Issue #1 - Unicorns, opportunities and funding gaps (September 2021)
Hello 👋 and welcome to the very first issue of Playbook Deal Flow!
Before we get into it, I just wanted to say a big thank you for joining and supporting this new newsletter.
I also wanted to share why I believe it’s important for this newsletter to exist.
When I think back to my own experience as a founder with StageLabel, I remember how limiting it was having no networks in place and also how much tunnel focus I had on the business with no context on what the baseline of what “great” looked like in a number of areas.
Similarly, over the last few years I have had plenty of friends both in and outside of tech that want better access and insights into interesting startup companies.
That’s why this newsletter is focused on 3 main outcomes:
Speed: Help founders to scale and speed up the process of finding their supporters/angels that can help them on their journey
“A rising tide lifts all boats”: Through transparency and better access to information on both sides of the table, we can help lift up the Australian startup ecosystem
Pathways: Create an easier pathway for those interested in angel investing to get started
If this sounds like something your friends, family, coworkers etc would be interested in, I would love it if you could share this newsletter with them 🙏
I should also remind you that nothing in this newsletter represents any form of financial or investment advice! This newsletter is all about joining the dots. If you would like to explore opportunities presented in this newsletter, I recommend speaking to a lawyer/accountant. Happy to help connect and make intros here if needed :)
Without further ado, let’s get into Issue #1 of Playbook Deal Flow!
The Deal Room:
Every month I’ll share details of a few companies that are currently fundraising. If you would like more information or want to connect with the teams, hit the “request an intro” button…I always do double-opt in intros…
Here are the companies selected for Issue #1 👇
Upflowy
🤔 The Problem: The top 1% of high growth companies create highly effective and optimised customer acquisition funnels, but the majority of businesses rely on single page forms, basic email retargeting and are often hampered by engineering resources they can devote to this problem.
From a call to action to an eventual qualified lead, there’s is an average 63% drop off which is the equivalent to 25% of a company’s spend.
🙌 The Solution: Upflowy solves this with a no-code engine to build personalised users flows & increase conversion through A/B testing.
🔑 Key Team members: Guillaume Ang (Co-founder): CEO of ex-Rocket Internet company ShopWings with CEO, 10+ years leading startup growth in Europe, China and Australia.
Alexandre Girard (Co-founder): Ex-Co-founder of Liftango and ex-project lead at Newscorp.
Matt Browne (Co-founder): Exited CEO (Donesafe), Co-Founder of YC Alum Whispli, Angel investor in 50+, Venture Partner at Antler and Managing Partner at Black Nova VC
🚀 Traction: Upflowy launched on Product Hunt on the 9th of September and hit Product of the day and Product of the week on the platform…not a bad achievement considering competition with YC companies launching at the same time!
Within 2 weeks achieved 21,000 page views, 5200 uniques, 1700+ upvotes, 500+ accounts, 70+ reviews and 50+ paying customers.
😇 The Ask: Previously raised $800K pre-seed round. Currently raising $3M seed round
HANK:
🤔 The Problem: Data is extremely valuable, yet most small businesses don’t have the resources or capabilities to find meaningful insights from their data.
🙌 The Solution: HANK’s data driven commerce platform offers affordable and accessible tools to help businesses leverage and unlock the value of their data.
🔑 Key Team members: The HANK team were previously a product development studio that specialised in developing Machine Learning applications for business. Their clients included Uber, Hoyts, Kmart and many other companies.
Alongside their team of specialists product managers, designers and engineers along with highly qualified scientists and statisticians, they have also built an advisory board comprised of the Ex COO of Metcash / CEO of IGA, The head of IBM Cloud Australia as well as experts in in-store optimisation.
🚀 Traction: The company is currently pre-revenue, but is running a pilot in 20 independent supermarkets across Victoria. Pilot’s have been operating successfully and expected average value of customer will be $900/store/month
😇 The Ask: Raising $2M pre-seed round of funding with $500K already committed from pilot customer.
Alariss: (Our first international startup 🌎)
🤔 The Problem: Global expansion is expensive, painful, and full of legal and regulatory pitfalls. On top of that, hiring is challenging enough without adding on cross-border difficulties
🙌 The Solution: Alariss helps companies all over the world quickly find, hire, and pay American sales talent in order to expand into new markets. Alariss builds companies’ remote go-to-market teams in the US from day one. Setting up a remote US branch office can take days instead of months or years and the remote salesforce can begin generating leads and eventually closing deals immediately.
