Creator Fund to back early-stage university deeptech startups

The next generation of leading deeptech startups will emerge from Europe’s universities. At least, that’s the belief of Creator Fund CEO and founder Jamie Macfarlane. 

Creator Fund has just raised a $20m fund — its second after a first of $5m in January 2021 — to invest in early-stage deeptech founders from UK universities across areas like AI, life sciences, robotics and quantum computing. The investing team is made up of 38 mainly PhD students on the ground across 28 universities in the UK.

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

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

How does the Creator Fund work?

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

Each student investor is put through a 10-part training programme that teaches them everything they need to know about being a VC.

They’re then matched with an industry mentor who works with them to identify opportunities early and to perform a technical analysis of potential startups to invest in. Each student brings strong domain expertise, which differentiates Creator Fund’s model from traditional VC firms, Macfarlane says. 

👉 Read: Does the university tech transfer system need an overhaul? 

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

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

The perks

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

“If you think about starting a company, the biggest challenge that you face up front is like where’s my first engineer going to come from? Or where’s my commercial lead going to come from?” Macfarlane says. 

“The majority of companies that we back recruit directly from our university network, either people who are in my PhD team, or from our broader network across universities.”

Secondly, when founders are ready to raise larger rounds, they can tap into Creator Fund’s wider network at leading UK VC funds. 

Lastly they get strategic support. This includes on-call support and advice from UK-based startup accelerator Founders Factory, which backs Creator Fund, and mentoring from Creator Fund’s team of core investors. 

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

Where’s Creator Fund’s money going?

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

Students are increasingly turning to entrepreneurship as a viable career path, and Macfarlane says they’re seeing up to 250 companies a month, and closing around a deal per month.

The first fund’s 16 investments include:

• A pre-seed investment in Imperial College-based life sciences startup BaseImmune, which recently raised a £3.5m round led by Hoxton Ventures. The company is developing mutation-proof vaccines.
• Edinburgh-based Touchlab, which is developing electronic skin for robots to give machines the power of human touch. Creator Fund led their pre-seed round after discovering the founder in the Edinburgh robotics lab. Octopus recently led a £3.5m seed round. 
• RecyclEye, launched by a group of PhDs in machine vision who are creating recycling plants that can sort rubbish automatically. It raised a £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: firstly, founders will now be able to raise bigger rounds, with more investment available. Pre-seed investment will range from $100k to $200k and then larger investments between $400k and $600k.

Secondly, there’ll be a sharper focus on deeptech startups.

“I think for universities, the type of business that they’re going to produce, that’s really going to win, it’s innovation rich companies with a really technical founder who really understands the field,” Macfarlane explains. 

“And so I think when we looked at the first fund it was those types of businesses that have really succeeded. And so we’re going to be sharpening that even further with the second one.” 

He expects about 75% of the portfolio to be made up of deeptech companies, which under the Creator Fund’s definition covers AI, life sciences, quantum computing and robotics. The remit can go beyond that though, if a startup passes the Creator Fund litmus test: does it have a world expert professor or PhD among its founding team, and do they have an advantage to win?

👉 Read: Can Harry Destecroix turn Bristol into Britain’s deeptech capital?

Seeking out Europe’s deeptech founders

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

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

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

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

The aim is to seal seven to ten early-stage deals under $100k, at six or so universities “where the dealflow is most exciting”. Creator Fund will not be leading these rounds in the way it does in the UK, but the founders will still have access to its talent network across Europe. 

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

Last year, N26- and UiPath-backer Earlybird launched a €75m fund to back companies coming out of European research institutions.

Tom Nugent is Sifted’s digital editor. He tweets from @TJNugent92