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PROfoundersCapital is a venture capital fund established for entrepreneurs in the digital media space, and backed by investors including Brent Hoberman and Michael Birch.
I've been talking to General Partner Rogan Angelini-Hurll about the aims of the fund, and what he will be looking for in entrepreneurs seeking investment...
What is the overall aim of the fund?
Our investors are all successful entrepreneurs, and this goes to the heart of the reasons for setting the fund up. I think there is a gap in terms of funding and the transfer of expertise in the market, which we aim to address.
The fund is also motivated by a desire to help, support and promote the next generation of entrepreneurs. There is also the personal feeling that each of these people knows that they have succeeded with a degree of luck.
Our investors are all high profile, so they already receive a lot of business plans, and feel an obligation to look at them, but the fact that they are busy with their normal jobs makes this difficult. The fund will fulfil this function.
I don't want to sound too altruistic, but there is a desire to be part of the ecosystem within the European digital space and to do something to help the Euro tech market.
How big is the fund now?
We had our initial close about six weeks ago at just under £20m, but we are targeting a £50m fund. We have a 12 to 18 month period before the final close; but we have had conversations with a number of individuals to add to both the financial and intellectual capital of the fund and hope to make some announcements by the end of the year.
In terms of how we deploy the capital, we will be targeting digital media and technology, and looking for capital - efficient businesses.
What levels of funding will you be offering?
The levels of investment will be between £500,000 and £2.5m, we're looking to fill the gap between angel and VC funding.
A lot of the more well-known VC companies have raised much larger funds than us, and can't make these smaller investments, as it would take too much time to keep up with too many investments.
One difference between Europe and the US is that there isn't the network of wealthy individuals who would fill this space. There are other funds around at our level, but I think that this space is under-served and the amount of business plans we have received tells us that there is a gap.
Do startups find it harder to get investment in the UK and Europe?
There are huge differences between Europe and the US, but we are not trying to replicate Silicon Valley, which is clearly a vibrant place with money and expertise available for startups. We are hoping to give some of that flavour.
How will you be providing help and support?
It is definitely true that experience shared between investors and startups can be of huge value. Profounders is structured as a traditional fund, with Sean (Sean Seton-Rogers) and I as General Partners.
I'm not saying that our investors will get involved full time, but it is beholden on us to make sure that, when problems and questions arise, we will be able to take interest and put them in touch with investors for advice on an ad-hoc basis.
We will be involved on a board level with the businesses that we invest in, and will communicate, probably not on a daily basis, but at least week to week. To the extent that we add value by offering support and advice, the fund benefits.
What do you look for in an entrepreneur? The idea? the team?
Certainly passion, which does sound difficult to measure, but one can tell passion in the idea and the dream if it is there.
Often people will submit business plans with solid, conservative forecasts but sometimes, and I don't want to encourage a flood of wildly optimistic pitches, you need to see the 'dream forecast' which shows the passion that entrepreneurs have in the idea.
Entrepreneurs do need to be clear and logical, they probably won't have every skill needed to set up and run a business. They should have the clarity of thought to be able to identify what their weaknesses are and seek to supplement these.
Generally, I try to look at it from the point of view of the entrepreneur, and I ask myself if I would like to work for them, in terms of the people, the strategy, and do I think there is a area of growth here which is something to get excited about.
How many pitches have you had so far?
A write up in the FT precipitated an avalanche of 400+ business plans, and we also have the advantage that our investors receive a lot themselves thanks to their reputations, so we have had more than 500 pitches in the last six weeks.
Some don't fit the criteria in terms of the size of investment required and the sector. We can't look at everything, and we will have to focus on four or five for the moment. We'll be looking at making 20-25 investments over a five year period.
What is the typical process for people seeking investment?
Generally, we will try to get back to companies pretty quickly, at least with a phone call.
Sean and I will pick out eight or nine different ideas, which will allow us to come up with high level discussion points for investment committee meetings, to get input into where we should be looking.
We will then try to get back to all the companies involved within the next week. Companies are often hanging on waiting for responses from VCs, which can be time consuming and distracting.
We think it's better to respond quickly, even if it is not the answer they were hoping for, they will not be left waiting.
If we are interested in doing a deal, we'll instigate the process of due diligence, with the aspiration that we can potentially do deals quickly, within six weeks.
What type of companies will you be looking to invest in?
Quite a broad range, anything from pure tech companies, to B2C websites, we don't want to limit ourselves, but some of the of types of companies we would be interested in include market aggregators, companies that facilitate the transition between online and offline, micro-payments, education etc.
Do you think that the talent is out there to invest in?
I think that there are some very good companies that are seeking investment, and we will have to limit ourselves to just a few, it's possible that we will have to pass on some that would have been a good investment.
I think that if you are a proper capitalised startup, now is a good time to be launching, Your competitors are likely to be having problems with their finances, and potential competitors may be struggling to attract investment.
From the fund's point of view, valuations for new companies have lowered from the levels of two years ago, so we are in a position to get better value for our investments. We are not worries from what we have seen, and the state of the economy at the present time.