Funding Fridays No. 10

Apr 01, 2022

Funding Fridays - a briefing on startup funding.

Happy Friday!

As you no doubt have figured out, the unanimous feedback from our subscribers was to send Funding Fridays on a monthly rather than weekly basis.

Additionally, many of you have been asking for content beyond the charts that give a perspective on the funding market. So, I’m including some of that this month. Let me know what you think.

Did your brilliant friend forward this to you? Subscribe here.

Bracing for a Change

2021 was a great time to launch startups and raise money because: (1) Labor markets have tightened up coming out of the pandemic. This increases labor costs for startups, but it seems to be pushing people to launch new startups as new business formations have jumped in the last six months. (2) Record breaking amounts of venture capital has been invested, due in part to the fact that the deal size at each stage has increased. (3) Deals have become more founder-friendly. There has been a decrease in participating liquidation preference and an increase in the step up of valuations from round to round. However, there are indicators that VC is bracing for a slowdown due to: (4) Investors have left themselves vulnerable to valuation corrections by sacrificing protective deal terms in exchange for access to deal flow. (5) The prospect of increasing bond yields may reduce venture’s allure for LPs, but that effect will likely be tempered if inflation persists. Pitchbook (22 minutes)

The Funding Divide

How does your race or gender impact your ability to raise VC funding? Here are some stats from 2021: All female teams raised 25% less than all male teams. Teams with minority members raised 29% less than all-white teams. All female teams with minority members had 158% more investor meetings than in 2020, but still raised the least amount of money. How does race or gender impact the scrutiny of your pitch deck and your fundraising outcome? Investors spent an average of 3:44 on all female teams and they raised and average of $1.5M. Investors spent an average of 3:46 on all male teams and they raised and average of $2M. Investors spent an average of 2:51 on mixed teams and they raised and average of $1.5M. Investors spent an average of 3:57 on teams with no minorities and they raised and average of $2.4M. Investors spent an average of 3:23 on teams with minorities and they raised and average of $1.7M. DocSend (16 minutes)