Episode 1 rolls out new $81M seed-to-Series A fund, despite Brexit headwinds

Episode 1 has been a stalwart of the early-stage funding scene in London for the last few years, investing in successful startups like Carwow, Triptease and AimBrain. It’s now closed its second U.K. “seed-to-Series A” fund, which generally aims to lead rounds of £500,000 to £2 million. The fund is a £60 million ($81 million) Enterprise Capital Fund (ECF), raised with the support of the British Business Bank, the U.K. government’s economic development bank. Many U.K. funds are turning to the BBB in the wake of Brexit, which has effectively switched off the EU funding taps.

Several new institutions, including Draper Esprit and ADV, joined the ranks of the fund’s existing LPs. Draper Esprit, the publicly listed VC firm based in London, announced its investment in Episode 1 back in October.

Episode 1 said the new fund is 60 percent bigger than its first fund, and was oversubscribed, despite the uncertainty caused by things like Brexit.

Founding partner Simon Murdoch (pictured left) emphasizes that the “enormous amount of experience at Episode 1” — which includes his early stewardship of Amazon UK — is what attracts early-stage founders to the fund. In June the fund invested in AimBrain, a London startup that offers “biometric identity” as a service to help fintech companies and other financial institutions fight fraud.

Murdoch told me: “The macro environment is moving around a lot. I’m not a fan of Brexit. It’s causing problems with startups with recruitment. But it’s better in early stage than being invested in big companies. There’s still plenty of innovation. Startups are still an exciting place to be, even with the current macro environment.”

“It’s very hard to raise a fund right now. Even though we’re still quite well-known, it’s still hard to get money from ‘fund of funds,’ so it’s great to see DE and ADV invest and we’ll see more of that patient capital become involved in the market, especially with Brexit.”

He added: “We are predominantly about Enterprise and Marketplaces. We’re shying away from B2C as it requires deeper pockets. We’ve done a number of AI/ML companies already. One key thing is the startup aiming at big markets. We are keen on mega-markets like property, cars, manufacturing. So we are focused on being ‘seed to Series-A’ specialists, where the entrepreneurs are often technical founders. The thing to do is look for great people.”

On ICOs he said: “ICOs are great for companies if they can raise money that way. But investors should be careful and only buy into ICOs where they are confident that the demand will outstrip supply in the future.”