🔑 Key Team members: The CEO, Joyce, was the first employee and VP of Sales and Business Development for Human Interest YC S15, now valued at over $1 billion, where she built their repeatable sales process and recruited the initial teams. She is an expert in global expansion, helping launch Groupon in China and cross-border initiatives for the World Bank in East Africa.
The CTO, Nick, is the former co-founder of Verdiq, a machine learning platform for social polling, and an experienced developer as well as former US diplomat. As a diplomat, he was tasked with advancing economic negotiations, foreign investments, and international entrepreneurship initiatives, including allocating STEM scholarships for hundreds of emerging market students and organizing the Global Entrepreneurship Summit (GES).
🚀 Traction: Over 185 clients are currently using Alariss
😇 The Ask: Previously raised a seed round led by General Catalyst. Now raising their Series A and looking for companies expanding to the US.
The Memo:
Each month, I’ll go a little deeper into one company and I’m very excited about our featured company this month is Glow.
Glow is a fast-growing B2B SaaS company that has managed to stay under the radar as they have built an incredible business over the last few years.
In 2013, Tim Clover (Founder & CEO of Glow), left his role as a Director of PwC and wanted to take his experience in building data capability and insight solutions for large retailers and big banks, to solve the challenges that businesses face around market research.
Specifically, he wanted to take something that often requires lots of specialised experts and time to do effectively, into something that was easier, quicker and more accessible.
And that’s where Glow was born, a best-in-class online research platform that enables better decision making, fast.
After raising some money in 2014 to get started and signing up Target as their first customer, the business has been on an incredible trajectory since then, landing large brands such as Schweppes, Pepsi, Puma and Bain & Co as some of their Enterprise customers.
The business operates on a fully breakeven basis and has been growing ARR at 100% YoY for several years, and on track to deliver this impressive growth again in 2022 (despite market uncertainty). They've seen demand for their platform shift to the global market in recent years, with growth in revenue from overseas-based clients growing from 5% in 2018 to over 40% in 2021.
With current offices and team members across Australia, Hong Kong and London, the next stop for Glow is the US as they look to tackle the $2.5B global online market research market - a market which continues to grow as more use cases become feasible (and then the norm) via tech like Glow.
The leadership team comprises experts in the space with decades of experience across a range of disciplines. Their ability to attract experts to the team such as Matt Houltham (former CEO of Havas Group) as their CMO and advisors such as Lachlan Donald (Former Co-founder & CEO of Buildkite) to their growing advisory board demonstrates the culture and mission they are building.
Despite their ability to continue growing 100% YoY on their own steam, they are considering raising a Series A funding round with the right set of investors to join them on their journey and help them expand to meet the opportunity they've created.
They are also open to meeting with any potential future hires, team members, partners, advocates and advisors, so if you would like to connect, request an intro below!
The Folio:
September has been a record month in the Australian tech scene with over $1B (more specifically $1.054B) in funding for Australian startups!
Data sources, especially around early stage funding, is hard to come by but this month there were 24 funding announcements that took place.
A full list of these funding announcements is available here, but I wanted to share a few interesting insights from the data points that were made available.
1) The big opportunity in early stage funding
Despite 41.7% of the deals being done in Seed stage, only 5.3% of funds were allocated to this segment.
This is obviously skewed by the 3 x $200M+ rounds for Canva, Airwallex and Scalapay this month, however it is interesting to note that by comparison data according to the Global VC report states that roughly 30-40% of all global venture investment is focused on the “Angel/early-stages”. (Source)
This month may be an extreme case, but has been generally representative of the lack of early stage (pre-seed and seed) funding available for founders.
This is a by-product of Australian VC’s raising significantly larger 2nd, 3rd and 4th Funds, allowing them to double down on great companies that are seeking later rounds of capital.
Given the Power Law distribution of returns that the VC model is built on, this is a great approach for these funds, but it also means that there is a missing piece (and opportunity) for early stage investment in Australia.
It’s great to see a number of funds and syndicates such as Black Nova, Ten13, Tidal VC and Flying Fox Ventures among many others having a dedicated focus at filling this early stage funding gap!
