Monthly Archives

December 2017

UK VCs growing faster than European counterparts

By | Venture Capital | One Comment

One fear I heard expressed a lot post Brexit is that the London will lose it’s place as the dominant startup centre in Europe. These fears were compounded by programmes from France, Germany and other governments to get UK companies to relocate.

It appears these campaigns have had little impact. As you can see from the table above UK based funds had considerably more success fundraising this year than their European counterparts.

It seems that despite Brexit London is growing stronger as a startup ecosystem. I would posit that’s because there are powerful network effects at play. More funds attract better and more ambitious entrepreneurs who generate bigger returns and whose employees found new companies, in turn attracting more funds.

Nice to end the year on a happy note. Happy holidays!

Data compiled by Yannick Roux

VCs and our quest to invest in “home runs”

By | Venture Capital | 2 Comments

This chart (taken from a recent post by First Republic’s Samir Kaji, data from leading venture investor Horseley Bridge) shows that to get the 3-5x return that most venture capitalists target 10% of their portfolio need to return 10x+. That explains why we are so focused on market size and other upside indicators when we invest. Getting a 10x result is hard and if 10% of our portfolio is to reach those dizzy heights then all of our investments must have that potential.

Of course, a 10x return on an individual investment doesn’t necessarily return the whole fund and many venture funds go a step further and stipulate that every deal must be a potential fund returner. That’s the way that we work at Forward Partners, so for us every investment in our second fund must have the potential to return £60m back to our investor. That means if we have a 10% stake the exit value should be £600m or if we have a 25% stake it should be £240m. If we have invested £6m to get to that point the return will be 10x, and if we have invested less, the multiple will be higher. What doesn’t work for us is investing £2m and with the potential of getting £20m back – that’s a 10x return, but it’s not a fund returner.

It would be interesting to see a version of this chart which replaced “Percentage of investments > 10x return” on the Y-axis with “Percentage of investments that returned the fund”.