Female Foundry Week 89: All eyes on VCs. Bad ideas. Good ideas. State of Gender Diversity in European Venture. Priorities of Family Offices change. VC IPO backlog piles up.
Welcome to The Week 89, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In the news
London-based Fifth Dimension AI, co-founded by Dr. Kate Jarvis, raises a £2.3m Pre-Seed round led by Anthemis' Female Innovators Lab Fund and Seedcamp; Also London-based TitanML, co-founded by Meryem Arik fetches a €2.6m Pre-Seed round led by Octopus Ventures; Amsterdam-based Carbon Equity, co-founded by Jacqueline van den Ende, Lara Koole and Liza Rubinstein Malamud, bags a €6m Series A round led by BlackFin Capital Partners; London-based Untangled Finance, co-founded by Manrui Tang, secures a €12.8m Venture round led by Fasanara Capital; London based myenergi, co-founded by Jordan Marie Brompton, lands a £30m round led by Energy Impact Partners; Dutch The Selection Lab, co-founded by Lotte Welten, secures a €1.25m Seed round led by Borski Fund; London-based Ostium Labs, co-founded by Kaledora Fontana Kiernan-Linn, raises a $3.5m Seed round General Catalyst and LocalGlobe; Tallinn-based Paul-Tech , co-founded by Eve Plakk and Anu Einberg, picks up a €1.4m Seed round led by Superangel.
All eyes on VCs.
It is becoming clear that the current fundraising crunch isn't all down to a diminished pool of capital flowing from Venture Capital investors. There has been a consistent decline in the allocation of funds from non-VC investors too. - The value of deals from corporate venture capital arms, private equity firms, and sovereign wealth funds is on track to hit the lowest level since 2018.
The lack of interest from nontraditional investors has primarily been driven by a closed-off exit environment that is generating less returns across their portfolios.
Even though corporate venture capital arms took part in more than a fifth of European VC deals as of Q1 this year, and have been a regular participant behind the Europe’s most prolific financing rounds to date - they seem to be now retreating to their core businesses too, justifying the move by protecting their bottom line.
And while private equity firms are holding up record amounts of dry powder, they too are slowing down their investments, making only an exception for opportunistic deals with high value startups that are desperate for cash.
Bad ideas. Good ideas.
The most common problem I see among very early-stage startup founders I meet is fundamental. They do not test their business ideas well enough before they start forming a team, giving up on their daily jobs, drafting their fundraising pitch decks. They don’t allow themselves to go through the phase of having a number of very bad business ideas. When I ask about what had led them to start their business in the first place, it often turns out (never directly) that it was the first business idea they had (!).
Don’t get me wrong. There is no written rule here. Of course, you can wake up one day and come up with an idea of creating an online marketplace that connects people who want to rent out their homes with people looking for accommodation. What makes a good business idea, is a strong belief (ideally based on evidence) that there are people (and lots of them) ready to pay for it. Pay is the key word here. Not ‘use’, not ‘test’, not ‘download’ but pay for it - on an ongoing basis. This means that the problem they face must be significant enough so they are happy to pay for getting it solved.
The biggest cause of bad business ideas is the eagerness to make them happen: you come up with a random idea, plunge into it, and then increasingly, you feel you've put so much time into it that this must be the idea. Don’t discard plunging - that’s a good thing - just realise that having invested time into something doesn't make it good.
State of Gender Diversity in European Venture.
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Priorities of Family Offices change.
The data released last week that dives into some of the general challenges that Family Offices today are trying to tackle, identifies wealth management (74%) and investment management (55%) as their key priorities today. The increased focus on managing investments is not a surprising, given the rapid change in market sentiment. - When things get tough, Family Offices, just like companies do, focus on the bottom line. Family continuity is less important if the family office’s capital is at risk from inflation and economic turmoil. ‘Family unity and continuity’ is currently only a top priority 21% of family offices, down from 34%. What is also interesting, the report also finds that attracting and retaining talent at Family Offices is currently a challenge, especially for larger, more institutional family offices (47% vs 32% for <$500M AUM). Also, 45% of Family Offices are boosting their spend on technology to increase their efficiency and improve reporting.
VC IPO backlog piles up.
Recently released data indicates an estimated backlog of nearly 80 IPO candidates awaiting their turn to go public, highlighting the poor exit environment plaguing so many VC-backed startups. The outlook remains mixed; Instacart, Arm and Klaviyo recently all went public - Among the three only Klaviyo’s IPO’s performed well, with its stock price increasing by 15% after listing. By comparison, Instacart initially saw a 40% surge in its stock price upon listing, however it ended September trading below its $30 listing price. Arm, experienced fluctuating share prices following its IPO, ultimately finishing September almost 5% above its initial price.
With interest rates staying high, and without critical off-ramp, later-stage startups are being forced to burn more cash, raise more down rounds and ultimately ask for more capital than is available.
This week hiring:
See more jobs on the Female Foundry Job Board.
Founder & Investor Meetups
Tuesday, October 17, Paris ➯ Grand Paris Entrepreneurs édition 3 | Wednesday, October 18, London ➯ London AI - Investment Strategies, Amsterdam ➯ Finale UPALMERE's Startup Hero Journey | Thursday, October 12, Amsterdam ➯ AI Founders Lab | Friday, October 20, London ➯ The Future of Greentech: LIVE, Paris ➯ Ateliers de l'innovation des Outre-mer.
Enjoy your Sunday! See you next weekend.
Suggestions? Drop me an email.
Thank you Tatiana for your help.