europe, measured by first VC financing, has also fallen. This year, only 1,619 first-time financings have closed in Europe, that is less than half of 3,876 in 2022. And so, if funding challenges continue and runways get shorter, startup closures may soon be on the rise as well.
From the Community
Female Foundry x TechChill Milano
Female Foundry is an official partner of TechChill Milano taking place on the 25-27th of September in Milan and we have 2 x €299 FREE General Attendee passes to give away to the Female Foundry Community!
To enter the FREE ticket draw, submit your interest below. Deadline: August 18, 10pm BST. T&C of TechChill Milano apply. I will announce the winners here next Saturday. Good luck!
Hiring
This week hiring:
RefreshGlobal ➯ Operations Manager | Settly ➯ Finance Intern | Paebbl ➯ Research Product Leader.
See more jobs on the Female Foundry Job Board.
Founder & Investor Meetups
If you are developing a for-profit sustainability solution for the European Market, are a female founder, and have raised less than $3m of funding to date, Village Capital has just opened up new applications for its autumn Greentech 2023 cohort, which I am personally supporting ➯ Apply here.
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Tuesday, August 15, Berlin ➯ Open Mic Pitch | Wednesday, August 16, London ➯ How to get VC conviction, London ➯ How to Fundraise from your Network | Thursday, August 17, Berlin ➯ Soulful Tech: Yoga and Networking | Friday, August 18, Amsterdam ➯ Funding Friday.
I hope you’ve had a great week. Enjoy your Sunday!
Agata
Written by Agata Leliwa Nowicka, an investor, a startup adviser, a two-time entrepreneur, and a founder of Female Foundry based in London.
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Thank you Jacob for your help with research. Suggestions? Drop me an email.
Check femalefoundry.co for more fundraising tools and investor content. View other Female Foundry articles.