Creator Fund to support early-stage deep tech university startups

The next generation of leaders deep tech new companies will emerge from European universities. At least, that’s the belief of Creator Fund CEO and founder Jamie Macfarlane.

The Creator Fund has just raised a $20 million fund, the second after the first of $5 million in January 2021, to invest in early-stage deep tech founders from UK universities in areas like AI, life sciences , robotics and quantum computing. The investment team is made up of 38 PhD students, mostly on the ground at 28 UK universities.

The fund is backed by more than 70 LPs, including the founders of autonomous vehicle startup Wayve, online travel company Lastminute.com and AI startup Faculty, and by general practitioners from leading European investment firms, between them affine capital, firstminute.capital and MMC Ventures.

It has also raised a smaller $1 million angel fund dedicated to investments in universities in Europe, part of a pan-European expansion plan that it hopes to replicate its UK success across the continent.

How does the Creator Fund work?

When it launched, the Creator Fund was the first VC of its kind in Europe to use student investors. The model has been ever since replicated in Switzerland by VC Wingman Ventures, based in Zurich, and pioneered in the US with initiatives such as Dorm Room.

Every student investor goes through a 10-part training program that teaches them everything they need to know to be a VC.

They are then assigned an industry mentor who works with them to identify opportunities early and conduct technical analysis of potential startups to invest in. Each student brings a wealth of domain experience, which differentiates Creator Fund’s model from traditional venture capital firms, says Macfarlane.

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“A machine learning company will be scrutinized by a Ph.D. in machine learning, for example, which is a differentiating factor from traditional venture capital where the investor might be investing in a life sciences company but not have a degree in life sciences”.

Once a potential deal is identified, the fund’s core team of professional investors discusses the go-to-market strategy and performs due diligence on the founding team and business model.

The advantages

Startups that become part of the Creator Fund network receive three main benefits. Firstly, they have access to the best talent from the UK’s leading universities.

β€œIf you think about starting a company, the biggest challenge you face is where will my first engineer come from? Or where will my business advantage come from? Macfarlane says.

“Most of the companies we support hire directly from our university network, whether it’s people who are on my Ph.D. team or from our broader network at universities.”

Second, when founders are ready to raise larger rounds, they can tap into the Creator Fund’s wider network across leading UK venture capital funds.

Finally, they get strategic support. This includes on-call assistance and advice from the UK-based startup accelerator Founders Factory, which supports the Creator Fund, and mentorship from the Creator Fund team of core investors.

The founder of Loci, a Cambridge-based startup that turns video content into virtual worlds for game developers and the metaverse, for example, he worked with the Creator Fund for three months to find his first business hire.

Where does the Creator Fund money go?

Universities that are part of the Creator Fund UK network include Aberdeen, Edinburgh, Imperial College, Oxford, Manchester and Queen’s University Belfast.

Students are more and more resorting to entrepreneurship as a viable career path, and Macfarlane says they see up to 250 companies a month and close one deal a month.

The 16 investments of the first fund include:

  • An early investment in Imperial College-based life sciences startup BaseImmune, which recently raised a Β£3.5m round led by Hoxton Companies. The company is developing mutation-proof vaccines.
  • Edinburgh-based Touchlab, which is developing an electronic skin for robots to give machines the power of human touch. Creator Fund led its pre-seed round after discovering the founder at the Edinburgh Robotics Lab. Octopus recently led a Β£3.5m seed round.
  • RecyclEye, launched by a group of computer vision doctors who are creating recycling plants that can automatically sort garbage. Raised a Β£3.4m seed round from US investors after Creator Fund’s pre-seed round.

There are two main differences between the new fund and the original: First, founders will now be able to raise larger rounds, with more investment available. Pre-seed investment will range from $100k to $200k and then larger investments between $400k to $600k.

Second, there will be a greater focus on deep tech startups.

β€œI think for universities, the kind of business that they are going to produce, that is really going to win, is innovation-rich companies with a really technical founder who really understands the field,” Macfarlane explains.

β€œSo I think when we looked at the first fund, it was those types of businesses that were really successful. And then we’re going to sharpen that even more with the second one.”

He expects about 75% of the portfolio to be made up of deep tech companies, which the Creator Fund defines as covering AI, life sciences, quantum computing and robotics. However, the scope can go further if a startup passes the Creator Fund litmus test: does it have a world-class professor or Ph.D. among its founding team, and do they have a head start on winning?

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Looking for Europe’s deeptech founders

Deeptech investment is picking up speed in Europe. A new deep tech research institute backed by AWS, Google, and Deepmind is set to open in Hungary later this year.

However, according to McKinsey, Europe innovation rate it’s lower than the US and China, something the Creator Fund is trying to fix.

The fund started in London before expanding to Oxford and Cambridge and then the rest of the UK, and Macfarlane plans to replicate that in Europe.

The $1 million angel fund will deploy investors on the ground later this year at some of Europe’s leading deep tech universities: think ETH Zurich and the Technical University of Munich (TUM).

The goal is to seal seven to 10 early-stage deals for less than $100,000, at roughly six universities “where the deal flow is most exciting.” The Creator Fund will not lead these rounds like it does in the UK, but founders will still have access to their network of talent across Europe.

Then, says Macfarlane, the plan for next year is to expand that to a pan-European proposal and raise a fund that can deploy capital to universities across Europe.

Last year Earlybird, a backer of N26 and UiPath, launched a €75 million fund to support companies emerging from European research institutions.

Tom Nugent is the digital editor for Sifted. He tweets from @TJNugent92

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