Sarah Drinkwater

News

June 5, 2023

Solo GP Sarah Drinkwater raises fund to back 'community' startups like Monzo and Depop

Common Magic has raised a third of £10m target

Eleanor Warnock

3 min read

Prolific angel investor and ex-Googler Sarah Drinkwater has raised a third of a £10m fund. The fund, called Common Magic, will back European and US startups at pre-seed and seed building “products with community at their core”.

While Europe has seen more solo GPs emerge in recent years, Drinkwater is the only female solo GP in the region who doesn’t have a traditional VC background. It also makes Drinkwater one of several Atomico angel programme participants — including Deepali Nangia, partner at Speedinvest, and Stefano Bernardi, solo GP at Unruly Capital — who have gone on to become full-time VCs. Atomico is also an LP in Drinkwater’s fund. 

What’s Common Magic’s fund strategy?

Common Magic will back about 30 companies with cheques of £100k-150k on average and is in the process of doing its first deal.

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Drinkwater says she has a preference for “first rounds” when other institutional investors haven’t yet backed a company. The fund has a “light reserve strategy”, meaning that it won’t set aside much money to do follow-on investments in outperformers in the portfolio.

👉 Read: What do LPs want to see from first-time VC fund pitch decks?

“My goal with this fund is really to weave the speed and style of an angel — fast decisions, blunt feedback — while at the same time being operationally useful in a particular area,” she says. Hence Common Magic won’t lead deals or take board seats. 

“So many of my founders, as an angel, have used me to, for example, practice something they want to message to their lead investor better. They bring it to me and we hash it out together. That's the kind of role that I want to play with founders in this fund, too.

“I see VC as a support function. It’s interesting to me that VCs have become this glamorous, celebrated role and actually, to me, a VC is ultimately, picking and really supporting a certain group to go further.” 

What is community exactly?

Drinkwater says the companies she wants to back have “some mechanism where they bring their customers, users or participants together”, and gives the example of secondhand fashion app Depop, neobank Monzo, open-source AI company Hugging Face and open source business software company Odoo as such companies. That means Common Magic is technically sector agnostic, but Drinkwater says she is seeing “lots of exciting things” in developer tools and future of work. 

She believes the community component can get early-stage companies to product-market fit faster and get better product feedback. 

“It’s pretty clear to me that advertising doesn’t work and we’re over the growth hacking madness of the 2000s and 2010s. I believe for certain companies, community can replace that as a mechanism to build trust.”

Drinkwater says she’s looking for founders that have “distance travelled” — in her definition, that’s founders who aren't 21, who may have experienced failure before and are “somehow underestimated or underrepresented in their field”. 

Who’s backing Common Magic?

Drinkwater has 19 LPs so far. They include Atomico, Phoenix Court Group’s fund-of-funds, Basecamp, Taavet+Sten, Hugging Face CTO Julien Chaumond, Stripe CTO David Singleton and WeTransfer cofounder Nalden. 

Regarding the tough fundraising environment — she started raising formally after Slush in late November last year — Drinkwater says: “Raising a fund is always hard, and it should be. The privilege and the right to write cheques is not one that we should give away lightly.” 

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What’s the difference between being a VC and being an angel?

Drinkwater has written 37 angel cheques, in companies from Olympian Jessica Ennis-Hill’s Jennis to micro-ticket investment platform Odin. She says the biggest difference between angel investing versus being a VC is discipline. 

“As an angel, you do things that are intellectually interesting, where you fall in love with the story, where the price is not always a factor. A 3x outcome for an angel is great, but for a fund, it’s not.” 

For example, she recently passed on a team in Paris because the deal’s valuation was too high. “It’s hard.” 

Eleanor Warnock

Eleanor Warnock is Sifted’s deputy editor and cohost of Startup Europe — The Sifted Podcast. Find her on Twitter and LinkedIn