The UK has secured its largest dedicated pre-seed fund to date as Concept Ventures (formerly known as RLC Ventures) announces a £50m fund today. An impressive 80% of the fund’s LPs come from ethnic minorities and 18% are women. Pre-seed investing has dwindled in recent years, so are investors finally giving the early stages some love?
Where will the Concept money be spent?
- Concept will invest between £100,000 and £600,000 in more than 60 pre-seed stage startups, making it likely to be the first institutional capital these companies will raise.
What kind of startups and founders does Concept want to support?
- Concept wants to come back future of work companies, video games and game companies, and learning/improvement companies.
- Because the companies are at an early stage and there is still little data on their business, Reece Chowdhry, founder and general partner, says the fund takes a “personality-driven approach” to choosing investments.
- The Concept team has identified six qualities of successful founders, including openness to new experiences, that you look for. The company collects data points on founders throughout the investment process through a combination of surveys, interviews, and referrals. “Ultimately, this approach helps us build a holistic view of a founder’s personality, rather than using a ‘gut feeling’ approach that venture capitalists are known for,” Chowdhry tells Sifted. “This is not the only driver of our investment results, but a tool we are using to bring more data-driven insights to a key component of decision-making.”
Who supports Concept Ventures?
- The British Business Bank, the UK’s economic development bank, has committed £30m.
- The fund’s LP (limited partner) base is also made up of 80% ethnic minorities and 18% women. 70% of LPs are founders.
- Chowdhry says that being from an ethnic minority himself helped the team grow from a diverse base of LPs. “It was a combination of my own network and actively going after these people, particularly successful UK founders from ethnic minorities who haven’t had much exposure to the venture space.” He says many of these LPs come from traditional industries like health care and real estate and now want exposure to technology.
What is Concept’s track record?
- The fund was founded in 2018 as RLC Ventures.
- Fund I portfolio companies include corporate gifting platform Reachdesk, live video streaming pioneers Condense and financial education platform for women, you juno. They had two exits in the last two years, including Cliff.ai, which was acquired by Index-backed Gtmhub for an undisclosed price.
- As of 2021, 35% of the fund’s money went to minority demographics and 52% to founders based outside of London. 23 pence per pound invested went to women.
The pre-seed market
- Despite record funding from European startups in recent years, founders say the early stages can be the hardest to come by. Pre-seed investment decreased by almost 50% between 2016 and 2020.
- Most pre-seed investments are made by venture capitalists who also invest in later stages. Chowdhry says this is a problem because it means venture capitalists are writing “option checks”: they can invest more later if the company does well. “We don’t have VC as LP in the background. We want to side with our founders in the next round,” he says.
- Apart from Concept, it seems that there are investors who realize that the pre-seed needs some love. Octopus Ventures Announced a £10m dedicated pre-seed fund in June. Cocoa Ventures, also announced earlier this year, is investing in pre-seed and write checks from $150k-500k.
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Given the dearth of pre-seed targeted funds, it is encouraging to see a targeted fund coming out of the UK, Europe’s most mature market in terms of fundraising.
Concept is also something to keep in mind because all of the team members do not have a VC background. That puts them in a new class of emerging VCs in Europe led by everyone from former founders and operators people from other areas of finance and youtube stars. These funds are betting that their operational and industry experience will give them an edge over traditional venture capitalists since the founders want more than just money: They want everything from marketing support to hiring advice.
Eleanor Warnock is Deputy Editor of Sifted and co-host of The Sifted Podcast. She tweets from @misssaxbys