GoStudent and wefox-backer Speedinvest has started a fund of funds programme to back emerging pre-seed and micro VCs — the latest example of an established VC starting to invest in other managers.
“It’s about how we can help first-time fund managers scale from a $10m fund to $500m,” says Deepali Nangia, the Speedinvest partner leading the programme. “They learn from us, we help them scale. Yes, we might get early access to some deals, but that’s not the intent — it really is an ecosystem development activity.”
Speedinvest, one of Europe’s most active seed investors, will invest €3m across 10-12 early-stage managers based around the world, including emerging markets like Latam and Africa. There may be some stage overlap, but Deepali says the aim is to get more knowledge about smaller tech ecosystems in particular.
At least 50% of the GPs will be women or from other traditionally underrepresented backgrounds.
Nangia says that the firm was originally considering creating a scout programme, similar to many competitors; she herself is an alum of Atomico’s angel programme. But it would’ve been difficult to manage all the small investments made by such a programme, Nangia says, hence a fund of funds.
As Europe’s tech ecosystem matures, so too has the number of smaller VC firms — and funds to back them. There are at least 15 fund of funds backing emerging managers in the region, according to Sifted analysis, more than half of which have been founded in the past three years. Several European VCs have fund of funds programmes, including Phoenix Court Group and Molten Ventures.
Speedinvest announced in December it had raised €500m in new funds to back pre-seed and seed-stage companies and follow-on in successful companies.
What’s the USP?
Speedinvest has already made two investments in managers through the programme. The first was into Fund F, which announced the first close of its first fund to back purely female founders last year. The second investment hasn’t been announced, but Nangia says the team consists of one woman and one male partner.
Nangia says she gets lots of manager pitches, but her question is always: “What is the USP [unique selling point]?”
“That’s what I struggle with the most — how do I justify? Many of them have very little track record.”
In those cases, she says she looks for some sort of differentiation. Or she might ask the relevant sector investors at Speedinvest for their take on the manager’s angel portfolio. And, of course, reference calls with founders or former employers.
Nangia also says she prefers to have an existing relationship with GPs before going into any kind of due diligence process.
“I met a lot of brand new GPs that we have not had any interactions with. In which case, I want to get to know them better,” she says.
Nangia says the next steps for the programme are to create a community and a curriculum to coach first-time fund managers on the basics such as brand building, portfolio construction and how to help portfolio companies. Speedinvest will also help with LP introductions and due diligence.
Eleanor Warnock is Sifted’s deputy editor and cohost of Startup Europe — The Sifted Podcast, and writes Up Round, a weekly newsletter on VC. She tweets from @misssaxbys