London agency builds ‘data-driven deal sourcing instruments’
Early stage European enterprise capital (VC) agency Episode 1 has closed its third fund at £76 million ($95 million), because the London-based investor turns to in-house “data-driven deal sourcing tools” to search out the following massive factor.
Based in 2013, Episode 1 has a handful of exits to its identify from the 70 or so firms it’s invested in over the previous decade — these embody 3D mapping platform FatMap, which was acquired by Strava last year, and recipe-kit startup SimplyCook which Nestlé snapped up in 2021.
Episode 1 has two earlier funds, a £37.5 million inaugural pot adopted by a £60 million tranche in 2017, each of which had the backing of a U.K. government scheme often called the Enterprise Capital Fund (through the British Business Bank) which swimming pools private and non-private funds to spend money on “high-growth” companies.
This time round, Episode 1 has once more taken authorities capital, however through a special car often called the Nationwide Safety Strategic Funding Fund (NSSIF), a joint initiative between the British Enterprise Financial institution and the U.Ok. authorities focused at “advanced technology” corporations. British Patient Capital, a subsidiary of the British Enterprise Financial institution, can be listed as a restricted accomplice (LP), as is Molten Ventures — the artist formerly known as Draper Esprit — which returns after laying down capital for Episode 1’s second fund.
The deal stream issue
Episode 1 additionally claims round one-third of the fund’s LPs are former or present founders, together with Zoopla and Cazoo founder Alex Chesterman, Wayflyer’s Aidan Corbett, and Bloom & Wild’s Aron Gelbard. Furthermore, 21 of the founder LPs have been beforehand backed by Episode 1 itself.
Normal accomplice Hector Mason says one of many advantages of getting VC funds and angels as LPs is the trade of data round deal stream.
“If you have a later-stage VC as an investor in our fund, they will often see stuff at pre-seed that isn’t in focus for them, and they’ll pass us that deal flow — and it’s the same with Angel investors,” Mason advised TechCrunch. “The other benefit is when our companies need to go out to raise — we have very close ties with these funds, plus we can talk to them about what they’re seeing at different stages in the market and that sort of stuff. So it is helpful.”
As with its earlier funds, Episode 1 is concentrating on investments of between £250,000 and £3 million at pre-seed and seed-stage startups positioned substantively within the U.Ok., whereas retaining a “signifiant amount” to spend money on follow-on rounds. Its core focus will likely be on software program firms within the AI, infrastructure, well being, open supply, “techbio,” and market areas. It’s going to additionally contemplate investments in U.S. and European startups the place they’ve a big U.Ok. presence.
One of many notable modifications in how Episode 1 operates between the earlier and newest fund is that it has taken a cue from different VC firms by constructing its personal inner software program to determine founder expertise as early within the course of as attainable. This consists of collating information from all the same old repositories, reminiscent of LinkedIn, Product Hunt, GitHub, and so forth, then filtering out not solely probably the most promising startups, but additionally figuring out those who could be trying to elevate cash primarily based on alerts it detects from the information.
Episode 1 has made round 15 investments to this point since opening its new fund final yr, together with a $11 million Series A round for London-based clinical research tech company Sano Genetics. And a few quarter of those new investments, Mason stated, have been sourced utilizing its new data-driven tooling
“Everything that we’re building is focused on getting us in front of founders earlier than anyone else — and we’re very often the first fund to speak to a founder now because we’re identifying founders who are starting businesses when they have very little online footprint,” he stated.
