The Lowdown #6

???????? Hi friends!

In some personal, non venture related news, I turn 45 tomorrow ???? 

I’d like to take a moment to thank all the people along the way who have made me who I am, who have supported me, who have lifted me up when I needed lifting and who believed in me when I didn’t even believe in myself.

I’ll be dropping a post tomorrow on LinkedIn exploring some of the life lessons I’ve learned along the way. Be sure to check it out ???? 

So what’s the lowdown this week? Well, we’ll be diving into:

???? PE firms pass the buck… to themselves?
???? Loom exits to Atlassian
????‍♀️ California mandates VCs report on diversity

And Season 5 of Nothing Ventured is now LIVE with a new look and some awesome new guests! Check out the first episode with Mark Kleyner from Dream VC who are building the Investor Accelerator for Africa ????

Also, if you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Lowdown” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it.

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

The Lowdown

Much of the news I’ve been consuming over the last week has naturally been focussed on the evolving crisis and events in Israel and Gaza, but there is some stuff of note that has been happening in the venture ecosystem that is still worth touching on.

The Private Equity Ponzi

The FT article below is quite an eye opener for those that pay attention to how the private markets operate and the issues that arise when there aren’t great routes to exit.

As the article states, PE funds are resorting to sell their assets back to themselves (under new funds with potentially new LPs) in order to provide liquidity back to their previous funds and investors.

Whilst the IPO market might be depressed, there’s just something about this that feels… off.

I mean, what does it mean when the ‘greater fool’ is your own fund? How do you justify an arms length attitude to valuation mark ups?

The funds doing this cite keeping the strong cash flows from these businesses in the portfolio, but this sounds like the sort of argument you make when you’re trying to convince yourself rather than others.

We’ll see if, and when, markets picking up these assets can exit through more traditional routes, or, if these funds end up holding the bag and having to explain to themselves why this was an okay thing to have done.

Loom-icorn

Given the last bit of news, here’s one that goes in the other direction.

Loom, the video recording platform used by founders, product teams, students and pretty much anyone that wants to communicate and demonstrate without having to write a 100 page email, has been acquired by Atlassian for $975m.

Now, given the value, I toyed with headlining this ‘Soonincorn,’ but that would be snarky for the sake of snarkiness – the business has raised over $200m and was purportedly valued at $1.5bn in its last round in 2021.

I’d guess that those series C investors in the last round probably had preference shares, so probably came out whole. But whatever happened in that last round, one has to imagine that the founders, employees and earlier investors have come out of this with a big smile on their faces.

As someone that has used Loom on and off for some time, and generally only has good things to say about the product, it’s great to see the team seeing this through to a successful outcome.

It’s something to cheer about in an otherwise seemingly tough time for startups looking to exit.

Exciting news today. @loom is joining @Atlassian.

The company has entered a definitive agreement for Atlassian to acquire Loom for $975m.

25 million users.
1.5 billion minutes recorded.
1.8 million workplaces.
8 wonderful years in the making.

— Shahed Khan (@_shahedk)
Oct 12, 2023

Reducing Bias or Increasing BS?

Those that know me and who have listened to my podcast for any time will know that I am a massive advocate for increasing funding that flows to under represented groups, whether that’s female founders or people from minority backgrounds.

California has just signed into law a bill that mandates funds in California or funds that have invested in businesses principally based in California report on the demographic information of their investee companies.

I always have mixed feelings when governments get involved in these sorts of activities. Whilst I think that shining a light is positive, I also assume that these things just become exercises in bureacracy without any real impact.

And, because of the way reporting will occur (% of founders rather than % of dollars invested), it may not really represent the actual diversity of investments that a fund has made.

I guess we will see how VCs react and, over time, whether this will make a real difference in what kinds of founders their funds flow to.

For now, I’ll buy into the fact that it’s a step in the right direction.

And finally, I created a midwit meme which pretty much explains how I feel every time I open twitter, especially as I hit the big 45…

????And that’s a wrap for this edition of The Lowdown – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

Off Balance #14

???????? Hi friends!

It’s been a bit of a whirlwind weekend as I surprised my (much!) better half with a trip to Italy to celebrate her birthday with her family – for the first time since she moved back to the UK back in the early 2000s to boot.

We reminisced over all the moments and memories we’ve shared over the last 20 years. I’m pretty sure we made a few new ones to keep us going over the next twenty.

My better half, Debora, on her birthday ???? 

But, of course(!), I found the time to get a few words down and provide a bit more actionable insight and context to whatever you’re building and to your day ????

On a side note, I’m super excited to be leading the CFOs and Financial Modelling session for the EMEA cohort of Morgan Stanley’s Inclusive Venture Lab this week. It’s always such a pleasure to meet these incredible, diverse founders and learn more about what they’re building ????

In this weeks Off Balance, I’ll be chatting about:

???????? A brief word on the events in Israel
???? How to think differently about where to get your debt
???? Employee Equity Schemes – understanding the basics

Oh, and the new look Nothing Ventured Season 5 went live today!

Check out this Primer where I get to know Mark Kleyner and why he’s building Dream VC, the investor accelerator for Africa ????

Also if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram and drop me a note 🙂

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it.

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

A brief word on events in Israel

Events that have unfolded over the weekend with mass devestation caused by attacks on Israelis by Hamas has been met with condemnation by leaders across the world.

