London-based VC Fuel Ventures is today announcing the closing of a new £100m fund as it looks to up the ante on its pace of investment into UK startups.
The fund will be fully deployed over the next 12 months, as Fuel Ventures looks to back 60 startups at pre-seed and seed stage across most sectors. 30-40% of the fund will be spent on follow-on investments.
Doubling down on deployment
While many VCs are dialling back on deployment after a busy — and expensive — 2021 and 2022, Fuel Ventures is bucking the trend. Over the next 12 months it will spend just shy of the $110m it shelled out across those two frothy post-pandemic years.
That’s partly down to the firm gaining confidence and experience over the past seven years — this fund is its seventh — says founder and managing partner Mark Pearson. For VCs who are able to deploy cash, there’s also an opportunity to take advantage of the market reset.
“Things began to get silly with all-time high valuations happening between 2020 and 2022,” he tells Sifted. “We are at a very unique moment to invest as valuations are back at normal levels.”
Long term that’s also good news for founders, he adds, as lower valuations help LPs get better results. “If LPs don’t achieve healthy returns, the money in the future dries up.”
Where will the money be spent?
The plan is to write 30-40 pre-seed and seed cheques of between £150k-250k. Pearson says Fuel likes to participate alongside other VCs in follow-on rounds, writing cheques of between £2m-5m.
Fuel is sector agnostic, but it won’t back hardware, biotech and crypto startups, as these companies tend to require more capital before becoming self-sufficient.
It previously backed startups like fintechs Volt and Capdesk, cybersecurity startup Lunio and ecommerce company Heroes. Fuel has also exited a number of startups, including ContentCal to Adobe in late 2021 and Capdesk to Carta last September. One of its exits, Pearson says, returned the whole of a previous fund.
Raising during a downturn
Early returns like that no doubt helped Fuel close its largest fund to date in the same amount of time as its smaller vehicles in previous years, at a time when many funds are struggling to raise.
Family offices contributed half of the total fund, ultra-high net worth individuals 30% and corporates 20%. While most of the fund was raised from existing LPs, £40m came from new investors.
Despite that, market uncertainty means many LPs have become “more conservative” towards venture capital recently, says Pearson. “A number of other funds' performance have suffered in recent years. LPs want to track the investments they have already made for a couple more years if there is any uncertainty.”
