What does a marketplace for misfit organic vegetables, an app that supports people affected by eating disorders, and an anonymous employee review platform on equality in the workplace, have in common? They are all founded by women. They are also among the eight startups seeded by funds from Unconventional Ventures Pre-Fund 1 (UV PF1), Unconventional Venture’s first investment vehicle since its foundation in 2019 by founder and Managing Partner, Thea Messel.
Unconventional Ventures is a Nordic early-stage investment firm investing in under-represented founders. Headquartered in Copenhagen, Unconventional’s UV PF1 fund equates to €125K from a diverse group of 60 investors – 85% of which are women – aged between 16-70, from over ten different countries. Fund participants included professional VCs, angel investors, startup founders, executives, students and even retirees. The Unconventional micro-fund is in fact a pre-fund; it is not a conventional fund where investors invest in an investment strategy, but a specific capital raise for pre-selected companies.
We recently spoke with Thea Messel about her experiences at the helm of Unconventional Ventures, their wins and challenges in its first year of operation, next fundraising and her advice to women and under-represented founders.
What first got you into investing? What is your story?
While working in the financial industry, particularly focusing on climate change, I saw how difficult it was to find financial products that had sustainability at their core. When I transitioned into the startup space, I began thinking about how to make banking sustainable and how to build different products to fuel different startups. As a mother of one and then two, I also started to see structural and unconscious biases and lack of equality. Many of these biases affect female founders, with glaring effects particularly when it comes to gender and ethnicities. What particularly puzzled me was that we could see so little early stage funding was going to female founded companies, even in the Nordics (2%), the most equal region in the world, and at the same time we could see that female-founded companies were overperforming compared to all the male-founded companies.
I then created a pitch contest for female founders. The deal flow we received was amazing and the seed for Unconventional Ventures was planted. In the summer of 2018, I met Arlan Hamilton, and her experiences as founder and managing partner of a venture capital firm in the US investing in underrepresented founders resonated with my own experiences. I then created our first micro-fund and Arlan became its first limited partner.
Why women and under-represented founders?
I see the true value in companies founded by women and underrepresented founders. Besides the deal flow being of a higher quality, these founders tend to be that extra bit more conscious why they are creating the business that they are creating. The challenges they take on are typically bigger and will have a positive impact on society as a whole. This could be, for example, halting climate change by tackling food waste, providing financial inclusion for underserved groups, working on digital health solutions to underserved patient segments, or creating technology that increases transparency, like ‘diversitytech’, which I am obviously a huge fan of.
I believe that the businesses of the future will be those that have “impact” at the centre of their business models, and these tend to be run by women and under-represented founders. The sweet spot for me is between business opportunity and impact. This goes both for Unconventional Ventures as a fund itself, but also for our portfolio companies that create businesses that are scalable profitable businesses with impact. I believe those are the businesses of tomorrow.
What has been your greatest achievement at UV so far?
The fact that we are up and running, with investors and a fund, and investing into eight startups is a huge achievement in itself! Our first fund ‘UV PF1’ was a small fund of €125K , but it got us started. We were able to prove the thesis that there are high potential and unique startups run by under-represented groups out there, and which present highly competitive opportunities.
What have been your biggest challenges/failures and the lessons learned?
Even though you prepare for all the hard work, you don’t really know what it’s like before you start. One of the things that has been most challenging for me is understanding and reading the intentions of potential investors for the fund. It took me a lot of time to learn how to read the signs when people really wanted to see change or just wanted to be part of the “diversity” bandwagon. The number of things that I needed to learn in a short amount of time was enormous. I initially planned to raise a larger first fund and the failure to close said fund enabled me to go back and create an innovative process, and put in place a structure that made it legally possible for smaller investors to take part in Unconventional Ventures and back our mission. Looking back now, I am very grateful that we were able to lay this foundation. After all, that’s why I wanted to create Unconventional Ventures in the first place: to source underrepresented founders, and get them backed diverse investors, including under-represented investor groups. Early stage investing and venture capital funds are usually not accessible unless you have millions to spend, but we found a way to make that possible.
What are your priorities this year? What exciting things can we expect from Unconventional Ventures in the future?
We are now preparing for our next entity, and are currently fundraising, which takes up a lot of time. Furthermore, the top priority is supporting our current portfolio.
We are most excited about proving our own thesis: sourcing under-represented founders, and getting deal flow from under-represented markets. We are, and hope to continue, sourcing founders that are disrupting industries, as well creating new industries.
Could you tell us your impression of the current VC landscape in Europe? How have you seen it change in the last 5 years?
To my knowledge, there are already 10 funds across Europe investing in women and under-represented founders, so the landscape is definitely changing. However, there is a divide, and it depends on the kind of network you have. A lot of conventional funds I spoke with never heard of a fund like ours.
What practical actions do you think need to be carried out to shift the funding landscape in the next 5-10 years, and by who?
I want to see a wave investment into emerging fund managers – managers that dare to be outspoken, put money in funds in a new way and help change the statistic that only 2% of funding is going to female founders. I also want to see legislative changes; today it is almost impossible for small investors to invest in early-stage companies. I hope to see more and more under-represented founders thrive and create amazing businesses, on a large scale. This is what will create a better future for us all.
What advice would you give to startups with female and underrepresented founders, who are currently experiencing pushback?
First, look up funds that are targeting you as founders. There are numerous funds wanting to invest in women and under-represented founders (Ada Ventures, Jane VC, Borski fund in Europe to name a few). Then, when targeting more conventional funds, and funds that maybe are interested in your industry, take a look at their portfolio and ask, have they invested in diverse founders? Do they have female investment partners who are decision makers? These are the things that increase your chances for investment. So start there. You can then do the same for business angels.
For me, the future is unconventional! I believe that those who will win going forward are those that solve problems with transparency, inclusivity, and a will to make the world a better place, one founder and one business at a time.