London-based early stage fund Kindred Capital has closed its second fund at £81 million ($105 million).
The fund has a novel model which shares profits with founders who it has previously invested in called Equitable Ventures.
“We’re a very founder-led firm, we focus on people,” Leila Zegna, general partner at Kindred, told Business Insider in an interview. “COVID-19 has reinforced that for us. The only constant in any business is change and we have an increasing conviction in founders who embraced that concept of change.”
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European early-stage investors Kindred Capital has closed a second fund at £81 million ($105 million). “We’re a very founder-led firm, we focus on people,” Leila Zegna, general partner at Kindred, told Business Insider in an interview. “COVID-19 has reinforced that for us. The only constant in any business is change and we have an increasing conviction in founders who embraced that concept of change.”Kindred has just four partners but relies on an extensive network of existing founders to develop its connections.The investor backed 29 businesses through its first fund including will-writing startup Farewill, autonomous vehicles software startup Five, and social experience marketplace Pollen.Both its first and second fund work on the basis of “equitable venture.”Founders in Kindred Capital’s portfolio share the fund’s profits after commitments have been returned to fund investors. Entrepreneurs are allocated carry points which are vested over the life of the fund. It’s a novel structure, but one that has immense benefits, according to Zegna. “We want to identify the most ambitious founders in Europe,” she added. “Rather than have four partners turning over every stone we have 90 or so founders working with us. In retrospect it might look like we’ve invested in three or four themes but really the best founders become a magnet for other talent and serve as a concentric pull to other potential founders.”Zegna estimates that around 38% of Kindred’s deal flow is sourced through this network, and approximately 60% of actual investments were in founders brought in by its network. Similarly, she said the firm’s emphasis on talent pays off for companies with 54% of Kindred’s portfolio raising a Series A funding round within three years, which beats the industry average by 3x, per Dealroom data.
While the coronavirus pandemic forced in-person interaction to move online, Zegna said the experience of securing the second close of the second fund while dealing with new and existing investments helped crystallize the firm’s approach. “We were able to take a step out from a role as general partner and look to what our LPs saw. They had more proof points of when the rubber meets the road, what are these investors like in a challenging period. That’s been a net positive.” The new fund includes LPs such as the University of Chicago, Industry Ventures, Generation Ventures, Sands Capital, British Patient Capital, Isomer, and Legal & General. Similarly, founders such as TransferWise’s Taavet Hinrikus, Hybris’ Carsten Thoma, and OakNorth founder Rishi Khosla participated. Investments from the second fund include robot startup Bots and Us and VR-design company Gravity Sketch. “We try to suspend our disbelief and listen to people talk about the world they want to create,” Zegna added. “Equitable Ventures is a key part of that we can go further, faster and when we win, we all win together.”
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