Founders Future to kick off EUR 80m-EUR 100m fund this year as ‘now is the best time to invest in seed funding’

Founders Future II will aim to collect a total of EUR 80m-EUR 100m, he added. Menasé is “confident” on the firm’s ability to secure that amount due to good performance from its previous vehicle and his conviction that “now is the best time to invest in seed funding”.

“There are less ‘nice to have’ assets, and less deals in the pipeline at the moment; however, on average, the opportunities are of a higher calibre, and there is less competition in the market, which enables us to have a more structured and selective approach in our market,” he said. 

Seed funding does not have to confront the valuation issues affecting the wider venture capital market because investors enter at the beginning of the businesses’ life cycle, and their valuation is entirely dependent on the amount of capital they receive, he said.

Founders Future II’s limited partners will be entrepreneurs, single family offices and corporate or institutional investors, and the firm is expecting a very high re-up rate.

Founders Future’s first-generation fund collected a total of EUR 80m between 2018 and 2022, including EUR 30m dedicated to impact investing, which will be entirely deployed by year-end.  

Investment plans
Founders Future II will mainly invest EUR 3m-EUR 10m in the firm’s portfolio, deployed across Spain, Germany, the UK, Finland and Austria. The firm currently holds investments in 90 companies in France and in Europe, for a total valuation of around EUR 3bn.

Founders Future II will invest in 40-50 companies, whereas its predecessor invested in 60. It expects to make its first deal, which is pencilled in for September, as soon as the vehicle has reached a first close.

The upcoming vehicle will invest in line with the firm’s usual strategy, targeting SaaS-based platforms or marketplaces innovating in the sectors they operate in; mainly food, energy, bank and insurance, wellness and workplace. 

Founders Future also favours asset-light companies, without hardware, with high growth potential and with a business model that can be exported.

It will invest in exchange for a minority stake and very often has a seat at the board.

“Our main investment criterion is the companies’ founders,” Menasé said. The majority (52%) of the companies backed by Founders Future are founded by serial entrepreneurs with an established track record, he added. The firm will invest in companies without revenue if they operate in a market that Founders Future is familiar with, or if they are managed by people they have been in touch with.

The asset manager is usually the first professional investor in a company and acts as lead or co-lead in funding rounds. The firm favours seed funding rounds rather than pre-seed.

All of its deals are originated internally, with up to 10,000 annual investment opportunities received and 15-20 deals carried out each year.

Focus on profitability
The valuation drop in the venture capital market accelerated the firm’s strategy to support companies in their path to profitability, Menasé said. Breaking even has always been a priority for the firm’s portfolio companies, which are faring better in a context where profitability has become a key criterion due to the difficulty in raising funds.

The firm’s goal is to maintain a balance between very ambitious companies in need of a significant amount of cash to expand globally, as well as local players. This should allow the firm to maintain a successful exit strategy and be able to get a high level of liquidity, he added. 

Founders Future II expects to exit companies after a three-year period, whereas its predecessor aimed to hold investments for five years.

So far, the first fund has carried out three exits, with net IRR of 25%-35% he said, declining to give further details.

Founders Future was established in 2018 by Menasé and employs 12 people in Paris.

It has a strong ESG focus, with a B Corp certification and an endowment fund, Founders Future Act, which supports NGOs such as Doctors without Borders and the Red Cross. 

The firm also focuses on companies with a clear positive impact, such as French food composition analysis app Yuka and turnkey consignment service Bibak. It evaluates its impact strategy, its carbon footprint, governance and diversity metrics before and during its investment period.

For companies that do not have an obvious impact, Founders Future will not invest if management is not open to working on ESG-related issues and kick off a strategy to improve their sustainability.

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