200 German entrepreneurs have pooled their cash into a new € 160m fund to splash on pre-seed to Series A startups in Europe.
Dubbed 10x Founders, the venture network was founded by a group of seven German entrepreneurs and investors – Andreas Etten, Andrej Henkler, Claudius Jablonka, Felix Haas, Jan Becker, Jan Reichelt and Robert Wuttke. Together, they’ve invested in 300 startups over the last decade, including DeliveryHero, TIER and Volocopter.
The launch of the fund is the latest example of European founders and investors buddying up to raise the next generation of founders. In Paris, there’s the Galion Project, a pre-seed fund backed by 250 entrepreneurs. And in the Nordics, there’s ByFounders, a “Community-powered” early-stage venture firm investing in startups in the Nordic and Baltic countries.
Now that there have been more European tech successes, there are more founders and operators out there with cash to invest backing the next generation. And these business angels – with their hands-on knowledge of fundraising and building a business – can be extremely attractive investors for upcoming founders. Pooling their capital is a way to have more firepower to get into deals that would not be possible alone.
Since its inception in April 2021, 10x Founders has made 28 investments with 220 coinvestors in mainly European startups – and it plans to do another 25 this year. Check sizes vary from a few hundred thousand to € 3m.
10x has also signed up 48 business angel “fellows” (seven of which are female) who will not invest in the fund but will contribute industry expertise to portfolio companies. The 10x team says they invest alongside these fellows or even alongside other investors in their network.
“The fellows decide on their own if they want to participate in an investment deal,” says Haas. “If they were the original lead of the deal, we (10x founders) double their own investment (€ 10k-100k) and they get to keep the whole upside of that.”
Systemizing early stage investing
The idea of 10x Founders grew out of the founding partners’ angel activities.
“Through our collective investments, we recognized how important it was to get the right coinvestors into the rounds of the best founders, ”says Reichelt, who previously founded EndNote Click, a startup providing“ one-click ”access to academic journal articles.
As a founder, getting into the right rooms with the right investors “depends too much on serendipity and random occurrences,” adds Reichelt. The same goes for angel investors who have to spend months, even years, building up a network – and credibility – to be able to get in on the best rounds.
“It’s like, when I was living in London and I was working with a startup that wanted to get into the German market, I’d call Felix,” says Reichelt. But not every founder or angel has the ability to just pick up the phone to someone when they need advice. “At the moment, there is no systematic approach to enable startups to get access to the right people.”
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That’s where 10x Founders come in. The idea is to build an online platform where members of the community – an exclusive group of investors, entrepreneurs and operators – can log in to get access to knowledge, contacts and capital.
“This is not a public thing,” Reichelt is quick to explain. We are not just putting together a database of angels that anyone can access. We have to build and moderate this (online) community, so that if, for example, a fintech startup needs advice on breaking into the US market, we can call a US-based fintech business angel that could help them. ”
This approach, say Reichelt and Haas, is more effective than data-driven deal sourcing, which VCs like Sweden’s EQT Ventures and Germany’s Earlybird have increasingly been using to find and engage with startups ahead of the competition.
“We hear that this does not actually add too much value, as most of the fund’s investments still come from its network,” says Reichelt.
Part of 10x Founders’ “systematic” approach is creating a team of staff to build out its online platform and community.
Currently, 10x Founders has a team of 13 people, with two more (one based in Uruguay, the other in Egypt) joining this month.
Roles the fund will be hiring for in the near future include engineers, events managers and venture network managers – the latter of which will be responsible for managing the community, helping to introduce founders and angels to relevant contacts.
But why does Europe need this fund right now?
“It’s an amazing time to be in the European ecosystem,” says Haas. “Finally more funds are popping up, more people are joining early stage companies, more people are starting early stage companies – with a higher risk profile but potentially higher rewards in hardware and B2B SaaS.”
But while this is great, the European funding landscape is still fragmented – especially in comparison to the US – and this is only getting worse. More microfunds (small investment vehicles that raise $ 50m or less) are popping up all over the continent. And crossborder angel investing is still quite rare too.
“The farther away a connection, the less likely it is that you think about them in the exact moment of a startup investment”
Haas says this is largely to do with the fact that our personal and professional networks tend to revolve around people in our “geographical or industry proximity”.
“The farther away a connection, the less likely it is that you think about them in the very exact moment of a startup investment,” he adds.
10x Founders hopes it can build bridges across European ecosystems – and is especially looking to support ambitious founders that want to scale across Europe and then eventually in the US, “as that is where we can really help,” says Reichelt.
Miriam Partington is Sifted’s DACH correspondent. She also covers future of work, coauthors Sifted’s Startup Life newsletter and tweets from @mparts_
Correction: an earlier version of this article stated that 10x founders doubles the investment of fellows (10k to 50k). It has been corrected to a limit of 100k.