VC Profile: Possible Ventures lines up frontier tech deals halfway through fresh EUR 60m fundraise

The firm is halfway through the fundraise for its third fund and is planning to announce a first close by mid-September, said Hitchen.

Its flexible approach in acquiring small stakes in startups across the frontier technology segment is well received by investors, he said, referencing the tailwinds benefiting investments in the space, particularly increased interest from policymakers.

"I'm proud of our fundraising progress because the market is quite different to two years ago," said Hitchen. "Our dedicated approach helped us secure a very good uptake from existing LPs, as well as expand our LPs base."

With its current fundraise, the firm wanted to expand its investor base internationally, and as a result, its LPs base now includes some family offices and several funds-of-funds, many of which specialise in investing in emerging markets, he said. Professional VC fund-of-funds include Spanish firm Aldea, Germany-based Equation and UK-based Molten.

The majority of its 200 investors are European, including individuals and entrepreneurs, as well as 14 founders of startups that Possible Ventures had previously backed.

The firm is currently raising the fund across two vehicles, allocating EUR 25m to its core pre-seed and seed fund and EUR 35m to a separate fund dedicated to follow-on investments, said Hitchen.

Contrary to the common practice of fund managers, the firm is not aiming to increase its fundraising target each time it goes on the market. Seeking the same amount as its last fundraise, it plans to deploy its fresh capital into roughly 60 companies, acquiring 4% to 5% ownership stakes with tickets ranging between EUR 300,000 to EUR 1m. This means the fund will start making deals as soon as it holds its first close and will be invested across around two and a half years, he added.

"We don't seek to lead the rounds we take part in and while the majority of institutional funds require 15% to 20% stakes, as a smaller fund, we can be involved with a wide range of leading companies," he said. "Our peers appreciate our diversified portfolio and as we're not competing with them for ownership, they often want to bring us into funding rounds as we also offer access to a global network of investors."

Aligning with policy

With a focus on frontier technologies, the firm is targeting startups in tech bio − a segment where machine learning and software meets biology, as Hitchen puts it − as well as in climate tech, industrial transformation, energy and decarbonisation themes. "Today, AI touches all of these areas and is the new oil that underpins most deep tech companies and there's increased interest from governments and policymakers as these technologies contribute to sovereign capability and have become geopolitically very important," he said.

To some extent, the space is more shielded from the current macroeconomic concerns, given increasing sovereign and institutional support, including the available funding from dedicated funds in Europe and the UK, he added.

The NATO Innovation Fund held a final close on EUR 1bn earlier this month, becoming the world's first multi-sovereign VC fund to invest in startups developing innovative technological solutions, "leveraging the potential for commercial innovation to address critical defense and security challenges," according to an announcement.

Similarly, the Inflation Reduction Act (IRA), a USD 500bn bill that was signed into law in the US in 2022, has aims including channelling federal spending in the direction of carbon and healthcare cost reduction measures.

"There's a lot of different types of funding available for these types of startups and for a very early-stage investor like us, this is very positive because we need aligned investors to come after us," said Hitchen, noting that these industries are likely to produce outlier returns over the next decade, attracting even more funding.

While Possible Ventures invests globally − including in Australia, USA and Brazil − being based in Munich, it targets mainly companies based in Europe, primarily in Germany and the UK. It is always seeking divergent teams running startups with a base level of technical feasibility, he said.

According to Hitchen, the firm's best investment to date was in Sorare, a French developer of a global fantasy football game with blockchain-based sports trading cards. When it first invested in the business in 2019, Sorare had a EUR 2.1m valuation, which soared to EUR 4.5bn in three years.

The firm would naturally like to repeat this success, but looking ahead, its team expects the biggest companies of the next decade to be built in deep-tech and frontier tech trying to solve humanity's biggest problems, he added.

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