Investec Emerging Companies, part of Investec Corporate and Institutional Bank, is launching a fund, INVC, to invest in UK scale-up companies in the fintech and enterprise software sectors.
The fund has a target size of up to USD100 million, and will fill a gap that currently exists between seed and Series A funding rounds. Investec will be the cornerstone investor, accounting for approximately 15 per cent of the fund, with the majority provided by institutional investors and remainder by a small number of private investors.
Three investments already held by Investec Emerging Companies – fintech companies Monese, Curve and Bud – will be rolled into the fund at their entry valuations, providing an immediate uplift for investors.
The fund has made its first formal investment: Monese, the pan-European challenger bank that is providing instant-open accounts for the modern and global workforce via its own proprietary KYC technology. The company has raised a total of USD26 million to date. Alongside the INVC fund, other backers include Anthemis, Korea Investment Partners and Seedcamp.
Devin Kohli, who is co-head of INVC alongside Kevin Chong (pictured), says: “There is a widening gap between seed and Series A rounds. Typically, investors who fund a company’s seed round will struggle to find the capital to fund a subsequent raise. Meanwhile, the minimum cheque size for many larger investors who would traditionally fund Series A rounds is increasing, meaning that a cohort of promising early stage companies are underserved.”
The fund looks for market leaders tackling issues within large addressable markets, with high growth and a clear revenue model from the outset. For example, Monese – which Investec first backed in December 2016 – is unique among challenger banks in that it has with 400,000 registered users and a positive contribution margin.
Additionally, Investec believes that there is a lack of investors who can add non-monetary value post investment, and that this is an area where INVC can add further value through Investec’s network and internal resources.
Norris Koppel, CEO of Monese, one of the businesses that INVC has backed, says: “Having Investec and its network behind us has definitely put us in a stronger position. More broadly, Investec has international presence and ambition, and it’s important for us to work with people who understand and can support our vision to expand globally.”
Monese is currently signing up 35,000 new users a month.
Chong adds: “This isn’t an incubator or an accelerator of the sort you see from other banks. We’re not investing in companies to acquire their technology. We’re looking for companies with the potential to grow and become successful in their own right, rather than trying to benefit from proprietary tech.”
