Let’s Start Up - Issue 37 | A Year of Learning 📝
POV: You're a founder building a startup
Hi there 👋 Welcome to Let’s Start Up a newsletter, curated by me, Janine Sickmeyer, a tech founder turned investor. Follow me as I share startup tips, industry news, founders you should know, and investors putting their money where their mouth is.
What's In This Issue 🗞
A brief look into what you'll be reading about
A study about machine learning & investment decisions
What I learned after a year in VC
Two women building amazing consultancies
Advice for founders
What's On My Mind 💭
I’ve been thinking…
I’ve been a venture capitalist for a year.
Being an Emerging Fund Manager (EFM) is a lot like being a founder. Days are spent pitching, meeting with potential investors in the fund, and going over financials & term sheets. But the best part is meeting with founders and investing in the next generation of entrepreneurs.
My first year as a venture capitalist was challenging, but it was incredibly rewarding. As 2x founder and angel investor, I came into the world of venture capital without any direct VC experience. I implemented many of the strategies I learned as a founder in my career as an EMF. But that doesn’t mean I didn’t hit roadblocks or make mistakes.
After a few mistakes, hundreds of meetings, and tons of advice later, I learned a lot about running a venture capital fund. I better understand the market, Overlooked Ventures’ deal flow, and where we can provide value even better.
As a leader, entrepreneur, and investor, I know that all of this is normal. Part of being in this industry is being able to adapt and learn as you go. I’ve been transparently sharing my journey as an EFM since the beginning, and to reflect on my year of learning, I wrote about it on Medium.
By writing this post I hope to show aspiring VCs and emerging managers that it’s okay to hit roadblocks and learn as you go. 💥
What I’ve Been Working On 💁🏻♀️
Things I care about that I want to share
Venture capitalist investment decisions can be studied by machine learning.
I received an email from Victor Lyonnet, Assistant Professor of Finance at The Ohio State University who shared a paper with me that he co-authored with Lea H. Stern of the University of Washington. The title of the paper caught my eye: Venture Capital (Mis)Allocation in the Age of AI. In this study, a large administrative data set of French entrepreneurs (some of which are VC backed, others non-VC backed) is used in algorithmic predictions to determine the most promising investment opportunities. The paper found that VCs invested in “firms that perform predictably poorly and pass on others that perform predictably well.” Why? VCs will “select entrepreneurs whose characteristics are representative of the most successful entrepreneurs (i.e., characteristics that occur more frequently among the best performing entrepreneurs relative to the other ones).”
In Summary, the findings are as follows (taken from the paper itself):
VCs appear to be biased towards male entrepreneurs
VCs do not always select the most promising entrepreneurs
VCs tend to overweight gender, education, optimism, startup experience, industry, and location, which results in prediction errors
You can read the paper yourself here.
One year after starting a VC fund, here’s what I learned
I’ve been a venture capitalist for a year. In 12 months, I’ve learned a lot about myself and venture capital. It hasn’t all been a walk in the park, but being General Partner at Overlooked Ventures has been incredibly rewarding. Read this Medium post to see my reflection on the last year and Overlooked Ventures’ refined thesis.
Speaking for what I believe in
I used to REALLY dislike public speaking, that is until I started speaking about what I believe in. I’ll be talking about the following topics at upcoming speaking events
Finding the founders of tomorrow
Increasing diversity in VC
Investing in historically underrepresented entrepreneurs
Recently Hit the Stands 📰
Things in the news you should check out
My “Why” in Venture Capital: An Overlooked Founder for Overlooked Founders
Katherine Shiao, aspiring VC and recovering founder at VillaVox.com, wrote a piece on Medium about making the leap into venture capital. As a founder who also happens to be a woman and a person of color, Katherine noticed while pitching for VillaVox that the startup world is still a boy’s club. She stated that there is still more work to do and she will be an investor, who was an overlooked founder herself, that invests in overlooked founders.
