Do VCs like Episode 1 worry about competition?

by Simon Murdoch
There’s a lot of new money coming into early stage VC in the UK at the moment.

Congratulations to Harry Briggs, Rory Stirling and Simon Calver for their £200m/$300m Business Growth Fund backed early stage fund which leaked a couple of days ago. Congrats too to Passion Capital whose second Enterprise Capital Fund of £45m/$69m was announced last week.

Mosaic Ventures announced $140m a few months ago and DN Capital closed their fund of $200m around the same time too.

According to Steve O’Hear of Techcrunch there’s at least one more decent fund in the offing and we know of several others in fund raising mode with good chances of success.

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So in the last couple of days a number of people have asked us: are we worried about the impending competition?
The simple answer is no. A rising tide raises all boats. This is all great for early stage venture in the UK and Europe. We already see 100 deals for every one we invest in, and we are regularly “intrigued” by some of the deals others chose to invest in. I’m sure they are intrigued by our choices sometimes too.

The first great thing though is that with more money coming into the sector more great entrepreneurs will start businesses because the chances of success appear to be improving (only time will tell of course whether they are actually improving, and for each individual it is still a big risk starting a company for which they deserve the fantastic rewards when it works).

Secondly, VCs tend have a very cooperative relationship with each other. We very often coinvest with one other VC even in first rounds. We always want to show our deals to other VCs in subsequent rounds and we like to see their companies too when they are fund raising. So we are all very pally with each other publicly and in private.

Just once in a while there is a competitive situation where a company is really hot and multiple investors want to get in. At those times we investors are schizophrenic. We compete actively with whoever else is in the mix (if we can find out who the other potential investors are) though our house style is never to knock the competition – just accentuate our positive attributes. And when it is over and we have either won the deal or not, the dust settles and within days we are best of mates with the other VCs again. By the way, this is a very common situation over in Silicon Valley nowadays, but it is still fairly uncommon here in early stage.

A third benefit is it gives us great confidence for raising our next fund. With more money coming into the space, and with our track record and dealflow, we feel more and more confident that we will raise another fund too in the next year or so. We’ll be out there soon working on that – so let us know if you want to be notified when are raising 🙂

So net net, we like to see other VCs raising funds and are very happy to congratulate Harry and others whenever they do.

PS we are looking for 12 more companies to invest in with our current Enterprise Capital Fund. If you run a software driven company looking for up to £2m and are based in the UK, please get in touch.

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