Blackfinch Ventures, a Gloucester-based VC for tech start-ups, is looking to invest in up to 10 new companies in 2022.
The VC made 12 deals totalling £17m in the tax year ending in April – a mixture of investments into existing companies and fresh deals.
In total, Blackfinch has made 45 investments totalling £45m, again a mixture of new investments and follow-ons.
A recent addition to its portfolio is recruitment and HR start-up Placed, an app which uses machine learning to match candidates to employers without the need for CVs, while it recently further invested into SaaS integration platform Cyclr – of which it was part of a £5.5m funding round.
It also recorded its first exit in March with Glasgow-based Candidate ID, a marketing automation platform for recruitment. The software identifies in real-time which candidates have gone cold, are hire-ready, or best match a job description.
The VC invests through its EIS venture portfolio, writing cheques of between £250,000 to £2m into companies which have tech at their core and have evidence of strong product market fit.
It also invests in later-stage companies via its VCT fund, currently in tranches of £250,000 up to £3m. These could be EIS companies that have grown, making £500,000 to £1m or more in revenue per year and in a growth phase.
For its summer cohort, Dr Reuben Wilcock, head of ventures at Blackfinch Ventures, said the VC is now looking to make two to four VCT investment deals of around a £1m in tech companies making over £500,000 in revenue.
“What we aim to do is 10 new companies a year,” he said. “We invested in three at tax-year end, which were Placed, Measure Protocol and Futr, and we’re now looking to do two to four in the summer cohort and a similar number in the winter cohort to take us to about 10.”
Apart from one junior member, the Blackfinch Ventures team are all entrepreneurs themselves.
After gaining a PhD in microchip design, Wilcock started four tech start-ups – one of which, Joulo, exited successfully in 2014 – while his accelerator Future Worlds helps tech companies to grow.
Now at Blackfinch Ventures, Wilcock and his team are taking on a data-driven approach to business.
“We prefer to use a data-driven rather than a gut-feel conviction approach”
“We get our deals from all the usual places, but we also use a technique which is less normal,” he said. “We search the 25,000 high growth companies in the UK and we try to work out, using our data science background, which companies we think will be raising and look like good investment targets and we reach out to those.
“We prefer to use a data-driven rather than a gut-feel conviction approach. There’s a lot of psychological reasons for that. If you’re a senior member of a VC team and you go out for a coffee and chat with a founder, you’re creating a chemistry there and there’s no way you can avoid it. It’s very easy to have that bias creep in early where you like the founder.
“We try to remove that bias at a very early stage – if I get a deal through, it all goes to the pipeline team where they collect standard information in an objective, data-driven way, so were not being sucked into a sales story. We’re looking at the numbers and then based on that we will bring them in to pitch.”
The VC brings in 100 to 150 start-ups a year to pitch and conducts a lot of its efforts outside the capital, for example in Glasgow, Bristol, Leicester and Lincoln.
“We find that some of the deals outside of London are the best deals we do,” Wilcock concludes. “A combination of less hype, a bit less competition, but no difference in the quality of the founders.”
Top 3 things Blackfinch Ventures looks for:
#1 – Visionary founding team: “Ideally people who have done it before. Visionary, driven founding teams that really understand their space and are on top of their product.”
#2 – Global market: “Operating in markets that are very large, growing and probably global, too, so there’s no limit in how big they can get.”
#3 – Product market fit: “What we’re trying to do is spot the entrepreneurs that have got to the point where the product has got a market fit and it creates value, and when it gets to that point you can usually tell because all the engagement metrics tend to go up.”