London-based VC Concept Ventures has raised an $88m pre-seed fund, Europe’s largest.
The fund took just three weeks to close, says founding partner Reece Chowdhry — a whole lot faster than his first fund, which took three years.
“It was a very different process,” he says, thanks in no small part to Concept’s pre-seed investment into AI voice tech unicorn ElevenLabs; a deal which currently gives it a 400x return.
The new fund will back up to 50 companies at pre-seed in the UK and Europe, investing $1m per deal on average. It will also aim to lead over 90% of rounds.
The power law
“You have to demonstrate that you can hit a power law company in venture,” says Chowdhry. Luckily for him, ElevenLabs — which is currently undergoing an employee share sale which values the company at $6.6bn — was the first investment made out of Concept’s $65m first fund back in 2022.
“I don’t think we would’ve raised [the second fund] as quickly [without ElevenLabs],” he says. Although he adds: “A lot of investors said, ‘Take them out, and let’s see what the performance is’, and it was still top 10% without ElevenLabs, so they could see repeatability in the model.”
The first fund is currently in the top 1% for its vintage, says Chowdhry — by “all metrics”, including TVPI (total value to paid-in) and DPI (distributed to paid-in capital) — although he declines to share exact figures.
Other companies backed in the first fund include simulation tech for robots startup VSim, decarbonisation data platform Treefera and defence software startup Arondite.
Competition at the early stages
In the AI era, as companies grow faster than ever, competition amongst investors is mounting at the earliest stages.
“We’re seeing a proliferation of VC funds who typically wouldn’t have done pre-seed,” says Chowdhry. “But they’re going for known quantities — alumni of well-known companies, founders they’ve met before.”
Concept Ventures prefers to invest in unknown quantities, he says. The team have four key founder “archetypes” that they’re on the lookout for: “The PhD types, the Big Tech spinouts, the unicorn spinouts, the second-time founders,” Chowdhry says.
“We have a deep understanding of each of these archetypes, and we know what good looks like within each archetype.”
A second-time founder, for example, should be able to “lift the team very quickly” and also embed learnings rapidly, says Chowdhry.
The team is keeping a close eye on talent at ElevenLabs, Synthesia, Granola and Wayve, he adds, companies with the kind of “high performance culture” conducive to brewing great future founders.
Concept Ventures also has a founder test it’s developed itself, which involves “going through detailed elements of people’s lives […] to give us a sense of who people are and why they’re doing things, which enables us to select people when others don’t.”
It doesn’t, however, make a song and dance about its use of data. “Data VC is absolute BS,” says Chowdhry. “Everyone has democratised access to data — you can buy things off the shelf and see everything. What VC is moving towards is becoming a selecting and winning game.”
The LPs
Concept Ventures’s previous fund was cornerstoned by the public fund, British Business Bank. This second fund — unusually — has no government LPs.
“We focused on US institutions,” says Chowdhry; 80% of the fund’s institutional investors are based in the US. “They really understood what we were doing, the risk we were taking — and we can learn so much from them. Some of our LPs have been in generational funds, so it’s useful to have them on the board.”
The funds’ LPs also include over 70% of Concept Ventures’s founders.