I have no doubt that Israel’s response will be swift and will likely be brutal and, as the conflict escalates, will almost certainly cause more civilian casualties and losses on both sides.

I have no skin in this game and I don’t wish to opine on something where I neither hold expertise, nor where it does not immediately impact me or those around me.

However.

I do have family in the region and many Israeli and Jewish friends
I have interviewed several Israelis on my podcast, most of whom are ex IDF
I am concerned about the impact this has on innocents on both sides
I can’t assume that conflict will not spill over in impacting the rest of the world

I would love for there to be a swift and peaceful resolution to what has already been declared a war but I do not hold out much hope.

One thing I can say unequivocally is that there is no excuse for terrorism nor the premeditated and gleefull taking of innocent lives, that should be abhorrent to anyone whatever your thoughts on the politics of it all.

How can did I add value?

A couple of weeks ago, an angel I know asked if anyone could introduce one of their portfolio company founders to any debt providers.

I actually knew the company and the founder having done some work for them way back in 2019. (Side note – do you also intuitively bucket everything into pre and post pandemic eras?)

The business is already established and doing quite well and has a hardware and software element to it.

After speaking to the founder, it was clear that what they were after was a working capital facility that would help them fund inventory.

This would help them to grow further.

If you’re ever in this situation, there are a number of routes that you could consider taking:

???? Speak to your existing bank / financial institution

Pros: Should have a variety of products that you can access and there is an existing relationship which should mean a ‘quick’ decision.

Cons: Traditional insitutions are not known for having the hungriest of risk appetites so you may get to a yes but only after having jumped through a few hoops and having had to offer up a variety of different securities like personal / directors’ guarantees, a lien over the business or even a physical asset (like your home). Oh and a bunch of covenants that you have to maintain (things like interest cover, debt ratios, quick ratio and more) and report back on regularly (typically monthly).

???? Use a revenue based financing company

Pros: There’s typically a very quick turnaround once hooked into your systems. Repayment scales up and down with your revenue (i.e. if your revenue drops so does your repayment).

Cons: Restricted number of products, and although most do offer some form of inventory financing, others won’t. Fees and equivalent interest costs can be quite substantial and they may not be able to lend the sort of quantums you may need.

???? R&D Funding

Pros: Once you have a track record of submitting and being repaid for R&D undertaken in your business, you will probably qualify to secure a loan from specialist lenders specifically against the R&D due in your next claim.

Typically the lender will just add the interest to the principal loan amount and the whole lot would become repayable at the earlier of the R&D claim being paid out by HMRC or a long stop date normally set to a couple of months after you would expect to get paid out. This helps avoid the need for planning monthly payments, and if you are confident your claim will be paid by HMRC then the loan is pretty much covered.

Cons: You are likely to only be able to draw down a maximum of 80% of the total claim value, which may not be sufficient for your working capital needs. In the current environment, HMRC is pushing back hard on what qualifies for R&D, so whilst you may have claimed in the past, you are not guaranteed to qualify now. If the claim isn’t paid out, you’re still on the hook for the capital and interest.

????Venture Debt

Pros: Lighter touch diligence than traditional lenders and potential to pay interest only.

Cons: Venture debt is a specialist type of product which many institutions do not offer, so it can be hard to secure. Equally, it is often issued as part of a significant institutional equity round (so you need to raise from a VC). You may still have negative covenants (things that you are not allowed to do without specific approval) and you will likely also have to issue warrants (an instrument giving the lender the right to purchase shares in the future at an agreed price). This means more dilution – given that one of the main reasons to take out debt is so as to not dilute existing shareholders any further.

And there are no doubt other lenders and debt products out there that this founder could have looked at.

BUT

What I actually told them to think about was approaching an existing investor (especially an angel) to see if they would lend the required amount.

This is something that the founder had not considered, but realised that it made sense. They also had individual angels who had invested 7 figure amounts into the business and had the ability to write large cheques.

Overall there are several pros to going to an existing investor:

➡️ They have an existing relationship with you and the business.
➡️ They are able to make decisions quickly.
➡️ They are incentivised for your business to succeed.
➡️ They are also incentivised to not have further dilution.
➡️ They are less likely to insist on further security.
➡️ They are more likely to negotiate a good interest rate.
➡️ They are more likely to renegotiate in good faith in the event of trouble.

The biggest con would be a potential falling out with the investor should you become delinquent with the debt.

With that said, and having done and seen this done in a number of business, given the fact that your investors want your business to succeed, there is already huge alignment and a great opportunity to strengthen your relationship with them.

I’d love to hear if anyone has done this themselves and what your experience was. Drop me a message!

Generated by AI using Dream Studio

Off Balance

Most people involved in the startup and venture ecosystem will almost certainly have come across the notion of employee equity schemes and options at one time or the other.

In recent months there have been lots of articles about employee options being ‘underwater’ as valuations have cratered and I’ve no doubt that people have legitimate questions and concerns about how options work – whether you’re a first time founder or have just landed your first role in a startup.

In this Off Balance article, I’m going to try and give you a quick and dirty run down so that the next time you run into the issue of employee options you feel like you’ve got a base understanding you can build further on.

As always, you should always seek advice from your lawyer, whether you’re a founder or an employee, as every scheme will have variations and complexities that will be very specific to the particular company issuing the options.

With that said, let’s get into it ????????

