It’s finally happened: a gaggle of Europe’s most active angel investors (and successful former founders) — including Wise’s Taavet Hinrikus and Songkick’s Ian Hogarth — are getting into the VC game.
They’ve raised a €250m fund, called Plural, to invest in early-stage startups and bring serious operator “scar tissue” to Europe’s investment landscape.
To begin with, they’re joined by Hinrikus’s long-term investment buddy and fellow Estonian Sten Tamkivi and Khaled Helioui, former CEO of German game developer Bigpoint — but more former founders and operators will be joining as partners in the coming months, including at least two women. The idea is to build an investment platform that can scale — reaching 10 partners by next year and perhaps as many as 50 eventually.
“We’re building the kind of investment platform we all wished we’d had when we were building our companies,” says Hinrikus.
They’re not the only former founders interested in backing the next generation of startups. The OG European founder-turned-VC is Skype’s Niklas Zennström, who founded VC firm Atomico way back in 2006. More recently, Spotify founder Daniel Ek pledged to invest €1bn in moonshot projects, and Sifted knows of another set of former founders launching a VC firm next week.
“We’ve already proven we can have GDP-level impact in Estonia,” says Hinrikus. “If this works, we’ll have GDP-level impact on Europe.”
It could also give traditional VCs a real run for their money.
The big idea behind Plural is that operators make good investors — and that Europe doesn’t have enough investors who’ve been there and done it themselves.
“Only 8% of these people actually know what a startup is,” says Hinrikus. “The other 92% are well aware of what banks and consulting firms are… The most value they add is money, although sometimes they add negative value.”
Hinrikus’s fintech, Wise, is considered one of Europe’s top startup success stories. Its listing on the London Stock Exchange in 2021 was a big moment for European fintech — although shares have since tanked, like most tech stocks. (“I’ve stopped checking them,” jokes Hinrikus.) Hogarth’s startup, Songkick, sold to Warner Music Group.
There are seven lead investors already lined up to join Plural, but not all are ready to announce their involvement just yet. All will have equal “economic rights”, says Hogarth: “We’re all peers in this structure.”
“There’s a craft to building companies that’s under-discussed, and VCs don’t talk about it very much,” says Hogarth. “Iconic tech companies like Spotify, DeepMind, Adyen and Stripe are all companies founded by repeat founders. They’ve developed that craft. So, if you take a first-time founder with, say, a scientific breakthrough, and pair them up with Sten, they’ll develop that craft faster.”
Turning fund manager
Plural’s founding partners are hardly new to the investing game — Hinrikus has done 150 angel deals in Europe, while Hogarth’s angel portfolio is in the hundreds. Helioui’s angel portfolio includes big names like Deliveroo, Onfido and Remote.com.
But actually managing a fund with other people’s money in it will be a whole other ball game.
Plural’s LPs are a mix of institutional investors, such as university endowments, and startup founders. Will managing external capital change the way these long-time angels invest?
“They’re expecting a return in a sufficiently long horizon. They said take some money and run with it,” says Hinrikus, sounding confident that these LPs won’t push Plural to exit from portfolio companies early or encourage them to grow faster than they believe is wise.
“I’m fully aware that I might be innocent and naive about it — I’m a first-time fund manager, and I’m fully conscious of that,” he adds.
Areas of interest
Plural is interested in four general areas, which it’s calling:
- Opportunity gap reduction — ie, expanding access to healthcare and education;
- Mitigating climate change;
- Future of governance;
- Improving health.
Plural has already backed 14 businesses, including NFT infrastructure startup NFTPort, German insurtech Feather and 3D avatar startup Ready Player Me. Most companies have been sourced from other founders the team has worked with — and “that’s the absolute best source for us”, says Hogarth.
Hogarth says the goal for Plural is to build a portfolio that "reflects the population". 29% of the 14 companies backed by Plural so far have female founders and 26% have non-white founders; they didn't give a breakdown for their individual angel portfolios.
"It should represent all the ethnic, gender, geographic and economic backgrounds of Europe," he says — and the team will be tracking that data.
Plural is primarily focused on startups in Europe, although it will occasionally invest elsewhere. It wants to lead rounds but isn't bothered about board seats.
There won’t be an investment committee as such. “We don’t think the consensus-based approach is necessarily the best,” says Hinrikus; instead, the team will discuss investments to check that the partner really believes in the startup. “A lot of the best companies look really weird in the beginning — you need a leap of faith.”
We’ve Marie Kondo-d our professional lives down to focus on this
The idea is that each Plural partner will invest in around four to five startups per year, so they can get pretty hands-on. Hogarth says they expect to be working with portfolio companies on a weekly basis — and will all be full-time on Plural. (Hinrikus and Tamkivi’s investment firm Taavet+Sten will continue backing social initiatives, other VC funds and non-tech assets under the leadership of a new COO.)
“We’ve Marie Kondo'd our professional lives down to focus on this,”says Hogarth. Hinrikus adds: “This is what we’ll be doing for the next decade.”
Exactly what that support will look like will depend on each startup’s needs, Hogarth says.
In the case of portfolio company Field Energy, a climate tech startup founded by the former Bulb cofounder Amit Gudka, Hogarth helped Gudka interview early team members, structure a round of funding and work through branding. Hinrikus says they speak frequently about all sorts of company-building topics — like how to prepare for the next phases of growth.
Are they worried that their operational experience will go out of date?
We don’t know what the statute of limitations is on advice from former founders
“We don’t know what the statute of limitations is on advice from former founders,” says Hogarth. “But the way we’re working with them is quite operationally intensive and very in the weeds, which keeps you young.”
One company he’s been working with made a big IP breakthrough, Hogarth says, to give an example of how he’s keeping up with the kids. He helped the team spin that IP out of their university, learning a lot about IP licensing in the process.
He reckons that other aspects of being a founder — like hiring execs or thinking about strategy and financing — are “pretty easy” skills to maintain.
Plural will be hiring a non-investment team too. Already onboard are Victoria Kennard, head of ops, and lawyer Sandra Värk — but the focus, for now, is on scaling up the lead investor model, says Hogarth. “Finding those first 10 people will be the most important decisions we’ll make this year.”