London-based Ada Ventures searches for bold ideas that will change the world, by looking for founders that have been traditionally overlooked by venture capital. They have recently closed their second fund at £36 million. With investment coming from the British Business Bank, Plexo Capital, University of Edinburgh, and a host of entrepreneurs and investors, it reflects investor confidence in their innovative model. TFN spoke with co-founder Check Warner about how, and why, they are doing things differently.
A mission from the name down
Ada Ventures’ mission, to find those breakthrough ideas from overlooked communities, is reflected in its name. “The mathematician Ada Lovelace worked on the first computer but wasn’t recognised for her contribution until 100 years later,” Warner explained. “We are looking for the bright minds who can bring visionary thinking to solve the big problem of our age. Ada Ventures is about accessing extraordinary talent where other people aren’t looking.”
The idea and mission behind Ada Ventures was formed when Warner founded a non-profit called Diversity VC, which focused on making venture capital more inclusive. “When I first joined the industry, two-thirds of funds had no women in their partnership,” Warner recalled, “and in the UK, 85% of the investment committees had no women.” So, when she started Ada Venture with co-founder Matt Penneycard, they wanted to create a model that removed the barriers to inclusivity.
A new model for identifying founders
One of the major difficulties was the reliance on the warm introduction. “When we did a study that looked at the drivers behind the lack of inclusion, warm introductions were a problem,” says Warner. “If you know someone who knows a VC, you are 13 times more likely to get investment.” Determined to change this, Ada Ventures have developed a unique model.
“Instead of people having to know us or our friends, we created conduits into diverse communities that weren’t represented in the sector,” Warner told us. The conduits were Ada Ventures Scouts, chosen for their connections to underrepresented communities, they identified potential founders and brokered the introductions, so people didn’t need networks.
“We started with 10 scouts; we now have 100. And of the 28 companies we invested in with fund I, nine came from the Scouts.” Warner points out the impact on diversity, “of our investments, 55% are female founders, and 30% are from ethnic minorities. And, pretty unusual for most VC — 75% of UK VC is invested in London — we’ve invested outside of London. A study found our fund was 15 times more diverse than the average UK venture fund.”
Ada Ventures believe this diverse deal flow has helped exceptional returns. And the evidence backs this up, investments from their first fund pre-seeds have already raised £100 million in additional investment.
Ada Ventures also created Ada Angels. Like their scouts, the angels were selected because of their links to underrepresented communities, but each was given £50,000 to invest. The first angel made 22 investments, six of which went on to raise pre-seed funding from Ada Ventures. All the investments went to founders from underrepresented backgrounds. The second cohort of angels, announced alongside Fund II, will be more than double the size of the first and spread across the UK.
Solving the big problems
Ada Ventures Fund II has an ambitious focus on society’s big problems. “We are sharpening the focus on three sectors: climate, health care, and economic empowerment. We believe the biggest drivers of ultimate value are the shifts in population and behaviour, and they’re not very well understood,” says Warner. “One of the advantages we have as a leader is that we have this different point of view and different lens.”
Ada Ventures will be looking to invest in about 40 companies over the next three years, with pre-seed investments typically between £500,000 and £1 million, with seed investments of around £1.5 to £2 million. Along with underrepresented communities, the fund will be focused on UK startups, although they need to be ambitious, too. “Every single company we invest in has to have a global outlook from day one. We want to see companies that we can believe can be global winners,” says Warner. They also need to be convinced they can make a difference. “We will invest about 20% of the fund in high-impact businesses, and 80% in impact business, that’s really, really important to us.”
As well as their outreach, Warner also welcomes direct contact, whether directly to one of their scouts — who can all be found on LinkedIn — or through their website. Warner promises that they review and consider every approach.
A learning VC
What is clear from Warner is that Ada Ventures’ success is down to its diversity, but that diversity came from a thoughtful and considered approach. Her experience at Diversity VC means they aren’t just paying lip service to diversity, but activity structuring their fund to increase it.
And some of that might be down to Warner’s personal approach. Asked what separates great investors from the merely good, her response was, “humility.”
“I’m lucky enough to spend time with great investors, and the ones who make great returns all have humility,” she explained. “It’s the realisation of knowing what you don’t know, of listening to founders, and listening to their customers. And reinventing yourself because it’s not enough to have one hit, you need to do that repeatedly.”