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As we get closer to the end of the year, I thought it would be a good time to catch up with a few people who kept a close eye on deal flow in 2022 and look for indicators of what might be coming in 2023.
On a side note, this newsletter is going on a break until January 7, 2023. Thanks a lot for reading me since I took over from Alex back in May. I look forward to writing more dispatches in the New Year! — Anna
An update on deal-flow newsletters
I wrote a piece in May about deal-flow newsletters, whose goal is to help investors discover interesting startups without leaving their inbox. In light of how the global market for startup investment has changed — dwindled — in 2022, and how media companies have struggled, we were curious how the projects we learned about earlier in the year were doing. So we checked in, chatting with the founder of deal-flow newsletter PreSeed Now Martin SFP Bryant.
He shared the following updates:
- From the start of May to the start of December, PreSeed Now has profiled more than 50 early-stage B2B and deep tech startups from around the U.K.
- It’s driving deal flow. Many startups report getting interest from tech investors as a result of the coverage. Startups have also recruited staff and gained additional media interest as a result of being featured.
- In terms of actual investments generated, that is a bit harder to measure at this stage, but I’m going to conduct some research into this as we approach the newsletter’s first birthday in May 2023.
I will keep an eye out for any numbers that PreSeed Now may share next May, as well as for another experiment it started — member-only discussions using Substack’s recently released chat feature. (Members are what Bryant calls paid subscribers.)
Shortly after launch, Bryant said, he adjusted his model so that free subscribers would still get a short version of every newsletter. In 2023, the focus will be about building on 2022’s achievements with a greater focus on monetization.
Meanwhile, Spanish deal-flow newsletter Vermú passed the 5,000-subscriber mark in June, closing out 2022 with 5,332 subscribers and 66 startups presented to date. Its co-creator, Aitor Rodríguez, also shared interesting comments with me on some things he and co-founder Víctor Ramírez have noticed:
- Business angels are finding it harder to invest in early stages; the euphoria that was there at the beginning of the year has disappeared.
- Startups are thinking twice before going for a round; the amount of deal flow that comes to us has dropped considerably. That said, we continue to bet heavily on what we do, and our opening rate shows that the interest is there.
Vermú has shared metrics publicly since its launch, and its transparency page does show that its click-to-open rate fell below 30% only once this year. Tellingly, this was fairly recent, an unsurprising result given a global venture capital slowdown, but Rodríguez doesn’t sound overly concerned with monthly ups and downs, emphasizing his view that “Vermú is a very long-term initiative.”
Uptick in new businesses
There are reasons to think that the deal flow trough might not last — music to deal-flow newsletters’ ears, we’re sure. While existing VC-backed startups are wary of potentially raising down rounds, new companies are being created at a growing rate.
Stripe CEO Patrick Collison provided interesting data points in a recent tweet, noting that Stripe Atlas incorporations were up 90% year on year in November 2020, roughly flat in 2021, and up another 54% year on year in November 2022.
Stripe Atlas is the offering that the fintech company launched in 2016 to make it easier for anyone to incorporate a new company. According to Stripe’s product lead, Jeff Weinstein, it is responsible for some 10% of all new Delaware C corporations, “on the order of 10,000 per year.”
Stripe Atlas’s data volume is big, but is its trend skewed? It doesn’t seem so: As Cambrian VC founder and general partner Rex Salisbury noted recently on Twitter, “shockingly, business formations have remained permanently elevated following [the] pandemic.”
It may seem surprising to hear that a growing number of businesses have been created in the U.S. in recent months. But it is also one of the most encouraging pieces of news as we near 2023.
When even a company like Stripe is enacting layoffs, it cheers me up to know that former employees everywhere are starting new businesses — and may also get support to do so. If that’s your case, feel free to drop us a line. We wish you all the best with your new endeavors!
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