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fundraising

ZebethMedia wants to hear Black founders’ stories of VC fundraising • ZebethMedia

On Friday, ZebethMedia reported the latest Crunchbase venture capital data, and the news isn’t very good from a diversity point of view: Black founders raised a paltry $187 million out of the $150.9 billion in venture capital allocated in Q3 this year. To put that into perspective, that’s only 0.12% of the total investment made in the quarter. The story launched a conversation on Twitter about the current state of venture funds for Black founders. It unearthed pain and heartbreak, but it also brought to light the resilience of founders and investors who still have their hearts set on change. It also surfaced the reality that the powers that be — most, if not all, of the rich, white men, LPs and institutions with outsized power — are sticking to their old habits instead of doing much to truly bring about change in how venture capital is invested. One way to hold folks accountable is to keep openly talking about inequities. This is one reason why ZebethMedia has decided to create a forum for Black founders to — anonymously or not — submit their open, honest experiences of what it is like to fundraise for their startups today. We want to hear what investors still say to you behind closed doors. We want to know how often you’ve had to codeswitch, and what the anxiety levels are still like when walking into certain rooms. We want to know the good parts, like who are the allies, but also the bad parts, like who are the bullies. We acknowledge that this is not a new conversation, and there is much fatigue in constantly having the same conversations. But, it’s important to hold on, as there is much work to be done. The questions are below (click the form and scroll). Answer what you wish, as you wish; you can name names, or not. Please try to answer with a paragraph or 2-3 sentences and provide explicit examples where you can. We will publish many of the responses by the end of this year. Thank you for your help!

Operator Collective was early to bring on operators as LPs. Now it’s doubling down

When Operator Collective started in 2018, its idea of cultivating a community of operators as LPs to serve as a resource to its portfolio companies was unique. Now, it’s de rigueur as many firms build out their operator teams. But Operator Collective looks to prove that its model still rises above the rest with its second fund. The San Francisco-based organization raised $92 million for its second fund to invest in early-stage enterprise companies. The fund was backed by an LP base of 152 operators, in addition to a few institutions, and comes three years after the firm raised $51 million for its first fund. Operator Collective founder and CEO Mallun Yen said while there are a few changes for Fund II, the goal and structure are largely the same: Creating a community where startups and operators can help each other. Yen, a former operator (defined as someone with experience building a company) herself, got the idea for the model back in 2018 when she realized a gap in the market. She had sold her startup and wanted to potentially make some investments, but she didn’t think she had the right network to do so and wasn’t really sure where to start. Then it clicked: She realized she was likely not the only operator who had money to invest but not enough to write meaningful angel checks or have the time to vet potential investments. She decided to pitch her idea to Erica Schultz, whom she considered to be her target demographic. Schultz was working as the chief revenue officer and head of go-to-market at New Relic at the time. For Schultz, the pitch sounded perfect. “I was a busy operator. I didn’t have time to really diligence companies on my own,” Schultz said. “Once in a while a few came my way but the ability to invest through a fund specifically into enterprise tech was super attractive to me.” But Operator Collective will be deploying Fund II in a very different environment than Fund I. Having operating partners or teams of operators has become almost table stakes in recent years, and many firms now look to raise LP capital from operators, too. Yen thinks that their model still rises above because of its intentionality. “This was not build and then build a community,” she said about how the model differs from older firms changing their strategy. “We tore apart the venture model and built it from the bottom up to be optimized for operators. It’s not as afterthought. It’s front and center with Operator Collective.” She said that unlike other firms that maybe have one retired operator who was a CMO or one person just focused on hiring, Operator Collective’s network has multiple professionals from each area with a focus on underrepresented operators. Yen said this allows portfolio companies the chance to get access to an operator better suited to their company, and operators get to be involved without being overwhelmed. Fund II also includes a pilot program of 25 LPs that are all earlier in their career, which Yen said has seen great traction thus far. This type of model allowed operators to bring in deal flow while also helping diligence companies and has even fostered some members to join startups in C-suite roles. In a world where advice for founders comes from all angles and seemingly everyone is a an expert, Operator Collective thinks the connections it can foster between its portfolio companies and operator network can cut through the noise and keep its relevance as more firms look to offer a similar value-add. “I think what’s been super exiting is the reaction from the entrepreneurs and the market,” Yen said. “The feedback is not only that Operator Collective is incredibly valuable but brings so much advice to the table for entrepreneurs. It’s also really rewarding for them to tap into a diverse set of operators on their cap table and get to know a really diverse set of talent.”

Finding an exit from the ‘messy middle’ • ZebethMedia

Eric Tarczynski Contributor More posts by this contributor University entrepreneurship — without the university To predict what 2023 will look like for venture capital, we need to start by understanding where we are now. We’re entering a messy middle where prices continue to drop and the “2021” deal, industry slang for an investment made at an exorbitant price, is long gone. Companies can no longer raise $5 million to $10 million seed rounds with nothing but a deck and the assumption that revenue multiples will skyrocket beyond historical norms. The VC landscape has started to bifurcate, and it will continue to do so during 2023 both for fundraising and investments. Fundraising: A tale of two worlds Even though the best vintages originate during downturns, it’s difficult to allocate to something you’re already substantially overexposed to. In 2023, we will see two worlds emerge. The companies with the best talent, products and positioning will command capital at normalized market prices, and everyone else will experience a depressed market. Due to the Fed’s rate hikes and geopolitical tensions, the macro environment has slowed and inflation hit record levels. Investor confidence is down across the board and growth rounds are largely dead on arrival, with both seed and Series A valuations down by 30%-50%. It’s now questionable to pump money into a company that doesn’t have the traction to back up its worth. But this doesn’t mean all deals are off. Venture firms still have tens of billions of dollars to deploy, but they’re more hesitant about doing so now — growth, in particular, is experiencing a hanging-around-the-hoop effect that is likely to linger as the overall macro environment stays depressed.

