London-based D2 has today announced the close of its Fund I at over €18 million with the vision to create the most founder aligned venture capital fund in the world. The firm is offering startups terms that get cheaper for them the more efficient they end up being in their business. Investors in the fund include Shell Ventures, Mountain Labs, Bland Group, and a series of exited founders and VCs.
D2 aims to improve the odds of success for founders – conscious of the fact that the path to success or failure for startups really depends on a solid growth path and efficient business models. The firm incentivises efficiency by offering cheaper and more flexible investment terms while providing access to a network of experts to help founders scale their businesses.
With digitisation and massive leaps in software development companies today benefit from a set of digital rails that they can build their business on top of. The result is that it’s never been faster or cheaper to iterate towards product-market fit. It brings about more optionality for startups. Software businesses no longer need to decide their destiny at the point of company formation, instead, they can stay lean early on and aim for Series A milestones on the back of limited external capital. At this point, they can decide on the best path forward armed with more knowledge of what makes the best business sense.
Despite this, VC has gone in the opposite direction. Startups increasingly find themselves having to sell themselves as the next deacorn to get VC support – it commits them to a path that limits founder optionality from the beginning and removes the chance for agility and adaptability. The reality is that only 1-2% of seed-stage venture-backed startups become unicorns – so to raise funding purely on that pursuit is limiting.
The standard venture capital model is ready for a transformation.
Led by Amory Poulden and Nicholas Gaggero, D2 want to create the most founder-aligned fund to create the future of tech entrepreneurship. D2 invests between £200k and £1M in early-stage startups across Europe, focusing on real businesses with positive unit economics from inception, and, that are led by founders who want to build enduring companies.
Amory Poulden, Founding Partner at D2 said: “Startups today benefit from a set of digital rails that they can build their business on top of. The net effect is that it’s never been cheaper or faster to iterate to product-market fit and scale. We want to provide a new form of venture capital that is better aligned with the opportunities of today and gives founders more options to grow their company in the way that makes the best sense for them.”
The fund is offering founders more choices. They can choose between a straight equity round, or, a round using D2’s flexible HERO note. The HERO either convert into equity or a revenue share depending on the startup’s selected growth direction and can end up being 75% cheaper than a straight equity round. Post investment, the fund can offer non-dilutive capital to help founders fund the repeatable elements of their business without having to sell their equity.
Nicholas Gaggero, Partner at D2 said: “At the early point in a startup’s life everything is possible, and nothing is certain. Yet the way you raise your first round of capital narrows your options as a founder and dictates the direction of your business. D2 offers more flexible venture capital that can end up looking very different depending on whether a founder ends up pursuing a classic venture path or a more profit-focused route. D2’s terms actively reward efficiency with cheaper capital that helps founders own more of their business at exit. “
As a result, D2 is offering founders optionality, conscious growth that rewards capital-efficient founders with cheaper capital, and the right type of capital – funding that’s only applied when it makes sense and the timing is right.
The wider goal is to bring fresh thinking to VC funding, recognising that there can be no one-size-fits-all model, supporting founders in a way that prioritises individual needs and choices.
Jurgen Hornman, Investment Director at Shell Ventures said: “Shell Ventures is very excited to be D2’s partner. Their drive to provide founders with less dilutive options is helping to innovate the VC space and perfectly aligns with our own aim to be founder-friendly. We look forward to working with D2 to gain more insights about early-stage, capital-efficient SaaS-based startups in Europe and to further increase our collective positive impact on the companies that are working tirelessly to accelerate the energy transition.”