VC Funding To Black-Founded Startups Slows Dramatically As Venture Investors Pull Back
In the second quarter of 2022, venture funding for Black-founded startups was $324 million. This number is a steep drop from previous quarters. Although last year set a record for the dollars invested in Black-founded companies, these founders are getting far less disproportionally. Read this Crunchbase article for the funding statistics and percent of U.S. funding that Black founders are receiving.
Motley Fool Ventures' Ollen Douglass Breaks Down Some Keys To Venture Capital For Black Founders
Managing Partner of Motley Fool Ollen Douglass gives insight on the keys to fundraising, and trends in venture capital (VC) that Black founders should tap into on an episode of Black Tech Green Money. Learn more about Ollen Douglass’ predictions for the Future of VC on Black Tech Green Money.
Base10 and Vista Equity Partners’ are partnering to support historically Black colleges in growing their endowments and preparing students for jobs in tech. HBCU endowments have been restricted by outdated guidelines, making it harder to invest in venture or private equity. Base10 and Vista Equity Partners are working to direct the HBCUs to black-led and managed funds.
Women are swimming against the current of Europe’s VC flows, HSBC has launched a $1B fund to help
The British Bank HSBC launched the Female Entrepreneur Fund has launched the Female Entrepreneur Fund, a $1B lending fund for women-led businesses. In Europe, there is a lower level of entrepreneurial activity among women compared to other parts of the world. This initiative by HSBC aims to change that.
Fearless Fund’s Arian Simone on why a downturn is business as usual for minority founders
At the Embrace Ambition Summit hosted by the Tory Burch Foundation, Arian Simone, co-founder of the Fearless Fund, spoke on stage about the current state of the market. She remarked that diverse “founders are used to weathering harsh economic conditions due to systemic barriers that have already excluded them from fundraising.” The pool of capital might be at its lowest, but diverse entrepreneurs haven’t had a fair chance to begin with.
SoftBank’s Vision Fund Deals Show Slowing Pace, Smaller Rounds
Last month, SoftBank announced that they had a $27.7 billion loss on their Vision Fund and will be more conservative on investments moving forward. Although SoftBank announced this just a month ago, CrunchBase data shows they started slowing down in Q4 of 2021.
Introducing Kauffman Fellows Class 27
Congratulations to the 59 investors accepted into the Kauffman Fellows Class 27. This group represents 18 countries and is 47% women and 51% POC. A global network, Kauffman Fellows is made up of 6 continents representing over 670 VC firms. This class is 56% U.S. domestic and 44% international. Meet the group in the Kauffman Fellows 27th class!
Venture capital firm Sequoia created a 52-page slide presentation with risks for startup founders forging ahead during a downturn. The firm doesn't expect a quick-fix solution as it urges startup founders to preserve their cash. However, Sequoia partners do believe after a steep correction, the industry will see a swift V-shaped recovery.
Substack Drops Fund-Raising Efforts as Market Sours
Substack, yes the platform I use to send out this newsletter, has abandoned its plans to raise a $75 million to $100 million round (for now). Substack is an alternative to established publishers that gives writers a fairer share of the revenue (if charging paid subscriptions) In 2021, Substack was said to have $9 million in revenue and was valued at $650 million last year after closing a $65 million round.
Lack Of Investment In Women-Founded Startups Is A Missed Opportunity
The male to female entrepreneur ratio is 10 to 7, according to the Global Entrepreneurship Monitors. The funding gap is even larger. Because of this gap, investors are missing out on a trillion dollars. The case isn’t that there are just fewer women interested in entrepreneurship, it's that it’s harder for women to raise funding. Read this article from Karim Nurani for more on the founder experience for women.
Making room at the cap table: A new plan for promoting diversity in tech
Women, African Americans, and Latinos respectively comprise 33%, 8%, and 7% of the total tech workforce and just 20%, 5%, and 5% of its leadership. There isn’t enough diversity in tech, but we can work towards an improvement by starting at the cap table.
