Form began over a coffee in early 2018, but we first met more than a decade ago at university. After a career in public policy, including as a ministerial adviser in the British government, I’d realised there is this major gap between the world of startups and innovation on one hand, and the world of government and policymaking on the other. Yet nobody was thinking seriously about how to close this gap, or the value of doing so.
After also working in policy, Patrick had been leading investing at Deloitte Ventures and was developing his own view on what new funds need to do to win in a venture market with increasing liquidity and competition. His conclusion was that Europe will have to follow the US, where funds are increasingly differentiating by what they invest in and how they add value to founders.
We put the two insights together and saw a major opportunity for a new fund to tap into this untouched area between startups and government, and to help founders think through the associated risks and opportunities.
But the barrier for emerging venture fund managers is really high. We knew we needed to demonstrate that we could execute against the thesis we’d developed, just like any founder does in their early stages. So we started with a small Fund I which we raised over the summer of 2019 and started deploying in the autumn. From that experience we have a lot of founder empathy when it comes to fundraising! We’ve made five investments from that Fund I so far, but all the time have been working on a much larger Fund II which we aim to close in the first half of 2021.
Which industries are you working in?
We use “regulated markets” as a shorthand to answer this question. But what we really mean is any market or business model where the decisions of politicians, policymakers and regulators can have an influence, which when you think about it, is pretty broad!
We break this down into three main groups. ‘Hard’ regulated markets are those you might instinctively think of – financial services, healthcare, energy – where you tend to need a formal licence or authorisation from a sectoral regulator. ‘Soft’ regulated markets are those where the impact is more indirect – such as gig economy models, which are really exposed to changes in labour market rules, such as California’s AB5 law. And finally what we call ‘frontier’ markets, where regulation and policy is either fundamentally unlocking a market, e.g. Open Banking in the UK, or threatening to kill some business models outright, such as the tightening noose around crypto.
Key to this is our belief that policy and regulation are issues to be optimised for like any other – go to market, product, team, unit economics, and so on. They can be a source of real opportunity as well as risk, but often founders and their early investors have a real blind spot here.
What do you look for in a founder?
The founding team is probably the most important factor driving our investment decision making, so we think about this a lot. We can have really high conviction about a startup in every other way, but without belief in the founding team we won’t invest.
We use a model we’ve developed based on our own experience of investing, hiring and working with people, combined with the best insights we’ve come across from other investors. It’s also designed to avoid indulging our own biases about the background people have – we don’t want to fall into the trap of investing in people who look and sound like us.
Among the key questions we ask are: is there a degree of ‘founder-market fit’? Do they have the ability to recruit, lead and inspire a highly talented team? And do they have the bias to action, and grit that is needed to persevere through the inevitable tough times?
Can you talk about your current portfolio?
We could talk about it all day! What they have in common is an ambition to take on knotty, difficult markets which have deterred others, but where the opportunity reflects the size of the challenge.
So, Peppy is supporting employees through life’s key transitions, such as menopause and new parenthood. Bubble is making childcare more flexible and accessible. Organise is providing workers with the ability to collectively campaign for workplace improvements. Wollit is bringing stability to the incomes of those with variable or zero hours contracts. And Bricklane is democratising access to investing and saving in the UK housing market, without the need to own your own home.