Published in print and online editions of the Financial Times

Tech entrepreneurs launch venture fund

By Maija Palmer, Technology Correspondent
Published: December 10 2009

Technology entrepreneurs now have a unique way to cash in on their companies following the creation of a new venture capital fund.

The Founders Club, launched on Thursday, is a London-based venture capital fund open only to founders and chief executives of start-up companies.

The entrepreneurs will pledge to pay five to 10 per cent of any money raised – after they sell, or float, the business – back into the fund. When the exit takes place, the cash is distributed among members.

There will be 30 members in each fund, with a combination of early and late-stage companies to ensure pay-outs are staggered over a number of years.

Andrew Romans, founder of the fund, said that the idea appealed to entrepreneurs who were having to wait increasingly long to sell or float businesses in the current climate.

“The average time from a series A funding round to an exit in 2002 was around two years. In 2008 it had become six years. Now the IPO market has completely gone away and valuations on trade sales are down. To get a little liquidity is a big deal,” Mr Romans said.

Some 15 founders have already been selected for the first fund and a further 100 have applied to join. The club declined to name any of the members but said there was a mix of Silicon Valley and European businesses from the portfolios of the best-performing venture capital groups.

Mr Romans said that entrepreneurs also liked the network they gained through participating in the fund. Only start-ups that have raised money from venture capital investors are allowed to apply, and each business is closely vetted before being allowed in.

The Club will be managed by a group of 14 venture capital advisers, including Chris Burke, the former chief technology officer at Vodafone, Jonas Risberg, a former partner at 3i, and Patrick Chung, partner at New Enterprise Associates in Silicon Valley.

See original press release here.