Founders and investors in Europe often complain the region doesn’t have enough frontier tech funds and funds investing globally.
But Munich-HQ’d Possible Ventures is one of the rare investors to match both these descriptions. The pre-seed firm prefers to fly under the radar, not taking board seats and holding only small ownership stakes. It's invested in about 135 companies globally, including audio platform Podimo and Australian NFT startup Immutable, which was last valued by investors at $2.5bn.
The firm was also an early backer of blockchain-based sports trading card startup Sorare, after Possible founder and general partner Chris Hitchen put in a personal cheque of €50k in a 2019 pre-seed round. That round gave Sorare a pre-money valuation of €2.2m. Possible has subsequently invested €3m across multiple rounds.
When Sorare then raised its Series B in 2021 — Europe’s largest ever at the time — the scaleup was valued at $4.3bn, enabling Possible to pay back half of its first fund within the first 12 months. Possible still owns a “significant position” in Sorare.
“In venture, that’s pretty much unheard of,” says Hitchen. “But that’s the beauty of small funds.”
A microfund with 200 LPs
“The beauty of small funds” is something that Hitchen and the Possible team have been fierce supporters of — even as VC fund sizes globally have blown up.
Possible’s first fund, in 2019, was €10m and backed 50 companies. The second, in 2021, was €60m and backed 85 companies. Average ticket sizes range from €250k-500k. Hitchen, a serial entrepreneur from Australia, has also been angel investing since 2006 and wrote 50 cheques before starting Possible.
A smaller fund size means fewer management fees to hire a big team, so Hitchen says his strategy has been to raise from a large number of LPs. These investors work like “an extended network and an extended proxy team,” referring deals to Possible and helping with due diligence, operational support and introductions to future funding sources.
Most VCs have fewer than 100 LPs; Possible has 200, many of them individuals such as German footballer Mario Götze, Australian Rules football players, tech founders and GPs from larger VC firms. Institutional investors include Spanish fund-of-funds Aldea, German fund-of-funds Equation, Molten Ventures, LocalGlobe and Burda Principal Investments. Unlike most funds in Europe, Possible does not have any public money, which also frees it from some of the geographic limitations that can come with taking state cash.
“We have this army of people out there who are invested emotionally and financially in what Possible is doing, and our ability to open doors to customers and other VC funds is really unique,” says Hitchen.
The second part of Possible’s microfund strategy is taking smaller stakes than many other funds.
“We're not competing for ownership with the largest VC funds,” he says. “They're very happy to have us in the deals because we keep our ownership relatively low. They typically need to own 15 to 20%. We're happy to be closer to 5%.”
Hitchen says that the founders in the fund’s portfolio and from his angel investments have also been sources of dealflow. Possible’s seven-person team — which includes recent hires in Munich Dr Christoph Baumeister, a former portfolio company cofounder, and Marie Tai, an investor with a chemical engineering background — also reaches out to companies directly.
From space to techbio
Possible is investing in frontier technology, which it breaks down into health (areas like techbio), climate, energy and society (which includes topics like financial inclusion). The firm has also backed several space companies.
“We love complementary teams where you've got a scientist, a doctor, an engineer, a commercial person, really, really different backgrounds coming together to work on one mission,” says Hitchen.
Many of those are strategic sectors that piqued the interest of governments globally amid a renewed interest in encouraging homegrown strategic tech and securing sovereign capabilities.
Hitchen says that means the potential for a lot more non-dilutive, government funding available for “sectors that have traditionally been hardest to raise in”, off the back of initiatives like the US’s Inflation Reduction Act.
Fund III and resisting the temptation to go bigger
Possible is currently raising a third fund with a target of €60m and is targeting a first close at the end of July. That’s the same size as the last fund, and Hitchen says he has had offers of much larger tickets from LPs, but is committed to staying small.
“There are many temptations of getting bigger. That does make things easier when you have much larger management fees, but we’re focused on producing outlier returns, and I know [outlier returns] are easier if you have smaller funds, and we want to stay disciplined on that,” he says.
“We’re not looking to come into companies and dominate with operating partners and everything. We just want to be a wingman.”