Employee Equity Schemes

Why do companies have Employee Equity Schemes?
Equity Schemes are a way of incentivising employees and will often form part of their total package alongside salary, bonuses and other benefits they may receive such as gym memberships, health insurance or a company car.

They allow employees to participate in the future upside the company might have in a way that allows both the company and the employee to protect themselves from potentially negative outcomes.

For startups who often lack the cash to be able to pay full market salaries, allowing their employees to participate in the equity of the business helps to make up for the potential shortfall in salary and, because the employees can become future shareholders (owners) of the business one could argue that their incentives align more closely with both the founders as well as other investors and shareholders in the business.

One of the main ‘instruments’ that companies use for employee schemes are called Options.

So what’s an Option anyway?
When we talk about an Option in a business or finance context, we are talking about a contract between two parties giving them the option to buy or sell something at a future date and at a pre-agreed price.

In the context of startups especially, we are usually talking about the Option to purchase shares in the business at a future date at a pre-agreed price which is normally at a discount to the last traded share price (normally defined as the ‘price per share’ offered during the last funding round).

We’ll get into some of the details shortly, but for now just think of an option as:

A contract to purchase a defined number of shares in the future either defined by a date or on completing certain milestones, for a pre-defined price.

Why use Options over straight equity?
There are a few reasons why issuing straight equity may not make sense either to the company or the employee”:

Firstly, if equity were to be simply given to an employee in lieu of salary, there would be an immediate tax consequence – especially to the employee. The tax man would essentially argue that the equity is equivalent to the cash value it is being provided in lieu of and will charge personal income tax on that value.

Secondly, from the company’s point of view, if it has issued equity to an individual, it is pretty unlikely that that equity can be clawed back in the event that the employee ends up not adding value – or worse, is actively toxic.

Thirdly, most widely used Option schemes have had legislation drawn up around them which means that there are other tax benefits to using them. In the UK, for example, under the EMI scheme, if you have agreed a valuation with HMRC, even if the valuation has increased by the time an employee exercises their options (see below), they won’t get hit with any kind of tax bill. Instead, the tax impact only comes when there is an exit event. And, at that point, again on the assumption that the correct process has been followed with HMRC, you’ll be taxed on a capital gain rather than as personal income tax*.

Finally, from an employees perspective, there may be a reason they don’t want equity in the business after they have been issued the options (rare, but it can happen i.e. if the company behaves unethically). If they had been issued straight equity, they would be stuck on the cap table, unless they were able to find a buyer for their shares (which in early stage companies can be very difficult).

*In the UK, and indeed the US, there are various actions that must be taken to make sure that the option scheme is approved by the tax man and that the tax impact is minimised on the employee. These range from getting the valuation agreed in the first place, to only being able to issue the options within a specific window after the valuation agreed, to reporting back to the tax man on a regular basis.

Always take external legal advice and set up your scheme in the most sensible way for your company and employees.

Glossary of Terms

As with most contracts, the devil is in the detail. Thankfully there tends to be some pretty standard terminology used when setting up a scheme and in Option contracts specifically, here are the main ones:

Option Pool: A number of shares (often expressed as a percentage of the total shareholding) that are agreed to be set aside for issuing to employees, contractors, advisors or other external supporters of the business.

Scheme Rules: The overall rules that govern the option scheme irrespective of individual terms in individual options.

Option / Option contract: The commercial contract that specifies the terms by which the option holder must abide.

Vesting: The process by which options become available for purchase.

Vesting Schedule: The contractual timeline over which options vest.

Cliff: An initial period that must be completed before any options vest at all (thereby allowing for the eventuality that an employee leaves the business after a short period of employment).

Periodic Vesting: The process by which options may vest over a certain period (monthly, quarterly, annual etc).

Milestone Vesting: The process by which options only vest on completion of certain targets. Often used with sales teams and tied to revenue targets, however could even be used to incentivise a CFO to source and close additional investment etc.

Exercise: The act of purchasing options that have been issued to you.

Strike Price: The price at which the option can be exercised.

Exit only options: Options that can only be exercised at the time that a company goes through some form of a liquidity event (sale, IPO or orderly windup).

Good / Bad Leaver Clauses: In some instances, employees may be allowed to exercise options even though they have left the business – often before their options have fully vested, and normally at the discretion of the board of director. The terms of their rights to exercise will be defined under a good / bad leaver clause. As you would expect, a Bad Leaver would unlikely be allowed to exercise their options.

Approved / Unapproved Schemes: In the UK, an Approved scheme is one that can be issued to employees after having been agreed with HMRC and provides the tax efficiency I’ve mentioned earlier. An Unapproved scheme simply means that there won’t be any tax efficiency and these schemes are typically used to issue options to people who are not employees of the company.

Fully Diluted Equity: Whilst this isn’t a term that is used ****in**** options contracts, it is a fundamental concept to understand when talking about equity. Fully diluted equity is the ownership of existing shareholders, expressed as a percentage as if all options (and any other instrument such as share warrants) have been exercised. It essentially tells shareholders what their minimum ownership sits as as of right now.

Being ‘Underwater: An option is underwater when the exercise price exceeds the current price per share of the company (i.e. the company is valued lower than the option would suggest). This is obviously a critical issue for employees who have a large part of their compensation made up by the option scheme they participate in.

