Female Foundry Week 91: Weathering the storm. Follow the money. Organic growth in focus for PE firms. Female Foundry x Carta Dinners.
Welcome to The Week 91, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In the news
London-based Auquan, co-founded by Chandini Jain, picks up a $3.5m Seed round led by Neotribe Ventures; Also London-based Captur, co-founded by Charlotte Bax, fetches a £2.2m Seed round led by Sure Valley Ventures; Irish Skills Trust, co-founded by Michelle Dervan, fetches €1m Pre-Seed round led by Emerge and Rethink Education; Amsterdam-based Overstory, co-founded by Anniek Schouten, bags a €13.2m Series A round led by B Capital; Berlin-based Likedminded, co-founded by Kimberly Breuer, secures a €1.5m Seed round led by IBB Ventures; N&V Capital; Munich-based The Landbanking Group, co-founded by Dr. Sonja Stuchtey, lands a €10.5m Seed round led by BonVenture.
Spotlight
Weathering the storm.
It looks like not everyone is affected equally by the most significant decline in venture capital since the global financial crisis. As per the financial statements released by its LP, University of California Regents, last week, Sequoia, a leading player in the industry, is one of the very few funds clearly weathering the storm, with an average mark up of 9.2% across fifteen of its investment vehicles. Only four of Sequoia’s funds had their values reduced in the past 12-months, and even then, by an average of only 6.9%. That’s a striking result when comparing it with the US Q1 industry-wide average IRR of -16.8%.
How did the fund entangled in the FTX drama, that had spun off its highly profitable Chinese arm, slashed the size of its crypto investment fund, and shaken up its prominent leadership board - all in the past 12 months - manage to pull off such a performance? The answer might lie in Sequoia’s long-standing history of downturn resilience. Even though Doug Leone once predicted the burst of the dot.com bubble and the 2008 financial crises would not compare to the markets’ slump of 2023, right now, Sequoia stands up straight and tall, true to its name, weathering the storm.
Fundraising
Follow the money.
This week, I spoke with a founder who has been building up her pipeline of potential investors to target as part of her fast-approaching fundraising round. One thing became clear very quickly. She did not have any idea about where each of her ‘curated’ investors were in their capital deployment cycle.
With slow fundraising conditions for VCs, it is crucial for you to understand who still has got cash, who is most likely fundraising, and which companies are already in your target investor’s portfolio. Fundraising is already hard as it is. Remember, VCs are always open to ‘have a conversation’ even if they have no capital to invest. Why is that? VCs will count your conversation as their dealflow generation even when for you it might be a total waste of time. So follow the money. .. and these three easy steps. - Leverage data bases such as Dealroom, Crunchbase etc. for the following.
First, find out the latest fund closing date. Here: be careful. Many VCs have multiple funds running in parallel. Is the investment strategy of the latest fund relevant to your business? Now, prioritise funds that closed within the past 18 months. Taking into account the deployment spree of 2021, the chances are that older funds would have over-deployed and either are already fundraising or are slowing their deployment to keep their management fees. Avoid these funds, especially if your metrics are not that strong, or you operate in a crowded market.
Second, estimate available capital. Let’s say, you are looking at a €100m fund, minus 1-2% management fees, that fund will have about €85m to deploy. Now: halve that. Most funds will keep about 50% reserves for follow on rounds. Here you have it, that €100m fund you are looking at, in reality, has about $45m capital to deploy into new companies.
This brings me to the last point: pace of investment and portfolio. How many investments has the fund you are looking at already made? Did they recently lead a €3m Seed round? Estimate 50% of that round, €1.5m, has just gone out of your €45m piggy bank. Now, continue your calculations until you have a rough idea of how much cash is available. Any fund that has more than 30% of that ‘€45m’, is your target. It might be harder to get a clear picture of total available capital for larger funds with multiple investment vehicles and seemingly overlapping strategies where it is not clear which fund participated in the funding round.
Don’t let your founder time be wasted. The time you put into knowing who is likely to have cash, believe me, will pay off.
Analysis
Organic growth in focus for PE firms.
Private equity firms are increasingly reliant on the organic growth of their portfolio companies to meet their return targets. Higher interest rates and consequently, reduced opportunities for leverage and acquisitions have made relying on traditional strategies, including leverage and multiple arbitrage, less effective. As a consequence and as the latest data indicates, more and more private equity funds are counting on the profitability of their portfolio companies to generate returns. So back to square one, where cash flow is king. ➯ Read full story.
Community
Let’s get together!
Female Foundry x Carta Dinners
At the end of November, we will be hosting two dinners in London in collaboration with Carta to celebrate our State of Gender Diversity in European Venture initiative.
Dinners are FREE and the spots will be given away in a draw over the next two weeks. To enter the draw, you must have filled in our Survey. If you haven’t completed our 3-minute Survey yet, now is the chance:
Dinner One: 21st of November, 6:30pm - Female founders, VC investors and Angel investors. Dinner Two: 28th of November, 6:30pm - Female Emerging Fund Managers and LP investors.
Can’t be in London on those dates? No problem! We have a number of other free perks that will go to lucky winners that have completed the Survey. - We will be announcing the winner of a Slush ticket in the newsletter in 2 weeks’ time.
Hiring
This week hiring:
The Selection Lab ➯ Junior Customer Success Manager | Fifth Dimension AI ➯ Marketing Manager | Incapto ➯ Sales Development Representative B2B.
See more jobs on the Female Foundry Job Board.
Founder & Investor Meetups
Monday, October 30, Berlin ➯ Tapastartup 2.0 | Wednesday, October 25, London ➯ London AI Breakfast | Thursday, November 02, Berlin ➯ Desafía Berlin DEMO DAY, London ➯ TechItalia Meetup, Amsterdam ➯ Investor Connect | Friday, November 03, London ➯ Scale Up Networking Event.
I hope you have had a great week. Enjoy your Sunday! 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 Tatiana for your help.