Female Foundry Week 96: Blurring the lines. How to spend it. Stakes are getting high. First insights: Female Foundry x HSBC Innovation Banking.
Welcome to The Week 96, 2023 Edition of the Female Foundry newsletter!
Female Foundry - where investors and female founders meet.
In the news
Madrid-based Gataca, co-founded by Irene Hernández, fetches a €1.3m Seed round led by Signature Venture for its decentralised identity solutions; UK-based Hybr, co-founded by Hannah Chappatte raises a €3.7m Seed round from multiple investors for its tenancy platform; Paris-based BioFluff co-founded by Roni GamZon picks up a €2.2m Seed round led by Astanor Ventures to redefine the luxury textiles industry with plant-based fabrics; Warsaw-based Evidose, co-founded by Anna Litwińska raises a €455k Pre-Seed round from Inovo VC and 500 Emerging Europe for its supplements validation technology; Barcelona-based toddl.co, founded by Lorin May and Stephanie Meagher raises a €500k Pre-seed round led by Fondo Bolsa Social for its children’s activities platform; Innsbruck-based Hololight, co-founded by Susanne Haspinger, bags a €10.9m Series A round led by Flatz Hoffmann to fast-track XR streaming; Stockholm-based Lassie, co-founded by Hedda Båverud Olsson, lands a €23 million Series B round led by Balderton Capital for its preventive pet care platform; Paris-based WeeFin, co-founded by Marion Aubert and Sabrine Aouida secures a €7m Series A round led by European investment fund IRIS and Ring Capital for its sustainable finance solution.
Spotlight
Blurring the lines.
Tech start-ups are staying private longer.
In 1980, the median age of a company at its IPO was 6 years. From 1980 to 2000, there were more than 6,500 IPOs. From 2001 to 2022, there have been fewer than 3,000. This year has so far seen 148 IPOs. With a sluggish exit environment, providing expected returns for LPs has become tricky for a typical 10-year VC fund. The solution to the problem might lie in "continuation funds".
Atypical in Venture Capital, but a common practice in private equity, continuation funds allow for an extension of the investment period by transferring assets to a new fund they control, effectively, providing LP investors the option of either continuing their investment or exiting. Hurray. This year alone, several Venture Capital heavy-hitters, including One Equity Partners, New Enterprise Associates and Insight Partners, have been adopting the strategy. "Strip sales", another common private equity practice, and a process of selling part of a fund's assets to new investors, are also in vogue.
So, as an increasing number of large venture funds register as investment advisers, allowing more flexibility in their operations, the increased pressure for cash returns is staring to blur the lines between traditional VC and private equity.
Fundraising
How to spend it.
This year has been all about budget-cuts, cost-savings, optimisation and lowering head-counts. So, if you are one of those ‘lucky founders’ who has lots of cash in the bank, it surely cannot be a problem! Not so fast. I spoke with two founders this week from the ‘lucky group’, who closed their rounds recently - one of them even got a grant top-up. Happy days. Interestingly, both of them, on separate occasions, talked about their challenges in knowing how to spend the money they have just raised. ‘How is that possible?’, you may ask. Weren’t they required to provide a detailed excel spread sheet as part of the fundraising DD process? Isn’t round allocation part of the basics expected by investors?
Yes, it is, in principle. But going from a bootstrapped business to a £5m fundraise (and the expected £300k monthly burn) is scary and presents challenges of its own. Fundraising is a process you do not want to be rushing into again and cash comes with higher expectations from investors, bringing your ability to strategise into focus. It also brings into question your thinking to date, it expects you to double-down on your wobbly assumptions and relies on your processes (and instincts) to get things done at the first attempt, hire people you have never met, rely on other people to execute, and finally, to hope that your vision will withstand what’s coming and the opportunity is still there. Here is an article on the topic.
To anyone who is currently in the deep trenches of fundraising, remember, closing a fundraising round is the beginning, not an end, and all the promises you make now, will need to materialise on the other side!
Analysis
Stakes are getting high.
A newly released report points out that late-stage investors have been growing their equity stakes slowly over the past months. The average ownership of a late-stage round has grown from a low of 11.3% in 2021 to a median of 14.9%. Even though ownership percentages aren't quite yet back to historical levels across all stages and earlier-stage rounds have not so far been affected, early-stage investors have been able to acquire a larger part of each company this year than they did in 2021.
For VCs, it is of course good news, apart from potentially bigger monetary gains, larger equity position provides investors with more influence over the direction of the business and even a potential board seat.
Community
12th of December | Female Foundry x HSBC Innovation Banking
Join me and an array of fantastic speakers at the Female Foundry x HSBC Innovation Banking in-person event and get the first glimpse of the data we have been discovering as part of the State of Gender Diversity in European Venture initiative we are leading, before the official report launch in January!
Here are our two speaker panels. From how to raise the early stage funding right now:
On how to grow in the stalled late-stage fundraising ecosystem:
We have just few spots available now. Reserve your place by following the link below:
Hiring
This week hiring:
Prewave ➯ Enterprise Account Executive | Pai Skin Care ➯ Head of Creative | Ally Labs ➯ Business Impact Lead.
See more jobs on the Female Foundry Job Board.
Founder & Investor Meetups
Tuesday, December 05, Paris ➯ Tokyo Pitch Night in Paris | Thursday, November 07, Amsterdam ➯ ABN AMRO + Techstars Demo Day 2023, Berlin ➯ Demo Day: From Code to Creation.
Newton Program has just opened applications to its latest cohort, check the programme ➯ here.
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.