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Monday, May 20, 2024

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage in finding that fit. Data shows that a lack of expertise and business acumen in founders contributes to failed VC investments.

The same principle applies somewhat to operator VCs (firms typically launched by former startup founders). While there’s no definitive proof that operator VCs make better investors, recent research does indicate that founders and operators who become VCs are significantly more successful ↗ at backing companies than traditional investor VCs.

Operator VCs have a long history in Silicon Valley. Still, their adoption is less widespread in Europe and Africa: only 8% of VC firms in Europe and Africa are led by former operators, compared to nearly half in the US. OpenseedVC is applying the model in Africa and Europe with a new fund.

The firm, which plans to be the first check in startups launched by operators across both regions, has reached the first close of its $10 million angel-style early-stage fund. General partner Maria Rotilu said “the first close is well into the millions and fundraising is still in progress” without specifying how much. OpenseedVC hopes to reach the final close within a year, she added.

Supporting operators with funding… and operators

Rotilu founded OpenseedVC with a clear vision: to invest early in experienced operators eager to launch their technology companies. In a statement, OpenseedVC said it would provide these founders with not only capital and conviction at the earliest stages but also the support of a community of seasoned operators, which currently comprises more than 50 individuals.

“If you’re supporting operators that have identified a problem and are making the leap into building their technology, you’ve likely recognized a common challenge: the need for capital and guidance from other experienced individuals. To address this, we focus on enhancing the operator network in four key areas,” said Rotilu in a conversation with TechCrunch.

“In the early stages, expertise in software engineering is crucial. You’d need someone who’s recruited technical talent, built teams and understands infrastructure design, offering invaluable firsthand experience. So if that’s the common thread, I would say firsthand experience is what we optimize for across software engineering, product, go-to-market and people and talent.”

Most of the individuals in OpenseedVC’s operator network are people Rotilu has either worked with or received referrals for. Some are also limited partners in the fund, though they don’t earn carry now. Rotilu also mentioned that other LPs include founders and professionals from traditional and tech businesses and high-net-worth individuals across Africa, Europe, and the US.

Backing pre-seed startups in Africa and Europe

London-based OpenseedVC is targeting at least 60 startups over the next five years. The early-stage fund, which says it operates with an open application process and allows founders to apply without needing an introduction, will provide checks of up to $150,000 to startups focusing on the future of commerce (including B2B software, AI, and fintech), future of work (productivity), and digital health.

“We look at the earliest stages; that’s our sweet spot. Openseed is keen on making pre-seed investments, but the early stage of pre-seed because the later stage of pre-seed is more where you find the traditional VCs. We tend to move independently and quickly — and don’t necessarily need a founder to get a lead investor or anything like that before we invest,” remarked Rotilu. She added that the fund is interested in specific founder profiles within its broader operator-focused lens: domain experts (operators at high-growth tech companies, including first-time founders) and second-time founders who have built and exited a startup.

So far, the early-stage fund has made two investments: one in a stealth U.K.-based AI-enabled supplier dispute resolution software and another in Intron, a speech-to-text transcription model for underserved accents, starting with Africa. 

“We chose Africa and Europe to apply our thesis to work in these regions. Our thesis is that by backing experienced operators early in their journey with the right capital and support from peer operators, you can build a diversified portfolio that generates incredible returns for investors and provides crucial support for ambitious operators when they need it most,” said Rotilu, who prior to OpenseedVC, invested across multiple regions with different funds.

Before launching her fund, Rotilu was an operator in various roles, including country manager at Uber and general manager at Branch in Nigeria, where she helped both tech companies scale to millions of users. She later pursued an MBA at Oxford, where she served as managing director at the Oxford Seed Fund, one of the largest student-led funds in Europe. 

Striving for a diversified portfolio

During her MBA, the operator-turned-investor with a background in computer science interned at Hustle Fund, an early-stage fund in the U.S., where she gained experience investing in startups across the U.S., Latin America, Southeast Asia and sub-Saharan Africa. After she joined Octopus Ventures, one of Europe’s largest funds, as a principal and fund manager of First Cheque Fund, the firm’s £10 million early-stage fund for European startups in  B2B software, fintech, and health sectors.

Rotilu said that at Octopus, she realized a need to focus more on Africa, a market where she had made several angel investments during her professional career. The London-based VC firm provided little avenue for that, and Rotilu, who also wanted clarity and autonomy to develop a strategy she thought suited her experience as an operator and investor across Africa and Europe, saw that as an opportunity to launch her VC firm. 

The increasing number of female-led VC firms globally is a positive trend (even though it’s still difficult for women, particularly those of color, to seek funding or raise a fund). As more women participate in venture investing and more LPs and firms support them, this trend will increase funding for female-led startups, setting the stage for every stakeholder’s success. Most female-led funds are conscious of this significance, so it’s no surprise that OpenseedVC will also actively look to support startups led by female operators.

“There are very few female-led funds globally, and we have a specific perspective on what a diversified portfolio should look like. We focus on diversification across geography, industry, and gender,” Rotilu remarked. “A lot of work is being done around diversity, and as a fund, we apply a gender lens to our portfolio strategy. We aim for a truly diverse portfolio, striving for a 50/50 balance in co-founding teams,” she said.

Kaylie Pferten
Kaylie Pferten
A pilot of submersible crafts in a former life, now married to my husband David and writing about investment advice.

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