👋🏾 Hi friends!

Are you finding that Tuesday’s keep rolling around more often than would seem natural? Or is that just me 😬

This last week has been quite an interesting one as we continue to see things unwinding a little bit in the private markets, as some ventures continue to struggle in their fundraising activities.

But it's worth bearing in mind that this happens up the chain as well.

This data from Pitchbook shared by Maelle Gavet, CEO of Techstars on LinkedIn is pretty telling:

Nothing happens in isolation though - there’s pain throughout the ecosystem.

In this weeks download, I’ll be chatting about how WeWork became WeDone, my advice to a founder raising a pre-seed round right now and a deep dive into the VC landscape, its history, the major players, how they make money and more.

All of that will be followed by a look at what else has been happening in the world of tech and venture in this week’s Lowdown.

Remember, if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online - I’m very open to conversations.

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Now let’s get into it.

WeDone

In news of the “well nobody could have seen this coming” variety, WeWork came out last week with a warning that there is “substantial doubt” over their ability to continue as a going concern.

What that means is that after having ridden the manic highs of hubristic investment from the likes of SoftBank, where people managed to suspend belief and attribute tech like multiples to a real estate business, WeWork has continued to find itself facing reality.

Once valued at $47bn, its share price at the time of writing was a magnificent 18 cents (having bottomed out at 15 cents the day before), giving the beleaguered real estate business a total market capitalisation of $380m.

The company is blaming economic conditions and increased competition for its decline.

There’s no doubt both of those things will have had an impact, but not only were they once the market leader, they were also incredibly well funded with the world at their feet.

To continue trading, they would need to increase revenues, reduce capital expenditure and raise capital through issuance of further debt or equity (amongst other things).

I can’t help feeling that if the final nail does get hammered into the coffin to signal WeWork’s demise, it will be truly emblematic of the end of a weird period. I’m not quite sure how funding cult-like founders in hyped-up funding rounds with non tech ventures trading on tech multiples somehow became the norm.

How can did I add value?

A few weeks ago a friend of mine asked me to speak to a founder whose business he was considering making an investment into.

That’s a pretty normal ask, if I’m honest, but he didn’t give me a huge amount of information to go on - just that he felt that they might need a CFO.

So, after a bit of to’ing and fro’ing, I finally connected with the founder on a call.

I had read their deck and had some questions in any case, but wanted to hear their story as well.

The business is in a pretty traditional content vertical, and ever since the internet launched, it’s continuously been replaced with digital offerings.

But the specific proposition and type of content that they were looking to offer was interesting, and would almost certainly be attractive to individuals and advertisers alike.

The problems were:

• Whilst they had got the product to market, they had done no revenue in the last 7 months (more on that in a second).

• They were were trying to raise £1m.

They had also been working with some type of broker who had convinced them to put a metaverse strategy into their deck (which served their purpose more than the founder’s) and who had convinced them to go out looking for £1m.

They had also convinced them to stop generating revenue and focus on fundraising instead, despite the company having generated an ok amount of revenue in the previous year.

So here was my advice to them:

• They didn’t need a CFO, they needed someone who could give them some decent advice and nudge them in the right direction.

• Given they hadn’t thought about valuation themselves, I explained how difficult it would be to raise £1m on a tech valuation for a non tech business (flashback to WeWork).

• So, if they did manage to raise the £1m, they’d have ended up selling 50% of their business at least - if not more.

• Instead, focus on a much smaller raise, say £250k, where they could potentially raise on a rolling close with investors incentivised with SEIS.

• This way, if they were only able to secure a post money valuation of £1.5m (for talking sake), they’d at most have sold 16.7% of their business, not 50%.

• They could then work on delivering value that would allow them to raise a larger round down the track.

I was hopefully able to ensure that this founder didn’t waste a tonne of money and time pursuing an outcome that was difficult, if not unlikely, to achieve.

I wrote a short post on LinkedIn recently about the shady brokers that have come out of the woodwork recently preying on some founders’ naivety - and often desperation - as they struggle to raise in what seems to be a pretty tough environment. I also spoke about the reasons I don’t do this sort of fundraising for a fee work myself, so check that post out if you’d like to find out more.

If you are looking to raise and aren’t sure how to approach it, drop me a line in the first instance. Hopefully I’ll save you the pain of making some mistakes that’ll cost you big time in the future!