Top climate tech deals net nearly $4B in Q3, outpacing other industries • ZebethMedia

Climate tech wrapped a strong Q3, landing three of the top four equity deals, including the whopping $1 billion Series A raised by fleet charging startup TeraWatt. While the broader market might be cooling, climate tech continues to be a hot ticket, with investment figures for top deals in Q3 outpacing the two previous quarters this year. In total, five climate tech startups made CB Insights’ top 10 equity deals list in Q3, pulling in a combined $3.7 billion. That far exceeds last quarter’s $2.5 billion across eight top startups and Q1’s $1.4 billion across five top startups. Top climate tech investments continued to diversify, too, showing just how deeply it’s becoming embedded into the economy.

Supliful’s $1m deck • ZebethMedia

I don’t typically critique decks for fundraises we didn’t cover on ZebethMedia, but for Supliful, I had to make an exception because it’s a company that solves a spectacularly interesting problem. Consumer packaged goods companies can churn out products all day long, but marketing is an expensive challenge. Creators produce content all day long but don’t always have an easy way of monetizing their traffic. Of course, creators have access to affiliate marketing and/or promoting goods on behalf of brands, but Supliful comes along with another option: the ability to use their brand to promote white-labeled supplements and health products. Men’s Journal breaks down the simple genius of the business model, and TechRound has an interview with the founder that dissects the details of the company, its founder and its formation. Supliful also claims it raised $1 million with a really interesting deck, which was the thing that got my little ears to perk up. Plus, it was remarkably frank with its numbers and slides, without any redactions. Let’s dive right in. We’re looking for more unique pitch decks to tear down, so if you want to submit your own, here’s how you can do that.  Slides in this deck This is one of the best decks I’ve ever seen, despite being butt-ugly and riddled with mistakes. On the first click-through of the deck, I couldn’t get past the fact that it is laden with typos and the design is god-awful. But after leafing through it more carefully, I reminded myself of my go-to golden rule: People are willing to suffer bad UX for good content, but they won’t suffer great design for bad content. This 22-slide deck ain’t perfect, but it’s a great example of how a company can use storytelling to make a point. It also uses a few slides I see very rarely in slide decks (financial levers and predicates, to mention a couple) that are used to great effect here. Cover slide Case study teaser slide Problem slide Solution slide Market size slide “Why now” slide  “How it works” — product slide  Financial levers slide  Inside sales/market growth slide  Case study slide  Metrics slide  Competition slide  Predicates slide  Team slide  Investors slide  Financial projections slide  Use of funds slide  Contact info slide  Interstitial slide: Appendices  Appendix: Suppliers  Appendix: Adjacent market opportunities  Appendix: Creator growth Three things to love This deck — design and typos notwithstanding — is extraordinary, and I’m unsurprised that Supliful raised money successfully. There’s a lot to love, but since there are a few opportunities to do so, I want to celebrate the more unusual slides that work really well. Financial levers slide High-quality founders understand what the financial drivers are in their company. I’m particularly passionate about this, and essentially, what it boils down to is “if we spend 5x more here, we get 15x more revenue over there,” or “if we spend 2x more on this aspect of product development, we cut time-to-market by a fifth.” Knowing how these things hang together is crucial. I explored that more a few years ago: Supliful has a whole slide that shows that it has a deep understanding of what it needs to do to get where it wants to go: [Slide 8] Financial levers. Image Credits: SuplifulThis slide is deceptively simple, but it does a few things: It shows that in the next 18 months, the company wants to hit $4 million of gross merchandise value (GMV). That’s what the industry refers to as a BHAG — a big hairy audacious goal. But it’s not just wishful thinking; Supliful explains that it knows how to get there — get average markup to a third. Ensure they get 5% commissions on storefronts. And roll out a subscription plan for creators. For people in the CPG space, those numbers will seem not just reasonable, but eminently achievable. The psychological effect of this slide is, “Well, I believe this company can pull this off.” This slide clearly shows what drives the growth and evolution of Supliful, and that’s a lesson startup founders should note. If you can’t elucidate how you’re going to hit your goals, is that because you don’t fully understand or because there’s some complexity you haven’t cracked yet? Super clear ask slide [Slide 17] This is how you do an “ask” slide, folks. Image Credits: SuplifulKinda similar to the above, but instead of talking about the specific goal, which is related to understanding the financials within the business, this slide discusses how much the company is raising and what it can accomplish when it does. It does two things beautifully — it breaks down how much Supliful is raising and shows what the money will be spent on. These are classic SMART goals: The company is promising 4,000 active creators, an education program, 15 suppliers and testing capabilities, and automation tools to make selling more efficient for creators, all for $2 million. It’s clear, and it’s easy to measure whether the company is on track. For startup founders, the takeaway here is that clarity sells really well. There’s no doubt what the company is promising. My favorite is that the goals are distinctly defined. This isn’t “we will get some more creators,” it is “we will get 4,000.” This isn’t “we will engage with some food suppliers,” it is “we will find 15, and we’ll come up with a testing lab to ensure that what we’re selling is actually living up to its promises. ChefsKiss.gif. Predicates! Yaaaaas! [Slide 13] Let’s talk predicates. Image Credits: SuplifulAs a startup, you’re occasionally caught between a rock and a hard place; yes, you want to upend a market and change something significant, but when you do, how do you know that the customers want what you’re flogging? A great way of telling this part of the story is by using predicates — relatable examples in adjacent markets — that show that what you are doing might be possible in your market. Supliful picked print-on-demand services. Creators,

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