Plural holds EUR 250m final close for debut early-stage fund

The team is led by founders Ian Hogarth, Khaled Heloui, Sten Tamkivi and Taavet Hinrikus.

Hogarth co-founded Songkick in 2007, selling it to Warner Music in 2017. Heloui was CEO of Bigpoint from 2013 to 2017 and was an early backer of companies including Deliveroo and Bolt Payments. Tamkivi was an executive at Skype early on in the company's history and later co-founded remote working platform Teleport, which was sold to talent mobility platform Topia in 2017. Hinrikus co-founded international payments platform Wise in 2010; the company completed a direct listing in London in 2021.

The founding members of the firm had worked together prior to raising the fund, Heloui told Unquote. "We have invested in Europe and the US, doing SPVs together and leading some rounds, but there was a stark difference between what founders could or should expect from their investors, due to the lack of support in Europe," he said. "We found that there was a way to scale venture with founders & operators and started structuring the fund last year."

The team believes that having an operational background as a founder is crucial to being a successful VC investor. Citing Sifted, the firm said in a press release that around 50% of venture general partners in the US have an operational background, versus just 8% in Europe.

"There is no arguing against the fact that the US is more advanced than Europe," Heloui said. "But there may be more structural challenges and issues. In Europe, setting up a fund is challenging and there is a lot of administrative burden. In the US, the level of friction you encounter is less. We want to build solutions around this, allowing operators to become investors."

Plural wants to scale its team from four to 10 people by the end of 2023, Heloui said. In its plan to differentiate itself from typical VC structures, the firm has developed rules on governance and how it makes its decisions that differ from the norm, according to Heloui.

"We have spent an incredible amount of time on governance, determining how we make decisions and who is responsible for what," he said. "We did not take the standard industry model, we wanted something that would allow the firm to scale. On investment decision-making, we do a lot of work to identify the right "unemployables" with the right experience and mindset to be the best supporters and backers of founders." The term "unemployables" refers to the experienced founders that the VC is seeking to partner with, who it believes will find it hard to work for anyone else following their experience as entrepreneurs.

"We don't want an undue portion of their time to be spent convincing the IC of these investments, so we have discretionary decision-making on investing for anyone who joined our team," Heloui said. "But we still have risk management, so we're not just giving a free cheque to anyone who joins us, and we are each limited to four or five investments per year as a lead."

Investors
The LP base is predominantly made up of European and US LPs, Heloui said. "We have a healthy mix with a few institutions like university endowments, foundations, a couple of funds-of-funds, and a few family offices," he added. "And we also have some incredible operators and founders. We wanted people who could support us and be an extension of our network. And the university endowments will use their proceeds for scholarships, which is important to us and the founders we back."

The VC expects to further develop and expand its LP base for its next fundraise. "We are oversubscribed and a lot of LPs wanted to put in more, and we would be happy to accommodate some of them, increasing and entrenching these relationships," Heloui said. "Some institutionals take longer to get to know their partners and we are looking forward to developing those relationships next time."

Investments
The fund has made 14 deals to date, focusing on early-stage rounds and covering themes including climate, finance, healthcare, and AI-enabled businesses. These investments include metaverse full-body online 3D avatar developer Ready Player Me, and Mos, a banking platform for students.

"Our pipeline is pretty diverse right now," Heloui said. "The sectors we invest in will be representative of the people we bring in, reflecting their areas of passion and where they want to focus their time and efforts. We will be open-minded. The impact of technology is not showing any form of slowing down."

The fund is expected to make around 35-40 deals with equity tickets of EUR 1m-EUR 10m; it has a median ticket of EUR 4.5m to date.

"We want to be the main partner for the founders we back, so the more influence we can garner and maintain, the better partner we will be," Heloui said. "We tend to try to get double-digit ownership but we don't want rules that are too rigid. Some of the stakes in our portfolio trend closer to 20%, while some are a bit below 10%."

The firm could raise further capital for follow-on investments and will provide whatever makes sense in terms of each round, Heloui told Unquote. "If we find an iconic company, it will be critical to scale our involvement. We have investors who can support this and we want to raise funds to evolve our relationships with these companies. We don't have limits as to how long we will invest in a company."

The firm could offer opportunities for its LPs to participate in follow-on investments, according to Heloui. "We will work out for form of our LP participation, but we will allow them to double down on specific opportunities, and we could also extend the fund. But we want to treat all of our investors equally well, making sure they all have access to these opportunities."

While Plural sees plenty of opportunities for deployment in the current market, the firm acknowledges that the chances of early-stage startups raising further capital in future is currently much more uncertain, Heloui said. "The level of risk taken by investors has gone down, and scrutiny has gone up," he said. "So we need to raise even harder questions on the likelihood of our founders raising further capital. This climate will likely not change any time soon, so we have to push each other and challenge each other, putting our attention on the ability of the business to thrive or sustain itself. Growth at all costs is not justifiable at all costs and we need to see longer runways. But venture is about the breakouts, not the hit ratio, and we want to be in front of the best companies."

People
Plural – Ian Hogarth, Khaled Heloui, Sten Tamkivi, Taavet Hinrikus (co-founders).

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