Jon Coker, Founding Partner at Eka Ventures: Eka Ventures closed £80m second fund

0:00Hello and welcome back to the Scaling Europe show presented by Deal. I'm Seb Johnson. Today I'm joined by Jon. Jon is one of the co-founding partners of Eka Ventures, which is an amazing early stage impact VC investing across health, wellbeing and sustainability with a great portfolio, including companies like Runner, Urban Jungle, Hive and some other great, great companies. It's great to have you today. Jon, you've got some amazing news. Take it away.

0:19Jon Coker:Yeah, well, thanks for having me on. Yeah, it's a really exciting moment in Ica's life. We're announcing the final close of our second fund today at our hard cap of$107 million or£80 million. Yeah, just thrilled to be able to talk openly about it. We've been investing from that fund now for a year. We've got six awesome companies in there, have had some incredible support from our existing investors and then added some awesome new LPs. So, yeah, very excited to be able to talk more about it. It's a big fund,£80 million, especially for the early stages, a big fund. What's the thesis? Can you give it a bit of a breakdown?

1:04How are you going to be deploying the fund? Ticket size, industry focus, that kind of stuff?

1:09Jon Coker:Yeah, sure. So Ika, we basically are building, always have been building Ika on three things. One is a focus on what we call shared value, which is basically a belief that impact and profit can be delivered together. And we want to be one of the best performing funds while also building a really impactful portfolio. Second is we focus on what we think is like three consumer megatrends. So making life essential products more affordable and accessible is one. Second is shifting to a more preventative healthcare model. Third is making our big consumer supply chains more resource efficient and decarbonized.

1:47Jon Coker:And then our third part of our, like, I guess our third principle is just reshaping the way that VCs assess founders. And so the fund, our second fund really doubles down on that. And then I suppose in terms of like what we actually do, we invest really early, typically lead rounds, investment sizes, one to three million pounds at pre-seed and seed. Very cool. Can you talk a bit about your data platform, which is I guess is one of your or your primary sourcing system or tool? I think I read it's like almost half of your deals from FundOne came from your own data platform and tool. Can you talk a bit about what that is and how that works?

2:28Jon Coker:Yeah, sure. I mean, I think so. When we started Eka, we believe that over time, so back in like 2021, we thought data was going to become table stakes for VCs in the way that they source. And so our first hire was someone to build out that platform. And it's been unbelievably valuable to us. As you said, since we started using it, it's sourced 50 % of the deals that we do, which I think is actually really unusual. I think a lot of VCs talk about having data platform. But if you kind of go under the skin of it and ask where they actually found their deals, it won't be coming through those channels.

3:00Jon Coker:And and like a number of our very best performing companies came through that platform, including our first exit from from one runner came through that platform. So, yeah, it's like absolutely fundamental to what we do. We continue to double down on it. And we just made a new hire to kind of double down the process of building that platform. We were. Yeah, you know, we're not precious about how we're building it. Like we are building it to deliver investments that we can invest in. And so we have lots of paid for data sources and then we have data sources that we need to kind of create ourselves.

3:36Jon Coker:Yeah, it's awesome. And so why do you think that still managed to be an edge for you? You know, as opposed to being super commoditized and everybody having access to the same data, like where, why is that data thing for you being so powerful? yeah so i actually think there's it's the combination of the way that we um have built it and the fact that we have a reasonably differentiated point of view on the kind of companies that we want to back um so if you look at the if in it we ran the numbers as you can imagine as part of the fundraise for for fund two and and 70 i think 70 percent of the investments we made in fund one had no competing term sheet when when we invested so so and i don't believe that is because we were seeing companies that other people weren't seeing it was just because we were seeing things in companies that other people weren't weren't seeing that's amazing validation um because it's yeah it's uh there's so much noise in the market at the moment it feels like deals are so hot and so competitive that yeah i mean i love hearing that because it's so rare you know and and there's lots of vcs who base the whole thesis on consensus investing investing alongside the best um sounds great that's really cool yeah yeah i mean i i think i think that's another reason why we go so early because like that if that that that's that is great if it if it was still the case like the round after we invested then it would be a night so our kind of job is is to see companies that we think will rapidly become very very hot uh but not at the point in time we look at them.

