Realization. 'Ecosystem' #45
A weekly guide on tech news and early stage fundraising. Aiming to open access to the venture industry for less networked founders and junior VCs.
For access to all monthly events, archive or if you would like to support the project, become an annual subscriber⭐ New to ‘Ecosystem’? Find out what it is here.
Hello and welcome back to ‘Ecosystem’, issue 45!
45 weeks and counting. It’s been nearly a year since this newsletter first launched!
Looking back, it started as an extension to the webinar panels (for those who do not remember/were not part of the project back then - see an example!); that were brought to life during (and perhaps due to) the global pandemic. In a way, a response to something so foreign that was slowly entering most aspects of our lives. I believe one of the most valuable contributions of the ‘Ecosystem’ project is that it created a sense of ‘remote togetherness’ - if you’ve come to a few #EcosystemGiants events, chances are you have seen at least one other participant in more than one other session (hence why they’ve been hosted as Zoom meetings, allowing for maximum transparency and opportunity to connect with early stage founders and junior investors (predominantly!) who you may find common interests with.
On the note of connections, the easiest thing you may do is ‘hit reply’ and tell me in three lines:
1) Who you are?
2) What you would like to see more of from ‘Ecosystem’?
3) Who would you like to connect with and why?
The core goal of the ‘Ecosystem’ project from the very beginning has been to open up access to the venture industry to ‘outsiders’ - founders and people, working in VC, who come from less ‘obvious’ backgrounds. A year on, as I am typing this, I am 1) Part of the inaugural cohort of the Newton Venture Program, the first-of-its-kind training program for the investors of tomorrow, with potential to fuel the global ecosystem (an initiative by LocalGlobe and LBS); and 2) The newest member of the PropTech1 Ventures* team, a leading European VC fund, investing in the best early stage PropTech and ConTech start-ups ;). And it is where my focus needs to shift now. And I know you will understand.
What is next? A more detailed post will follow. What I can say is that for the summer, ‘Ecosystem’ will be coming to your mailbox every two weeks and #EcosystemGiants is properly returning in fall. I am incredibly grateful for every one of you who’s been part of this journey and I hope you’ll continue to be involved in the project - as much or as little as you like.
Over the last nearly one year, the insights shared and lessons learned from each speaker (and each reader/member of this community who has personally reached out to me) have never failed to amaze me. Thank you for trusting me with your free time and allowing this newsletter into your content diet! 💜 See you next time!
In this newsletter, you will learn:
Which is the first all-female led company to go public?
How (not) to fundraise when beta testing a consumer product?
Which Russian Netflix start-up rival got a $250M cash injection from two local funds
Top tips from the Managing Partner of a top European PropTech VC on structuring deals
*See info about our upcoming office hours and how you can meet the investment team in the ‘Sustainability’ section below 👇
#EcosystemGiants
It was fantastic to hear from Nikolas Samios (Co-Founder and Managing Partner, PropTech1 Ventures) last week and get his invaluable advice on early stage investing; deal negotiation, as well as insights on the direction in which the real estate industry and PropTech are going. Few memorable takeaways from our chat:
Training your pattern recognition algorithm as an investor
“Having seen hundreds of deals from great successes (IPOs) to the complete opposite (companies going belly up) trains your pattern recognition algorithm. Like machine learning in a human being. You see data, cases, situations - if you’ve been there 10, 20, 30 times; you build up a knowledge you can transfer. Of course, when you invest for the first time, you don't have that data but a gut feeling. After years, with more and more data, you can train your personal pattern matching algorithm, and hopefully, then you become a much more useful investor or board member. One who is able to help teams who are in complex situations for the first time to avoid some pitfalls and to hopefully provide a little bit of guidance and sparing to accelerate their development and to take out risks that are in the life cycle.”
VC deal-breakers
“One obvious example is a very weak cap table. It is not OK for a founding team and managers to only have 20% worth of shares at seed stage. Not a problem in C-D rounds, when the dilution might be as big. But if this is happening in the starting phase, something must have gone terribly wrong. Either the founders were not able to raise capital at good terms (warning sign!) or they were ill advised (naïve?). This is something that can be easily spotted. Another one - serial entrepreneurs is good, parallel entrepreneurs, pitching in a way a portfolio of companies isn’t. Unless you are Elon Musk, that just doesn't work . Anything that creates potential conflicts is a clear no-go (CEO of two companies, CTO shared). There are structural things that help you as an investor sort out companies early on in the process. Those are besides all other aspects - at the business plan, you want to see scalability, some competition but those are not things you can spot in seconds. Founders need to understand that professional investors always have too many deals on the table, so they will quickly sort you out. It will also be very difficult to get back in the pipe, at least for the next couple of months, once out.”
