I would like to start this first ever article of Startup Digest with something that doesn’t come by very often. A glimpse into a VC pitchdeck, more specifically Seedcamp. The deck was to pitch to investors for Fund V and to raise £78M.

Seedcamp is a pioneer in the European VC world with early investments in Revolut and Transferwise. Fund III includes one of Europe’s fast-rising unicorns, Romanian software giant UiPath, which was valued at $10bn in its last round in July. Fund IV includes online events platform Hopin valued at $2.1bn+ just eight months after launching, surfing on the digital shift caused by Covid-19. And their investments have paid off looking at their first three funds they manage to have an average MOIC (Total portfolio Value/Cost of Investment) of 8.3X. A rocking and staggering number. DPI (the amount investors get back) of fund III is already at 125% and the fund still has several years to mature and realise their investments.

Seedcamp Fund V Fundraising Deck

What is their secret?

Well, Seedcamp is known to strongly build on its community as it brings them certain advantages they can leverages across their portfolio. First, there’s a large community of people who can address any problem a founder has. Simply because most founders in the community have been there and done that. In addition, the community works as a micro-economy where startups are most of the time their first clients and talent shifts from startup to startup. To get a perspective of the community, Seedcamp aims for 100+ companies per fund.

Something to think about:

As the advantages of multiple investments and a large portfolio in this case is clear, it also bears a lot of risk. Is the success of the previous funds dedicated to the startup/venture hype of the last decade and the increased amount of private capital available to startups? It is a dogma in the venture world that is known as the ‘power law of distribution’. The error lies in expecting that venture returns will be normally distributed. This ‘spray and pray’ approach usually produces an entire portfolio of flops, with no hits at all. Rather, they follow a power law: A small handful of companies radically outperform all others. This is what usually happens if you focus on diversification instead of single-minded pursuit of the very few companies that can be become overwhelmingly valuable. BUT not in Seedcamp’s case apparently. Does this community advantage weigh up to this power law or is the amount of private capital available to startups by well established VCs the key to success?

What AngelList Data Says About Power-Law Returns In Venture Capital |  AngelList
Power Law. Source: AngelList

Fun fact: The last time Seedcamp went to raise a fund, Brexit happened; this year when it headed out fundraising, a pandemic hit. Holding my breathe for their next fundraising round.

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