A word of caution

When talking to employees about options, never discuss it in terms of a percentage of equity (as this moves every time new shares are issued). Rather talk about it in terms of value, or preferably an absolute number of shares over which the options are being issued.

Wherever possible you should refrain from putting these things in writing until you are ready to issue the options. This is to protect the company as far as possible in the event that someone mis-speaks.

Types of Employee Equity in the UK and USA:

Right, we’ve got the basics covered, so et’s take a quick look different types of Employee Equity schemes in the UK and across the pond in the US.

UK:

Enterprise Management Incentives (EMI): These are a tax-advantaged share option scheme specifically designed for smaller companies and hence widely used by startups. There are certain conditions, for example a £250,000 limit on the value of shares over which options may be granted to any one employee. But it is quite flexible and relatively easy to set up and implement.

Company Share Option Plan (CSOP): This allows companies to grant options to selected employees who can then acquire shares at a fixed price. CSOPs offer tax advantages if certain conditions are met.

Share Incentive Plans (SIPs): Use in more established companies, employees can buy shares out of their pre-tax salary, often at a discounted rate.

Unapproved Share Options: As discussed earlier, these don’t have the tax advantages of the schemes above but are more flexible. They’re also relatively easy to set up and issue.

USA:

Incentive Stock Options (ISOs): These are exclusive to employees and come with tax benefits, but they must meet specific IRS requirements.

Non-Qualified Stock Options (NSOs or NQSOs): Unlike ISOs, these don’t have the same tax benefits but are more flexible and can be granted to anyone – similar to unapproved share options in the UK.

Restricted Stock Units (RSUs): Used in established (and often listed companies), employees receive shares once they vest, without needing to buy them. They’re taxed as income when vested.

Stock Appreciation Rights (SARs): Employees benefit from the increase in share price without having to purchase shares. They receive the appreciation amount in cash or shares.

How the Schemes Work:

EMI & CSOP (UK): Companies grant options to selected employees at a fixed price. When the options vest, employees can exercise them, purchasing shares at the previously set price. If the company’s share price has risen, employees stand to make a gain.

ISOs & NSOs (USA): Similar to the UK schemes, companies grant options at a set price. The main difference lies in the tax treatment upon exercising the options and selling the shares.

Impact on Valuations, Shareholders, and Accounts:

Valuations: Employee equity schemes can dilute the ownership percentage of existing shareholders. However, they can also align employee interests with company growth, potentially driving up the company’s value.

Shareholders: Dilution can be a concern, especially if a significant number of options are granted. However, motivated employees can lead to increased company performance, benefiting shareholders in the long run.

Accounts: Companies need to account for share-based compensation. In the US, for instance, the Financial Accounting Standards Board requires companies to estimate and report the fair value of stock options they grant. And given the reality of most early stage businesses where fair value can be very hard to define, this leads to using pricing models like Black Scholes to arrive at a price. This may lead to a charge to the income statement as equity is credited.

To really bring it home, check out this worked example based on a (simplified) UK Unapproved vs Approved EMI Scheme.

Who fancies paying an additional $29,500 in tax?

Hopefully this has given you a good primer in the basics of what you need to know about Employee Equity Schemes, whether you’re the founder responsible for issuing them, or the employee being granted them. And, of course, this is non exhaustive, not only are there other types of equity products out there (like Growth Shares) but legislation will also move over time.

Make sure you know what you’re getting and what it’s going to cost you!

Gif by dynastydrunks on Giphy

I hope you found this useful, as always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at hello@emergeone.co.uk and let me know ????

????And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

The Lowdown #5

???????? Hi friends!

I’m off to Italy (again!) for a long weekend as a surprise trip for my wife. We’ll be celebrating her birthday with her family out there for the first time in over 20 years ????

So this newsletter may be a little bit lighter than my normal verbal extravaganza!

For this week’s Lowdown, I thought I would highlight some of the reasons to be positive about the state of venture today.

There’s been a couple of huge announcements here in Europe and one that’s not quite as big in Kenya, but it’s important nonetheless!

???? Atomico raises 1bn Euro
???? Dawn bags $700m
???? Greylock lands $1bn
▶️ Enza Capital closes $58m

Keep reading to get the full lowdown on each of these…

And remember to check out this week’s Nothing Ventured pod where we take a look back at some of the operators we’ve had on in Season 4, sharing all their wisdom.

Also, if you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Lowdown” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it.

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

The Lowdown

You would be forgiven either whilst reading this newsletter or, indeed venture news in general, for thinking that the venture ecosystem was in a pretty sorry state.

Indeed articles like this one from Pitchbook paint a picture of an industry struggling to get out of declining returns with IRR dropping into massively negative territory in 2022 as hyped up valuations started getting marked down.

But the reality is that despite those declining returns, there is still a huge amount of dry powder out there waiting to get deployed.

LPs are still looking to deploy into funds that they think can still generate those outsized returns of yore.

So let’s take a peek at some of the firms that have just announced new mega funds as well as one slightly smaller, but still important, fund in the context of the region it’s in.

Atomico Raises 1bn Euro

First cab off the rank is Atomico which has raised 1bn Euros, with a bullish stance on where Europe is heading.

Despite the continent seeing a likely 39% decline in funding in 2023, this new fund which will be deployed across venture and growth is testament to the fact that founding partner, Niklas Zennström, believes that Europe has the chance of becoming a true tech superpower. It’s evident that there’s huge value to be unlocked by the continent!