The elevator, ‘Blackberry’ pitch
“Investors used to have blackberries in the old days - I always said to my portfolio companies, think about the partner of a VC fund somewhere at an airport, looking at his Blackberry. The screen has about 10 lines of text only (no graphics, nothing!). If you can tell your story and why it is interesting as an investment on the space of the blackberry screen, then it's a good pitch. If the investor is then interested, he will press forward and share with the team. It doesn't matter if you have a beautiful presentation somewhere at the end of that email. The architecture of the information at the very beginning of a pitch is very important.”
The unique challenges PropTech and Contech founders face
“It’s a very b2b oriented market - the vast majority of business models do not sell to a consumer in the fast-paced internet marketing-driven way. When your product is somewhere in the value chain, it can take you years to sell due to the long b2b sales cycles. Plus the whole industry is not agile, everything changes very slowly. The reality is most real estate players still don't even have a central database, where data for all assets is stored in. The status quo may be even worse than founders anticipate. Nevertheless, we believe that the potential and the need for change is so massive, that it's definitely a good idea to be building something here.”
What about the barriers that RE companies still need to overcome on the way to innovation? Why is ESG important?
“User behaviour is changing - we are all consumers who learned to understand what a good customer experience is. We assume this level of customer experience can be applied to real estate - but here the interface is broken. When co-working spaces started, what was the basic product they offered? Choice, flexibility, an empowerment of the user. This is now also happening in residential real estate. On top of that, we get more pressure from new regulation. If we look at the new 'Green Deals’ - on a European level, and now also under the Biden administration in the US: This is putting pressure on the system - anyone who was earning decent money, and thinking they didn’t need to innovate, should now reconsider that. Change is the reason venture capital exists - if there is massive change in an industry; if power is moved from old, traditional players to new, more agile ones - this is exactly where venture capital is needed. And venture capital can make good deals in such an environment. We believe ESG is both a great field to invest in and of course a total necessity for any real estate player to implement these practices. A good methodology and governance.”
Also many thanks to Brittany Harris who shared how her company QFlow (all women-led ConTech startup ;)) is making construction projects more sustainable and profitable through AI and ML.
Supported by community partners:
Kaiku, LMRE, MentorshipHub, ParlayMe, Startups Magazine
Innovation Ecosystem Updates
Trending. As international travel resumes, fake Covid-19 certificates hit airlines (WSJ). European country powerhouses (Germany, France, the Netherlands) urge the EU to take a more active role regulating Big Tech killer acquisitions (Politico). UK furniture retailer Made.com (co-founded by Li Ning, Brent Hoberman, Julien Callede and Chloe Macintosh) targets a ~£1BN London IPO (City AM). A year after George Floyd’s death (that sparked the Black Lives Matter movement), what changed and how is progress measured (Politico)? Plus what can the VC community do to better support black founders (Quartz)? And the firm, investing only in Black entrepreneurs that launched with $2M in capital commitments last year, successfully closed on a $50M debut fund with LP backing from Tech Giants like Apple, Google, Paypal (Techcrunch). Tensions are rising between Twitter and the Indian state following a mis-labbeled ‘manipulated media’ tweet of a government official (Al Jazeera).
Trend: Cloud companies are starting their own venture arms. Salesforce, Slack and most recently Zoom debuted a $100M fund (The Street), while PayPal continues to make fund of fund investments to support diverse founders (Fortune)
Massive rounds. Swedish communications platform Sinch raises $1.1BN in a new share issue, with previous investors Softbank and Tamasek re-upping existing commitments (Tech.eu). The start-up goes head to head with sector unicorns Twilio and MessageBird to offer brands better ways to communicate with consumers. US Real estate financing start-up Homeward that aims to help people buy homes quicker, lands $371M (mix of debt and equity) at a $800M valuation to meet demand and expand into new markets (Forbes). French customer experience platform helping brands optimize apps and websites Contentsquare secures $500M in Series E funding led by Softbank Vision Fund (Forbes). All the way from South America, Brazilian proptech start-up (a real estate marketplace focused on rentals and sales) QuintoAndar lands $300M in Series E at a $4BN valuation (up from $1.5BN), as the company eyes international expansion (Forbes). Russia's answer to Netflix (and most popular on-demand video-streaming service) Ivi.ru raises a $250M series D round, led by VTB Group (the country’s second-biggest bank) and steel steel billionaires Alexander Abramov and Alexander Frolov’s Invest AG (Bloomberg). Six month-old California AI safety and research company Anthropic comes out of stealth with $124M in a star-studded funding round led by Skype co-founder Jaan Tallinn, Facebook and Asana cofounder Dustin Moskovitz, former Alphabet exec Eric Schmidt among others (Techcrunch). And finally, back in Europe, Berlin-based digital healthcare start-up Ada Health raised $90M in a series B fundraise led by Leaps by Bayer, the impact investment arm of Bayer (PYMNTS). Congrats to the Stout team for advising on this one!
Scoop: Stockholm-based buy-now-pay-later unicorn Klarna rumoured to be closing a >1$BN funding round, at a > $40BN valuation, backed by Softbank (Business Insider).
