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A few weeks ago, we were very excited to announce that Passion Capital, one of the UK’s pre-eminent early-stage tech venture capital firms, would be partnering with Seedrs in its latest £45 million fund.
Since 2011 Passion Capital has backed more than 160 founders who have grown their teams to include more than 4,000 team members and are worth more than £5 billion in aggregate. For the very first time in Europe, this groundbreaking partnership will give crowd investors access to a private venture fund.
We sat down with Passion Capital Partner Eilieen Burbidge to find out how the venture capital firm came to be, and why this is an important turning point for private company investment.
Tell us a bit about yourself – how did you get into the world of venture capital?
With a university degree in Computer Science, most of my working career has been at tech companies in either product or business development roles. I lived in the San Francisco Bay Area (silicon valley) for 10 years during the dot com boom and a couple of years of the bust and absolutely loved the energy, entrepreneurialism and ambition within that ecosystem. Given how vibrant and remarkable it all was, I genuinely planned to spend the rest of my life there in the Bay Area. It’s for that reason that I thought working 1-2 years abroad in order to acquire some international experience would be useful, and that’s what brought me to London in early 2004 to work for Skype.
I joined Skype very early on as the first product hire (There were only 5 of us in London and a small 10-15 person team in Tallinn, Estonia) and was so incredibly lucky to have been part of that early chapter. I then got involved in investing because I started helping the Skype founding engineers with their investment activities out of their private angel fund (ASI.ee, €50 million) to back early stage tech startups.
Between 2006-2009 I had the pleasure of working with and representing the ASI team on their four London-based investments. Through the course of what started as simply helping out and working with friends on their “hobby” and interest to support entrepreneurs, I was introduced to the tech investment ecosystem, notion of due diligence and partnering with founders — and that’s how I came into venture investing.
What are your earliest experiences with Passion’s other Partners, Malin Posern and Robert Dighero – what are the combined strengths of this team in the way of experience and expertise?
Robert was angel investing a bit after exiting QXL. Although he had an engineering background, he served as the CFO for QXL for 10 years and has an incredibly sharp and analytical mind. Additionally and perhaps more crucially to me personally, he is one of the most decent people I’ve ever met and can be infuriatingly objective which is obviously a fantastic trait to have in a partner. We’re very lucky to work together and assess teams jointly because Robert will take much of what people say at face value (since he himself is so trustworthy and can be taken at his word, so he trusts people at face value as well!) whereas I assume anyone who’s pitching is grossly exaggerating and that I should work to find out the real truth.
We both came to know Malin many years ago (even before Passion Capital was investing as a fund) because as angels, Robert and I had both invested in a subscription shoe business, Stylist Pick, endorsed by celebrity influencer Cheryl Cole. Index Ventures also invested in the business, and Malin attended board meetings along with Robin Klein. Malin’s just as analytical, sharp and detail-minded as Robert (both worked at Bain in previous lives!), but also has fantastic EQ, a strong sense for consumer trends and innate commitment to sustainability.
All three of us complement each other incredibly well and so when we are all drawn to work with and back a team, we get very excited.
Passion Capital has an impressive track record in backing tech stars such as Monzo, GoCardless, Nested and many more. At a high level, what do you look for in early stage businesses when building the Passion portfolio?
We’re always first and foremost backing the founders. We’d like of course to also see a big market opportunity, some fantastic early traction and defensible IP or assets (or momentum) in order to protect against competition, but at the end of the day, we’re backing the founders.
GoCardless has been incredible for us because all three co-founders either continue to or have gone on to run other incredibly successful businesses which we’ve had the privilege to back.
What has been one of the most exciting success stories in the firm’s portfolio?
We’ve had so many exciting successes and it doesn’t always just come down to the most money returned (although that’s clearly a priority for our fund investors). We were lucky to get our first material Passion Capital exit 18 months after investing in Mendeley which was acquired by Reed Elsevier (now RELX), but since then and more recently, Monzo Bank has clearly been a phenomenal success and widely-recognised brand. But I’ve always said that even if the Monzo company valuation doesn’t end up to be tens of billions, I’ll forever be proud of having backed that team, its ambition to make banking work for everyone and the culture which makes that brand second to none and one that has legitimately moved banking forward in the interest of customer outcomes and benefits.