Some might argue that regulation is a limiting factor, but I think in some ways, the tougher regulatory environment in Europe means that new ventures have to think hard about how and what to build in a more meaningful way. It prevents them from assuming they will just be able to fix their problems by throwing cash at them down the track.

With over 200 investments including Klarna, Graphcore, Lime and Gympass across 5 funds, it looks like Atomico is just warming up.

Dawn Capital Bags $700m

Next up, we have Dawn Capital that just raised a $620m early stage B2B software fund alongside an $80m follow on fund.

With $2bn now under management, the fund has backed companies like izettle which are now ubiquitously used in stores to capture card payments and which exited to Paypal, as well as others like Dataiku and Quantexa.

As co-founder and GP Norman Fiore says, we are on the cusp of the next technilogical platform shift driven by AI and Dawn wants to be at the front line to capitalise on the opportunity.

Greylock Lands $1bn

Across the pond, Greylock Partners has launched a $1bn fund to focus on early stage businesses from Seed to Series A.

This, despite the fact that Reid Hoffman (founder of LinkedIn) who has been a GP in the fund since 2009, announced around a month ago that he would be scaling back his involvement and would not be heavily involved in this new fund.

It would seem that Reid will be focussing his time on exploring the AI landscape, just not from within Greylock.

The new fund – Greylock 17 – will focus on Pre-seed, Seed and Series A investments. The fund hopes to grow their track record of over 250 exits including Redfin, Aurora and Coinbase.

Enza Capital Closes $58m

And finally, I wanted to give a shout out to the little guys! You’ll see that in the upcoming season of Nothing Ventured we try to explore the African ecosystem a bit further. I thought it would be great to juxtapose Enza Capital’s recent announcement of its $58m close across 2 funds.

Given the size of the 3 funds we just looked at, which on a standalone basis total almost $3b, you may be asking why I’d be looking at such a small fund.

Well, everything needs to be taken in context.

Firstly, the largest Africa focussed fund, Partech Africa II, sits at 245m Euros. This $58m is over a fifth of the size of that fund.

Secondly, this Enza has been deploying pan Africa across Kenya, Uganda, Nigeria, Ghana, Ivory Coast, Senegal, Egypt and South Africa which is great to see.

And finally, in a move that really shows that they are founder focused, they have reserved 10% of their carry pool for founders – though this won’t necessarily be equally shared.

The point is, it’s easy for us to get carried away with and fixated on the massive numbers we’re seeing here in Europe and across the pond.

But it’s worth remembering that in some markets, you can have a much smaller base but much bigger impact.

And finally, a word from everyone’s favourite meme master…

People in 1980: “I can’t wait for flying cars and all the other amazing inventions we will come up with in the future”

People in 2023:

— Dr. Parik Patel, BA, CFA, ACCA Esq. (@ParikPatelCFA)
Oct 1, 2023

????And that’s a wrap for this edition of The Lowdown – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

The Lowdown #1

???????? Hi friends!

I’ve run out of things to say about the weather. But so as to not disappoint, we’re going through a ‘heat’ wave’ in the UK.

Sadly though, I’m nowhere near a beach so am stuck with looking out of the window and daydreaming of crystal clear water and sand…

OK. I’m back.

As I mentioned in Tuesday’s Off Balance I’m switching up the content and scheduling again. From now on you’ll be getting The Lowdown straight to your inbox – a quick recap of some of the news within the ecosystem that’s caught my attention over the last couple of weeks.

Today I look at:

???? Sequoia’s fall from grace
???? Air Streets AI fund
???? Pretiosum’s second fund
???? Un-crowning the Unicorn

Don’t forget to check out this week’s Nothing Ventured pod where we take a look back at the last season starting with our conversations with all our friends from across the pond.

Also if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Lowdown” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

The Lowdown

Before we start, I did a webinar with Anthony Rose, Founder of SeedLegals on the what, why, how and who of startup CFOs.

Check it out!

Now, let’s check in with what’s been happening in the wider tech and venture ecosystem this week…

Sequoia having a bad hair(cut) day.
Most people who have anything to do with venture know a little something about Sequoia, the firm that has, over the years, invested in amazing companies like Atari, Apple, Google, AirBnB, Instagram, OpenAI and… FTX…?

And that’s where the trouble starts.

As this article from the FT notes, many consider the investment and evangelising of FTX and founder Sam Bankman-Fried as a step too far.

The firm has also broken ties with its China fund (HongShan) and slashed its crypto fund.

The question is whether this is a firm under distress, or if, as others might look at it, a firm that is going back to doing what it does best.

I guess time will tell.

Air Street’s $121m fund to bet on AI
Nathan Benaich is pretty well known for his dedication to the world of AI – before it became the done thing I might add.

Air Street Capital’s State of AI reports are a must read for anyone interested in the space.

In fact Nathan was recently picked up and quoted by the guys on the All In Pod – maybe this means he’s in the arena (you’ll have to check out the pod to figure that one out ????????).

But this week the news is that Air Street has raised its second fund of $121,212,121 ???????? 

You might argue that raising an AI focussed fund in 2023 is no biggie, but the pedigree of Nathan and the team at Air Street is a cut above so it’s really pleasing to see this, especially given that overall market conditions remain,,, difficult.