Acquisitions. Spanish mutli-category delivery platform Glovo goes on a shopping spree in CEE - as it snaps up three of Delivery Hero’s brands (Bulgaria & Romanis’s foodpanda; Serbia, Montenegro, Bosnia and Herzegovina’s Donesi, and Croatia’s Pauza) for $200M+ (Tech.eu).
Sustainability. Which Berkshire Hathaway company (creating and scaling modular architecture) is quietly disrupting the construction industry (Fast Company)? US organic food sales soar to new highs in 2020 (at near $62BN!), jumping by a record 12.4% (TBP). Would you like to meet the investment team at one of Europe’s leading PropTech VCs? Apply today, 31 May 2021 to join PT1’s very first Office Hours (this Thursday, 3 June at 10AM CET).
Wins for women. Not one, but two female-led companies IPO’d this week. Congratulations to Anjali Sud (CEO, Vimeo) for taking the all-in-one video software solution public (and fuelling its growth from a CollegeHumor side project to a multibillion-dollar company!)! 👏 Massive well done to Heather Hasson and Trina Spear (Co-founders of healthcare DTC apparel, FIGS) for becoming the first ever all-female co-founder (and co-CEO duo) to debut their business on the stock market (at a valuation of >$4BN!) via Reuters. 👏 Plus, kudos to TMV’s Co-founder and GP, Soraya Darabi (and one of my all-time favourite ‘EcosystemGiants’ guests) for being an early investor in the company and for her 10th successful start-up exit (Cheddar). 👏 Andrea Hippeau, Caitlin Strandberg, Isabelle Phelps and Stephanie Manning Cohen all got promoted to partner at leading stage New York-based VC firm Lerer Hippeau! 👏 Four ex-Google women suing the ad giant over gender bias win class-action status (and now represent 10,800 women seeking more than $600M) via Bloomberg. 👏
Funder
Winter Mead (Co-Founder, Oper8r LLC) with insights on how investors in funds make investment decisions
Elizabeth Davis (Investor, Anthemis) on what can the VC community do to support the next generation of female entrepreneurs (i.e. ‘build bridges between founders and funders to understand the fundraising process’)
Founder/Operator
‘This (Rock/Pebble/Sand framework) methodology is particularly useful when so many priorities compete for Product’s time. Big Rocks represent the two or three most important priorities. Rocks are the things that come to mind when you ask yourself, “What do I really want to accomplish this year?” Pebbles and sand, on the other hand, are medium and small priorities that fill the extra space, space that inevitably arises in any development process.’
Tatyana Mamut (SVP of New Products, Pendo) dives into the frameworks for navigating crises as a product manager (formerly Chief Product Officer at Nextdoor, she increased new user retention by >20%, and engagement of DAUs by >60% at the height of the storm in 2020)
Twitter Highlight
Celine Halioua (Founder and CEO, Loyal)
Start-up of the week
Repurposed beauty with a purpose
re:love cosmetics is a new circular beauty brand that transforms what’s left from coffee into high-performing, organic skincare products. The female-led start-up embraces and powers the true meaning of circularity - giving coffee grounds a new life while creating efficacious products, rich in antioxidants to amongst other benefits help in the prevention of skin aging; with the ultimate aim to inspire more people to use natural by-product beauty products.
Tweet @ElnuraAshimova to share she was featured in ‘Ecosystem’!
Do reach out to me if working on a product advancing one or more of the United Nations Sustainable Development Goals.
Start-up Go-to Resources
Fundraising Field Guide v1.0 - written by Seedcamp's Carlos E. Espinal to help early stage founders decipher and navigate the fundraising process. Order book v2 here
Building a consumer social product? The Dos and don'ts of beta testing (and raising) off a testflight
Valuations - or negotiating the economic terms of a VC deal by Fred Wilson (Founder and Partner, Union Square Ventures)
What are the qualities of a great founder - and how to become one? - tips from Reid Hoffman (video lecture and transcript)
How to raise money from a VC? - a must-read article by A16Z's Scott Kupor on whether to raise venture capital; and if so how much?
Navigating the PMF journey - a mental framework as described by Bessemer Venture Partners' Adam Fisher
How investors use growth ideas to evaluate startups? A must-read resource by A16Z's Andrew Chen (that helped him land the role at the firm!)
The MVP framework - measuring and proving user retention Fundraising 101 : what do early stage investors look for, what makes a business VC-backable and how to approach fundraising - tips from Reshma Sohoni (Co-Founder and Partner, Seedcamp)
Creating effective slide headlines for your deck - a guide by Hustle Fund Co-Founder, Eric Bahn
What is a pre-seed round and how to raise one?Thank you for reading another ‘Ecosystem’ newsletter! What feedback do you have for me (likes/dislikes)? I would greatly appreciate if you share this with contacts (founders, tech operators & investors) who may find the content helpful🖤 Connect with me on Twitter