Passion Capital’s most recent Fund III has already invested in 11 early stage companies, with 15 or more to come. What kinds of businesses are you looking to back and what are the indicators of a promising opportunity for Fund III?
We’ll continue to look for really compelling founders working on propositions that we think show great promise. This could be in consumer or b2b sectors but we’ll be led by the founders. In terms of early indicators, within Fund III we’ve already invested in a number of additional fintech businesses as well as healthcare (both reproductive health and mental wellness) and SME SaaS and tools.
What made you decide to launch this groundbreaking partnership with Seedrs?
We had noticed a trend largely from the US of expanding the definition of qualifying investors, increasing the limit as to how much could be crowdfunded and also solo GPs raising funds with new structures — which enabled fund investors (LPs) to have greater flexibility in terms of their commitment amounts (bringing minimums and barriers to entry way down) and for how long (whether on a quarterly basis or otherwise, but moving away from the classic 10 year commitments and drawdown schedules).
At the same time, as has been the case for a while, we see angel investors, including former founders or operators from within the ecosystem, investing into a number of startups because of their love of the ecosystem, interest to maintain exposure to the sector, and to support other founders. However, we think an alternative option could be for them to invest in an indexed fund or a portfolio (suite) of startups — or into a fund developing a portfolio.
Overall, we saw all of these factors democratising access to venture funds and breaking down barriers to what was historically out of reach for everyday investors. With new platforms, structures and approaches, we felt this was all immensely positive and not only wanted to take part in it, but wanted to see if we could help push the trend even further. Our remaining warehoused allocation seemed to be an ideal opportunity to experiment and try this out. We’re overwhelmed and truly invigorated by the positive response.
What are you looking forward to most about bringing on board crowd investors and how will this potentially benefit Passion in the long run?
We’re really hoping to validate the notion of having the Seedrs nominee as an LP to a much larger degree in our next Passion Capital fund (Fund IV), and we’d also love to see other GPs and funds doing the same thing in their funds. After the announcement, we were contacted by a number of other funds who said they’d been trying to think of ways to do similar, so we’re thrilled that there might be more of this to come.
It’s fantastic to see a team of partners with such strong gender diversity. What is Passion Capital’s wider commitment to diversity, not only in your own team but also in the teams of the early-stage businesses you work with?
This is a difficult question to answer not because we don’t have a clear commitment to diversity, but because it’s so innate for us and a natural outcome of any of us doing any activity that it’s hard to enumerate or explain.
It’s clear to us that we don’t have a diverse or inclusive enough tech ecosystem overall, and that within venture investing it’s even worse. It’s equally clear to us that diverse points of view, social classes, life experiences and perspectives help to drive better decisions and outcomes, and that the world has been exclusionary for too long. As members of under-represented communities ourselves, it’s important for us to use our platform, profiles, and business activities to help continue to drive change for the better.
What do you think the VC community can do to continue improving the state of gender diversity and inclusion within the private equity space?
I remember when asking or answering that question would have felt like an eye-roll or tick box and when no one actually dwelled on the answer or the genuine intention. I’m pleased to see that as a consequence of #metoo, BLM and so many other forces, that the investment sector is recognising the need to improve gender diversity — as well as diversity across other axes and social classes as well.
Continuing to have the conversation will help. Looking for more female GPs and members of investment committees and on boards will also help. But I also believe this needs to be broader than just gender. We need to make a concerted effort to do away with team pages of all white men.
What is one piece of advice you’d give to aspiring female founders, regardless of the sector in which they operate?
There’s probably quite a bit of advice depending on circumstances, lifecycle and unique experiences and challenges, but one piece would definitely be to not think of themselves as female founders.
They’re founders first and foremost. They will have had individual experiences and pathways that give them strength, skills and tools that others won’t have. They may not have the same set of experiences that other people (men or women) would have. Their priority should be not on the latter but on the former — and how to channel all of their energy, ambition and talent in order to execute as well as they can in the sector in which they operate. As they deliver and succeed, we will celebrate all that they had to overcome because they were women.