Pretiosum closes in on Fund II
Whilst I was still wrestling with the format of this newsletter back in August, I neglected to give a shout out to one of my favourite people in the UK venture ecosystem – Yana Abramova – who has just done a first close on her second fund as a solo GP ????????

Yana is one of those people that just focuses on where she’s going and gets there.

It’s great to celebrate this milestone ????????

Where have all the unicorns gone?
I decided to have a look at how we’re tracking in terms of new unicorn creation (unicorns being companies valued at $1bn or more).

The data from Pitchbook is pretty telling.

We’ve gone from 612 new unicorns in 2021, to 352 in 2022 to… Just 60 so far this year ????

Either unicorns have gone back into whatever mystical lands they normally frolic around in or, and my money’s on this explanation, it was all a bit arbitrary to being with.

Now, whilst Pitchbook does give you most recent valuation, the problem with this is that it only really gets updated when an equity round is closed. So it’s quite feasible that many of those unicorns minted in 2021 especially are truly paper valuations.

Pitchbook – New Unicorns Yearly

I was also slightly surprised to see that India has 30% more unicorns than the UK but I guess when you’ve got 21x the population it’s more surprising they don’t have more.

And finally, in other news, Burning Man… isn’t burning.

In fact, the weeklong desert campout was disrupted when the area flooded just hours before the eighty thousand attendees were about to head home.

Zach’s post here, and thoughtful thread here explain his perspective on why he believes Burning Man is worth the effort.

The rain has made the burning man playa a lake the night before 80,000 people were about to start heading home.

Things just got interesting.

— Zach Coelius (@zachcoelius)
Sep 2, 2023

????And that’s a wrap for this edition of The Lowdown – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

The Lowdown #3

???????? Hi friends!

I know I promised I’d steer clear of the weather, but… I’m British aren’t I?

After a beautiful Indian summer with temperatures hitting 30 centigrade for half of the month, we’re back to a proper British autumn – wind, rain and chilly winds.

Ah well, nothing lasts forever. Sigh.

Let’s get into this week’s happenings.

Today I look at:

???? Airtable cuts team + what’s the valuation?
???? A certain Brand gets burned
???? Following the money – where are all the millionaires going?
???? Are tech IPOs back on track?

And remember to check out this week’s Nothing Ventured pod where we take a look back at some of our guests talking about the acceleration of tech and venture in the pan African ecosystem. ????????

Also, if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Lowdown” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it.

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

The Lowdown

Airtable Recalculates
I’m not the biggest fan of spreadsheet replacement tools but over the last year or so, I’ve gotten very deep into using Airtable to work as my operating system.

I use it for my CRM, dealflow pipeline, recruitment database and much more. It’s one of the few softwares that actually work with my (undiognosed) ADHD.

And in plenty of conversations I’ve had with VCs, who use it internally, they’ve told me pretty much the same thing – it works really well whilst you are still scaling up.

But, in news that broke this week, Airtable is laying off over 27% of their staff – after having laid off more than 250 back in December.

Blaming the market’s switch to chasing efficiency rather than growth at all costs, Howie Liu (Airtable’s CEO) also noted that the company will be focussing on selling into more lucrative enterprise deals rather than chasing the little user (like me).

Anand Sanwal, founder of CB Insights, argues in the post linked below that Airtable’s valuation is off – on the upper end – by close to a whopping 90% against their last valuation back in December 2021 (peak hubris).

Putting aside the negative news in itself, Anand’s thread is a really great way to understand the maths behind the valuation. Though, when challenged on the accuracy of some of his numbers, Anand doesn’t hesitate to adjust the numbers to show the recast position.

For folk like me that geek out on this kind of thing, it’s super interesting to follow the calculus and understand how some household names – at least in the venture ecosystem – have suffered from the frenzied investing of the ZIRP phenomenon.

Airtable is probably worth less than the total equity funding it has raised

I’m not talking about the $11.7B valuation it raised at in December 2021

I’m talking about it being worth less than the ~$1.4B+ in financing it has raised

Here’s the math/data

Airtable is on track for… twitter.com/i/web/status/1…

— Anand Sanwal (@asanwal)
Sep 17, 2023

Brand’s Brand on the Bonfire
I’m going to be honest and say I was really not paying attention to this news at all.

That’s mainly because I rarely spend time reading around things that are happening in popular culture, and certainly don’t keep tabs on celebrity news.

There is a lot of opinion, condemnation and blanket support for Russell Brand out there, and I don’t intend to add to that. But whilst I don’t have a first hand account of what happened and therefore can’t comment, I can say that any tale of abuse is abhorrent.

Every victim, alleged or otherwise, needs to be taken seriously until events can be investigated – no person should ever be above the law.

It’s similar to one of the things that really affected me during the post-Trump (post truth) era. Even though despicable things were being admitted to, people would take a “jury’s still out” attitude and defend the undefendable.

And what we’re now seeing, which will no doubt be lambasted as cancel culture, are private platforms using their policies to cut off the reach and revenue of individuals like Russell Brand when they’re caught in the cross hairs.

We’ll see what happens as this story unfolds.

The only thing I know for sure is that even if the case is clear cut, the public response will not be.

Millionaires on the Move
I’m a huge fan of Visual Capitalist. They have some incredible data visualisations that really cause you to think.

In this article, they map the movement of high net worth individuals (HNWIs) between countries to see where all the rich folk are heading to.

