New €30m fund launched by Copenhagen-based Unconventional Ventures will back founders from underrepresented groups, with a focus on climate, health, education, and inclusive fintech
- New fund will target impact-led founding teams led by people from underrepresented groups, mainly in the Nordics
- One reason for the Nordic bias is that the region has fallen behind the European benchmark when it comes to investment into diverse founding teams, according to the fund managers
- The fund is targeting a final close of €30m, having already raised €12.5m at first close
- Investors include Danish state fund Vaekstfonden, Norwegian government-funded Investinor, as well as other institutional investors and family offices
Copenhagen-based Unconventional Ventures (UV) has launched a €30m fund that will target diverse founding teams composed of underrepresented groups, including women, people of colour, immigrants and people who identify as LGBTQ+.
UV’s general partners and fund managers Thea Messel and Nora Bavey will back diverse founders of impact-led technology companies that aim to deliver a positive social or environmental impact in relation to climate, health, education, and inclusive fintech, among other themes.
The fund already has capital commitments from the Danish state investment fund Vaekstfonden, Norwegian government-funded Investinor and institutional investors Atomico and Chr. Augustinus Fabrikker. It has also received commitments from family offices and high net worth investors, with a total of €12.5m raised in the first closing.
Speaking to Impact Investor, Messel said she was confident they could raise the remaining €17.5m over the next 12 months, adding that she and her colleagues were already “in conversation with investors for the next closing”.
A triple-layer impact fund
Messel described the new fund as a “triple-layer impact fund”. The first layer is the fund itself, which is led by a diverse team, with two female fund managers at the reigns. The second layer, is the focus on companies in which at least 50% of the founding team has to come from underrepresented groups, and the third, is that the startups themselves have to have social or environmental impact at the core of their business model.
“As far as we can see, there are no impact funds in either Europe or the US that have both diversity of the founding team and impact at the core of the companies they invest in as their focus,” said Messel.
Strong pipeline of opportunities
This is UV’s first structured alternative investment fund but the company, which launched in 2018, has already invested in a number of diverse founding team-led early-stage ventures at a smaller scale in the past. In 2021, the company launched an accelerator programme targeting underrepresented founders.
Messel explained: “We’ve been in operation for four years, and have been building an extensive pipeline since that time. Through our accelerator, we have also been able to identify and mature a number of companies that are now ready for investment.”
The fund will invest in between 30 to 35 seed and pre-seed stage companies with 70% of the portfolio invested in the Nordics and the remaining 30% across the rest of Europe, although Messel expects this balance to shift towards countries outside the Nordic region over time.
Nordics playing catch-up in the diversity stakes
One of the reasons that Messel gives for the Nordics bias, is that the region has fallen behind the European benchmark when it comes to investment into diverse founding teams, an issue which the team behind UV Fund I hopes to redress.
In its most recent annual report into the funding gap for startups led by all-female or mixed teams, which analyses data from the Nordic region, the UK, France and Germany, of all the venture capital invested in 2020 in the Nordics, 92% went to all-male teams, leaving 7.3% for mixed teams and a scant 0.7% for all-female teams.
The Nordics performed only slightly better than Germany, with the UK and France both performing better in support of all-female founding teams in 2020.
“In the Nordics we pride ourselves on being champions for equality but if you look at the stats we’re doing worse than the European benchmark and that‘s appalling. It has taken time for the Nordics to admit they are lagging behind, which is why we are exceptionally proud that we have such high calibre investors on board,” said Messel.
All-male investment teams
Messel said that lack of capital managed by mixed-gender and all-female founded investment managers was also a problem, an issue which has been covered before by Impact Investor.
This is backed up by the report which found that among European venture capital funds, 84% of capital is managed by all-male GP teams, 15% by mixed-gender teams, and only 1% by all-women founding teams.
For Messel, this holds major implications for the evolution of impact investment given that investors, who are typically men, predominantly sign bigger cheques for male and mixed gender founding teams, and yet all-female and mixed founding teams are 73% more likely to build impact companies.
“When it comes to early-stage funding, it’s a small group of people who write the cheques and they tend to be dominated by all-male teams,” said Messel. “There is an incredible deal flow of diverse founders offering amazing investment opportunities. These are people who have already had to overcome so many obstacles and yet against all odds, have still decided to launch their own companies because they have absolute conviction in what they’re doing. Until we have a better balance in terms of the fire power we have behind investment managers, we won’t see that diversity balance and a huge investment opportunity will have been missed.”