Seedcamp, the pan-European accelerator program, has made a first close of $28 million on its third investment fund,substantially larger than any previous fund, the company announced Tuesday.
According to Carlos Espinal, one of the founders of Seedcamp, the third fund, which is targeting at least $30 million, will allow the accelerator to provide much greater follow on funds for the companies in which it invests as well as investing in more companies. The fund aims to invest in 100 start-ups.
“It is a big size of fund for an accelerator,” he said. “This is not about a short term approach. You need to be working with all the players in the industry.”
Should Generate $450-500 million In Market Cap
A fund of $30 million would be expected to generate around $450-500 million in market cap.
Espinal said that the focus of investment activity would remain its traditional $25-$50,00 funding, but having a much larger fund would allow Seedcamp to do much greater follow-on funding.
He also said Seedcamp’s ability to provide bigger checks would help European start-ups raise more capital. “Often VCs are looking for other people to join a round. If we can provide that initial funding that makes it much easier for our start-ups to get other investors.”
Partners in the fund include Russian search engine Yandex, London-based VCs Index Ventures, Octopus Investments, White Star Capital and Fidelity Growth Partners as well as Spanish bank venture arm Caixa Ventures. Private investors include Taavet Hinrikus of TransferWise and Sten Tamkivi, formerly of Skype now Entrepreneur in Residence at Andreesen Horowitz.
Half Fund Comes from Public Funds
However as with so many European funds, a substantial proportion of the fund, some $49.9% of the first close, comes from public funds from the European Investment Fund.
According to David Dana of the EIF, the fund invested in Seedcamp originally because Europe was underserved by venture capital. He said the EIF was happy to invest because of feedback on the fund’s previous performance.
Despite receiving European public money, start-ups would be under no obligation to remain in Europe and would be free to locate their businesses anywhere.
Recognizing the inevitability of European start-ups basing at least some of their operation in the U.S., Sohoni also announced that either she or Espinal would in future be spending about 50% of their time in the U.S.
Deepening Links to U.S.
“We are not sourcing U.S. start-ups,” said Sohoni. “This is about access. It’s about building deep connections. You can’t build those just by flying in for two weeks, you need a much larger presence.”
Acknowledging that European public money might be used to support start-ups that ultimately end up in America, she said “They are going to have a presence there. What we are trying to do is to help them build their companies here in Europe first. You have 20 people, 50 people maybe more. Then you appoint a head of Biz Dev [business development] there, rather than moving to the Valley when you are at the back-pack stage.”
Seedcamp, which started in 2007 as classical accelerator, says it has evolved its model. Rather than simply provide a 3-6 month period of intense coaching, Espanol says Seedcamp looks to form a life-long relationship with its alumni.
Last year Seedcamp released figures suggesting that the average Seedcamp company went on to raise £1.3 million in funding after completion of the program, and some 83% successfully raised capital.