In an absolute endorsement of the Brexit plan, it seems that 12,500 HNWIs (defined as having wealth over $1m) have been lost to the UK in the period between 2017 and 2022.

In 2023, the biggest losers would seem to be China and India with 20,000 HNWIs leaving those countries this year.

And where are all these wealthy individuals heading?

It would seem that popular choices are Australia, the UAE and Singapore.

I can’t say I am that surprised that these are the destinations, which are attractive due to lifestyle and/or taxation laws.

Certainly in the case of Singapore and the UAE, they’re also massively accessible hubs from which to travel in and out of.

Where would you go if you had the means and the motivation?

We’re Back, Baby…
Maybe.

Both ARM and Instacart went public over the last week or so, and so far, we haven’t seen negative sentiment in the markets.

Instacart shares traded 12% up after their filing and ARM had a lift of 25% after listing. Though their share price has come back down as analysts’ expectations suggest the company is overvalued at the moment.

Now, none of this is investment advice – I’m just highlighting what people might find of interest.

But it is important from the perspective of the venture ecosystem… If these listings go well, there’s a good chance that tech businesses will see this as an improvement in sentiment towards technology listings and may just look to list themselves.

And finally, a word from everyone’s favourite meme master…

NFT investors waiting to recover after a 99% decline

— Dr. Parik Patel, BA, CFA, ACCA Esq. (@ParikPatelCFA)
Sep 14, 2023

????And that’s a wrap for this edition of The Lowdown – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

The Lowdown #4

???????? Hi friends!

Just when you thought it was safe to go out in London…

I turn up with a hot mic and a bunch of crazy questions ???? 

Last night, with the team from Launchpod Studios in tow, I joined a tonne of people at Dream Factory for the London Venture Capital Network social and went a little off the chain.

Watch this space, as I bring some of the amazing conversations to light ????

Dan Pandeni Idhenga, Co-Founder of The London Venture Capital Network and me

Let’s get into this week’s happenings.

Today I look at:

????️ OpenAI at $90bn
???? From HS2 to HS who?
???? Akshata Murty (Rishi’s wife) winds down her VC fund

And remember to check out this week’s Nothing Ventured pod where we take a look back at some of our guests looking forward to the future.

Also, if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Lowdown” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it.

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

The Lowdown

The Rise and Rise of OpenAI
OK, there are few things to unpack in this bit of news that has been the talk of tech circles and whatsapp groups.

Firstly, it’s been less than 12 months since OpenAI’s last round but, should this go forward, we’re looking at 3x the valuation.

And what a valuation!

Reportedly up to a whopping $90bn.

Which would comfortably propel it from no 10 on this list of the most highly valued private ventures to number 3, behind only SpaceX ($137bn) and ByteDance ($225bn) – based on figures from this August.

And, if the below article is to be believed, they will be taking in the capital as a secondary financing, where employees or even existing shareholders could take some of their money off the table.

Now if that were the case, it would be an incredible outcome for those employees that are able to take advantage, but it also would suggest that the business doesn’t need fresh capital having raised $300m earlier this year and – wait for it – on track for over $1bn of revenue this year alone.

I’ve had more than a few conversations with investors that wish they could have gotten into the last round. No doubt they’re kicking themselves even more right now given both the upside as well as the performance.

HS Who?
In niche UK news, the government seems to be about to roll back on plans to link Birmingham and Manchester via HS2, the flagship infrastructure project that was approved over a decade ago… by the ‘same’ government.

But the politics of the decision aside, this is a pretty big blow for the tech scene outside London.

It signals that the country isn’t willing to invest in itself, which in turn has the potential to slow down inward investment to the the region and the country in general.

Given how critical the government made Levelling Up to its policy platform, this feels like an extremely odd decision to have made.

I found this article by Yiannis Maos MBE, founder of Birmingham Tech Week, incredibly insightful.

Winding Down a VC
I am fairly apolitical from the perspective that I just want a government that works and supports all levels of the country and economy, as fairly as possible.

Even in the short time that I have been writing this newsletter, it will probably come as little surprise to most readers that I am not a fan of the current government.

But articles like the one below give me a headache.

Whatever else you may have to say about the couple, the fact that Akshata Murty was using her wealth to invest in startups is a good thing for the country.

The fact that those startups availed of the Future Fund during the pandemic is not news, it is the reality of the scheme – it was set up to provide loans to high growth startups during a period of massive uncertainty when there was a real risk of many businesses going to zero.

The fact that some of these businesses have failed is not news. And that’s certainly the case for anyone that understands anything about the Power Law distribution of outcomes for VCs, and the ways VCs approach portfolio construction.

At a time when markets in general have pulled back, having capital allocators with the ability and network to support these businesses so that they can survive, thrive, grow and provide jobs and benefits to the economy is (at the risk of repeating myself) a good thing.

So headlines that prey on the tribalistic nature of people and using a political angle to create outrage where, really, outrage is not warranted, just do the ecosystem a massive disservice.

I know of plenty of VCs with strong ties to decision makers in various industries as well as government. It’s a crucial part of ensuring that the startups they back have the best chances at success.

Yes, it is understandable that there is going to be more scrutiny for the wife of the PM, but the fact that some of the portfolio took money from the Future Fund is not the problem here, and shouldn’t be – in my opinion – the story here, or the reason to close down the fund.