A Little Birdie Told Me 🐦
Tweet of the moment
Hot Take of the Week 🔥
Somebody had to say it
Founders You Should Follow 👀
Keep an eye on these founders making moves
Adrienne Sheares | ViviMae Labs
Adrienne Sheares is the Owner of ViviMaie Labs, Director of Social Media & Content, a Digital Strategist, and a Content Creator. An award-winning social media marketer, Adrienne leads ViviMae, a social media consultancy with clients across non-profit, edtech, b2b, creative, and more. Adrienne has also been featured in Adweek, Cision, Sprout Social, The Washington Post, and more. Last week, Adrienne spoke at her HS commencement where she shared advice to the class of 2022 that will stay with them for years to come. Learn more about Adrienne and ViviMae Labs on the website!
Denise Hamilton | WatchHerWork
Founder & CEO of WatchHerWork, Denise Hamilton is a speaker and executive coach with 25 years of executive professional experience. WatchHerWork is the destination for professional advice for women, offering services to both corporations and individuals such as group coaching, inclusion strategies, digital courses, and more. Visit the WatchHerWork website to access hundreds of resources and to start learning from and working with Denise Hamilton!
Deadline to Apply 📆
Opportunities and events you don’t want to miss
Learn how to negotiate your first term sheet at TechCrunch Disrupt | Oct 18-20
Mandela SH Dixon (CEO, All Raise), Kevin Liu (director, Techstars Investments), and James Norman (CEO, Pilotly/general partner, Black Ops) are taking the stage at TechCrunch Disrupt to share their expertise with founders.
New on the Founders Library! 📚
Founder resources from Cobble
Welcome to the newest section of the Let’s Start Up newsletter! In this section, we’re sharing articles, downloads, and more from Cobble’s Founders Library. These materials are FREE, all you have to do is sign up for a Cobble account.
Article: 5 Things I Wish I Knew Before I Started My Company
If there is one word to describe the first year as a founder it’s ‘intense’. Any entrepreneur can tell you the rollercoaster of building a business is an experience like no other. The highs are incredibly high, and the lows? They’re enough to have you rethinking your entire life and business. Read this post for a few things our Content Marketer Tyshia Ingram wishes she knew before starting her company.
Article: How to Take Care of Your Mental Health as a Founder
It’s safe to say that no matter what kind of business you have, the industry you’re in, or the background you come from, being a founder is a uniquely challenging experience. The constant uncertainty, anxiety, and stress that come along with building a business can be a lot to manage. When you think about the mental and emotional rollercoaster of entrepreneurship, it’s pretty easy to understand why founders, in particular, are more likely to experience mental health challenges than other people.
Sign up for Cobble to get access to all of these resources and more (it’s free).
New Funds Announced 🚀
Recently launched venture funds
Pegah Ebrahimi and Wesley Chan debuted their $450 million funds and their venture capital firm FPV. FPV is investing in technology companies across all stages.
Founder Tips 🤔
What you need to know
If you needed a push, seed funds are open for business & talent is open for work. It’s a great time to tackle a meaningful problem, according to Ben Blumenrose.
Believing and doing everything everyone else is can lead to a mediocre personal life and career
Having hard conversations about equity, who makes the final decisions, and how you want to grow your team is necessary in the early days. Consider Mac Conwell’s advice of getting a 3rd party to help mediate.
Before You Go 🚪
What you might have missed
More people want parents at events!
Beyoncé’s new album is coming out soon and I bought too many of the mystery boxes.
Major shade from the CEO of Binance after Coinbase layoffs.
It is very risky to not invest in first-time fund managers.
A comment about the state of the market.
Bootstrapping founders are making MOVES. If people say it isn’t possible they're lying.
Always plenty of gold in each issue! Maybe I need to go through the old ones, but would love to hear more about your thoughts on the world of bootstrapping (especially given your experience on the other side of the aisle now!).