2) The valuation gap
The stages of investment seem to get murkier all the time, but based on the listed stages on the 24 investments this month, the average cheque was:
Seed stage investment: $5.58M
Series A investment: $44.64M
Series B+ investment: $97.9M
The range between the lowest and highest cheque size was:
Seed stage investment: $1M to $16M
Series A investment: $3M to $210M (wow Scalapay 👀 )
Series B+ investment: $5.3 to $275M
What is interesting to note through these numbers is how they differ when we separate out the companies in each stage based on whether they have a female Co-founder or are an all male team…I have to warn you that the differences are stark 😲
5 out of the 10 (50%) seed stage funding investments had a female Co-founder this month…but all 5 of these investments were in the bottom 6 investments by quantity at this stage. If you separate these companies out, the average seed stage investment for a female Co-founded business falls from $5.58M to just $2.28M (a 59.14% drop). Comparatively, the average seed funding amount for all male teams jumps from $5.58M to $8.88M.
Unfortunately that difference is even more stark when looking at Series A investments. Out of the two female led businesses that raised a Series A funding round, one only raised a grand total of $3M…which was lower than the average seed round raised this month.
Separating this investment out from the average $44.64M raised at the Series A stage this month, the average drops to $14M for female led businesses which represents a 68.64% decrease.
If considering both Seed & Series A stage investments together:
7 female Co-founded startups raised a total of $39.4M
9 all-male co-funded startups raised a total of $328.9M
Again, we are working with limited data in just looking at funding data from 1 month, but according to Techboard’s Female Founder Funding Report FY2018-FY2021, “Solely female founded companies, and to a lesser extent mixed teams, raised significantly less per round when compared to all male founding teams - Series A rounds are on average 66.8% smaller for solely female founded teams compared to all-male, Seed rounds were 63.3% smaller on average.” You can find the full report here.
I have also had conversations with 2 female founders raising capital in the last few weeks, advising them to increase the amount of funding they are looking to raise in their first/next round.
Clearly there’s an issue here and I would love to help. If any female founders are fundraising and want some help/advice or if anyone is focused on solving this issue, please reach out (rohit@startupplaybook.co)
Sidebar: I was planning on listing all of the funding deals in this newsletter…but it turns out that Substack has a word/length limit and I seem to have hit it 😬. Unfortunately that means I have had to put the links to all the funding announcements, broken down by segment on a notion page. You can find it here
The Stash:
As it’s our first issue, I wanted to share some blogs and resources that may be useful for angel investors:
📚 Books:
“Venture Deals: Be smarter than your lawyer and Venture Capitalists” by Brad Feld and Jason Mendelson. Link here
“Angel: How to invest in technology startups” by Jason Calacanis. Link here
📝 Blogs:
“Real life angel investing returns” by Yun-Fang Juan. Lifting the curtains on what returns for an angel investment portfolio looks like. Link to blog here
“Are you sitting at the right poker table?” by Mark Suster. It’s a great blog on the key aspects you need to be successful with Angel investing. Link to blog here
🎧 Podcasts:
If you are looking for some great insights from local VC’s and Angels, check out some of the interviews of The Startup Playbook Podcast. I’ve picked out a few for you below
Ep150 Rick Baker (Co-founder @ Blackbird VC) on culture, innovation and the “rule of no exits”. Link here
Ep151 Kylie Frazer (Co-founder & Partner @ Flying Fox) on term sheets, rolling funds and founder runway. Link here
Ep152 Alister Coleman (Co-founder & Managing Partner @ Tempus VC) on due diligence, focus and building multigenerational funds. Link here
Ep125 Adam Milgrom (Partner @ Giant Leap) on building your decision making muscle. Link here
Phew…that was a big first issue! Thanks so much for reading The Playbook Deal Flow and for making it all the way to the end.
I would love to hear from you to see how I can make this newsletter more valuable for you:
👂I would love to hear feedback on what you loved, what you hated and what you would like to see in future issues of The Playbook Deal Flow. If you have a spare 5mins, I would appreciate it if you could fill out this brief survey.
👋 Feel free to reach out if you want to connect. You can find me at rohit@startupplaybook.co or on Twitter & LinkedIn
❤️ If you enjoyed this newsletter, I would love for you to share it so others can benefit from this resource as well. Ps don’t forget to subscribe to this newsletter if you haven’t already!
See you at the next issue at the end of October!
Cheers,
Rohit Bhargava, Playbook Deal Flow