And finally, a word from everyone’s favourite meme master…

VCs doing diligence on AI startups

— Dr. Parik Patel, BA, CFA, ACCA Esq. (@ParikPatelCFA)
Sep 23, 2023

????And that’s a wrap for this edition of The Lowdown – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

The Lowdown #2

???????? Hi friends!

Bit of a whirlwind of a week for me this week with the first recording of the new season of Nothing Ventured in the bag.

Judging by some of the exploratory calls I’ve been having over the last few weeks, the rest of the season looks like it’s shaping up to be pretty spectacular!

In some personal news, I am writing today’s issue from my first ever Apple device, the Macbook Air – as someone who has been a Windows / PC user for the last 30 years, this has been a tough, but rational decision for me – check out my thoughts here.

Down to business!

Today I look at:

????️ Getir’s down round
???? When are we going to see some CBDC?
???? What happens when Excel gets bitten by Python?
???? What’s going on with tech’s talent pool?

And remember to check out this week’s Nothing Ventured pod where we take a look back at some of our guests most passionate about levelling the playing field in venture ????????

Also, if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

Give me a follow on LinkedIn, Twitter (do I really have to start calling it ‘X’ soon?), Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Lowdown” and, more importantly, tell me why you’d like to connect ????????)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing!

Now let’s get into it.

This edition of Nothing Ventured is brought to you by EmergeOne.

EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.

Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.

If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.

If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale ????

The Lowdown

Before I get started, those of you who are fans of the pod may remember our episode with Sameer Singh.

Sameer is the go-to guy for anything network effects (NFX) related to the extent that he parlayed his passion for NFX into a course, working with Atomico’s Angel Programme and joining Speedinvest as a Venture Partner.

He knows his stuff.

And if you want to learn from him, the next cohort of Applied Network Effects begins on 26th September 2023. Check it out and apply here. ???? 

Now, let’s check in with what’s been happening in the wider tech and venture ecosystem this week…

Getir Gets Down (Round)
Now I’m not gloating. Really, I’m not.

It’s never great to see the impact that business failures have on employees and the people and businesses that have come to rely on a significant part of their income from a behemoth that once was.

But, if you have spent any time following, reading or listening to me, you will know that since pretty much day one, my attitude to the whole 15 minute grocery delivery space can be best summarised as “whaaaa ?????????”

These business models were highly reliant on a mass of cheap venture dollars coming in to essentially subsidise customers’ – let’s face it – laziness.

In the latest example of “told you so” in the sector, Getir is purportedly raising fresh capital at a price that would slash their valuation by a whopping 78%.

As this FT article suggests – this overall dampening of fortunes in the grocery delivery space doesn’t bode at all well for Instacart’s upcoming public listing.

Maybe this isn’t the end for fast delivery, but it certainly feels like if they don’t figure out a way to make the economics work, the end can’t be too far away.

Will We Ever See a UK CBDC?
Probably.

But right now, it’s on hold due to concerns about privacy.

It’s worth checking out this episode I recorded with Alex Mann where we talk about Bitcoin for the most part, but we also delve into the implications of a Central Bank Digital Coin (CBDC) which – from where I’m sitting – could be pretty dystopian.

Imagine having a coin that is programmed so that you have to use it within a certain time frame, or only on certain ‘approved’ products or services…

The reality is that we could very easily see some of our freedoms encroached upon without us even realising it.

Or not.

The point is that we don’t know, and I’m not sure I’m willing to risk taking a punt on the government – any government – getting it right.

Excel Gets Bitten – by Python
Having just moved over to the Macbook and, prior to that, having moved most of my spreadsheet work over to Google Sheets, I have to say I wasn’t expecting to be writing about Excel here.

But Microsoft once again shows that they want their spreadsheet tool to be first choice for progressive finance users by announcing this new integration.

I’ve dabbled with programming (never deep enough to actually be any good, but good enough to know I could do a lot of damage if I applied myself), and I have locked horns with VBA, SQL and Python over the years.

If Excel can make this integration intuitive with smart UX and UI, it’s going to make a lot of finance types like me pretty happy.

Being able to do advanced data analysis and work with charts seamlessly all from within Excel is a big deal and I’ll be watching closely!

Where Have All the Employees Gone?
Or rather, where are they going?

Net headcount has fallen for 5 out of the first 6 months this year and overall hiring has more than halved in H1 2023 as compared to the same period last year.

The question that Carta poses in their Data Minute newsletter is whether founders will remain capital efficient when – I’d say if – funding bounces back.

My thoughts are that it is not a given that funding does come back to anywhere near the levels we have seen in the last few years at the same sort of valuations as we previously saw.

This is important as companies will, in my opinion, have smaller balance sheets to work from (i.e. investors may invest the same net dollars, but across a larger cohort of businesses at more sensible valuations).

And I also think that the last year has really sunk into people’s psyche.

I don’t believe that founders are suddenly going to become profligate with their spending just because investor purse strings have loosened slightly again.

But the further forward we move, the more likely we are to get to some point of equilibrium, and then we can take stock of where things are, and where they’re likely to go.

Graph courtesy of Carta Data Minute

And finally…

Did you play any bingo this summer ?????

Instagram post by @prayingforexits

????And that’s a wrap for this edition of The Lowdown – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

???? And if you think someone else might love this, please forward it on to them,

???? Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish