The UK has gotten its largest ever dedicated pre-seed fund, as Concept Ventures (previously known as RLC Ventures) announces a £50m fund today. An impressive 80% of the fund’s LPs are from ethnic minority backgrounds and 18% are women. Pre-seed investing has dropped off in recent years — so are investors finally giving the earliest stages some love?
Where will Concept’s money be spent?
- Concept will invest between £100k-600k in over 60 pre-seed stage startups, making it likely the first institutional capital that these companies will raise.
What kinds of startups and founders does Concept want to back?
- Concept wants to back future of work companies, video games and gaming companies, and learning/upskilling companies.
- Because the companies are early stage and there’s little data yet on their business, Reece Chowdhry, founder and general partner, says that the fund has a “personality-led approach” to picking investments.
- The Concept team has identified six qualities of successful founders — including being open to new experiences — which it looks for. The firm collects data points about founders throughout the investment process using a combination of surveys, interviews and references. “This approach ultimately helps us build a comprehensive view of a founder’s personality, instead of using a ‘gut-feel’ approach that VCs are notorious for,” Chowdhry tells Sifted. “This is not the sole driver of our investment outcomes, but a tool we are using to bring more data-driven insights to a key component of decision-making.”
Who is backing Concept Ventures?
- The British Business Bank, the UK’s economic development bank, has committed £30m.
- The fund’s LP (limited partner) base is also 80% ethnic minority and 18% women. 70% of the LPs are founders.
- Chowdhry says that being from an ethnic minority himself helped the team raise from a diverse LP base. “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 healthcare and real estate and now want exposure to tech.
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-streaming video pioneers Condense and female financial education platform, Your Juno. They’ve 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 had gone to minority demographics, and 52% to founders based outside of London. 23p per £1 invested went to women.
The pre-seed market
- Despite record funding into European startups in the last few years, founders say that the earliest stages can be the hardest to raise at. Pre-seed investment declined nearly 50% between 2016 and 2020.
- Most pre-seed investments are done by VCs who invest at later stages too. Chowdhry says this is a problem because that means VCs are writing “optionality checks” — they can invest more later if the company does well. “We’ve got no VCs as LPs in the fund. We want to be on our founders’ side getting that next round,” he says.
- Other than Concept, there do seem to be investors realizing that pre-seed needs some love. Octopus Ventures announced a dedicated pre-seed fund of £10m in June. Cocoa Ventures, also announced earlier this year, is investing at pre-seed and writing checks from $150k-500k.
Given the dearth of specific pre-seed funding, it’s encouraging to see a dedicated fund come out of the UK, Europe’s most mature market in terms of fundraising.
Concept is also one to watch because all the team members are from non-VC backgrounds. That puts them in a new class of VCs emerging in Europe run by everyone from train founders and operators to people from other areas of finance and youtube stars. These funds are betting that their operational and sector expertise will give them an edge over traditional VCs given that founders want more than just money — they want everything from marketing support to advice on hiring.
Eleanor Warnock is Sifted’s deputy editor and cohost of The Sifted Podcast. She tweets from @misssaxbys