Pre-seed funding has decreased by over 50% since 2016, despite increased European venture capital investment and the emergence of 72 European unicorns in 2021. Just over 1% of all VC funding in Europe went to founding teams made up exclusively of members of racial and ethnic minorities, according to a recent Atomico analysis from 2021. Additionally, female founders raised the smallest share of total financing since at least 2017.
Launch
In an effort to close the huge funding gap for extremely early-stage European founders, London-based VC Octopus Ventures has launched its first pre-seed £10M fund. Kirsten Connell and Maria Rotilu, both veterans of Seedcamp and Uber, make up the all-female investing team. They provide a special degree of expertise and experience in growing firms from their very beginnings.
Through the pre-launch of the fund, Octopus Ventures has so far made investments in 10 pre-seed firms, including the B2B SaaS platform Volunteero, the wealthtech Bloom Money, and the fertility startup Béa Fertility.
The fund’s managers Kirsten Connell and Maria Rotilu are already pacing a little bit ahead of schedule and have already invested in five startups in June alone, despite the fund’s three-year deployment period being set.
Fund’s future plans
The fund is concentrating on entrepreneurs in the three niche industries of B2B software, fintech, and health that Octopus Ventures specialises in. It will invest £100,000, and founders will receive support from a network of founders and advisors as well as experienced sector specialists from Octopus Ventures’ leading people and talent team.
Kirsten Connell comments, “We built the pre-seed team to move fast while providing every benefit of a major venture capital partner. In our first wave of investments, we’ve moved from first meet to termsheet in two weeks and, as part of the portfolio, our founders are benefiting from access not just to sector experts from Octopus, but a network of more than 400 leaders who have walked in their shoes and are ready to help guide and advise new founders on the trials of building a business.”
Maria Rotilu comments, “In our first wave, 40% of businesses have a female founder and 30% have at least one ethnic minority founder. We know we can increase the diversity of where we invest further, and we want to hear from female and under-represented founders with the next $1B idea.”
Alliott Cole, co-CEO of Octopus Ventures adds, “Falling investment at the earliest stages of business growth is a long-term challenge for European businesses but, more than that, it’s a missed opportunity. By establishing a devoted fund and two of Europe’s best pre-seed investors leading it, we’re seizing that opportunity to back the businesses that will change the world, from day one.”
The fact that entrepreneurs from a particular background have an immediate advantage when they already have an established network of angel investors is one of the key implications of the fragmented pre-seed market. This just serves to reinforce the dearth of diversity in European tech, which Octopus hopes to address with its brand-new pre-seed fund.
The Octopus team hopes to maintain this criterion throughout the fund’s lifespan. Currently, 40% of its first investments have female founders, and 30% have at least one ethnic minority founder.