5:13Jon Coker:And yeah, we have like a lot of data to show that. We have, the fundraisings that have come into the portfolio after we've invested have also been great. So, but yeah, that's our, I guess, our kind of core job really, right? The right to exist is that, I think. And can you touch on the runner story? Like what did you see in that team early on that kind of stood out to you as like, you know, people building a great product? Yeah, so I think there were a few different things. I go back to that point that I made at a start around people. The two founders, we have a process that we run, which I think is quite unusual in the way that we assess teams.

5:55Jon Coker:And both of them really stood out to us through that process. And actually, if you look at the experience set of, they're called Dom and Ben. And Dom was the CEO. Ben was in charge of the brand build. And if you look at their experience set before starting Runner, Dom had an experience set that would be like classic venture backable founder in that he was he came from McKinsey, was in digital project there. How I think top first in chemical engineering kind of thing, whereas Ben didn't have that classic venture backable profile. He was a run trainer. That's how he got into it. um and and yeah he also he to us in the way that we assessed them he stood out as much as as don did in terms of like what he was capable of doing um and so the two of them together we were like that so we we do a lot of we don't just do consumer investing but we we kind of think consumer first and we've done a lot of consumer investing over the years and you need someone i believe like ben who is this like incredible voice of the company brand builder like really authentic alongside someone like Dom, who's an incredible product builder.

7:07Jon Coker:And then they both had just done some like really outlier stuff away from your normal kind of thing, which is another thing that we look for. So there was that. And then I think, which was the main point. And then the other thing was that when we looked at the way that they were, the kind of the customer engagement and love and some of the metrics around that, there was some really pretty unusual stuff in there. um and the that also i think is is is what really appealed to us about it but if you know if you look at dom's post when he announced the exit to strava like he he he said in it that they'd been speaking to like virtually every vc and and they'd got rejection after rejection until us um and and that is i guess goes back to that point about trying to see stuff that other people aren't saying and it's super interesting that your point that they both had very different backgrounds one being a typical VC backable, the other not, and both performing really well.

8:04And it's interesting that I speak to a lot of investors and there's such a degree of consensus around the right type of founders to back. And it's interesting that your process that you're running, it almost equalizes that, right? Actually kind of, I guess, like it enables people to rise irrespective of their background. How did you think about building that process? Like what kind of things are you looking for when you're testing?

8:26Jon Coker:Yeah, so we basically, when Camilla and I set Iker up, we went back through all of our track record from before Iker. And we had quite a lot of good outcomes from it and tried to identify things that were common amongst those companies. And the thing that stood out was the ones that we felt had really accelerated. The founders had this just unbelievable capacity to develop. and and it kind of makes sense logically right so when when we invest they're they're really doing stuff like you know we backed um gusto the food business when the founders were effectively still packing boxes and and then and then rapidly if they're doing well they go to managing people who are doing stuff and then very quickly they're they're managing people who are managing people and you know they're getting further so what they're actually doing is dramatically changing but they need to be like world class at it, at every step of the journey.

9:29Jon Coker:And then, so, you know, the old logic would be, okay, well, you bring in very experienced people to who, but that, the data doesn't say that. The data says that founder led businesses outperform in the venture environment. So those kind of two things are true. Founder led businesses outperform, the founder needs to change very dramatically in the way that they lead. And so we were like, okay, well, we need to find, we need to build a portfolio of invest in a portfolio of companies that are led by founders you have this like crazy capacity to develop and then then we were like okay well how do you assess for capacity develop and we built the framework that we use and i think there's there's there's lots of stuff in that the one that really stands out to us is just having shown in the past people having shown in the past that they're able to do something that is like truly outlier is is for us one of the best indicators and so we do this founder interview or kind of like basically we we say to founders look we want to have an hour to an hour and a half with you just one-to-one where we only talk about you we don't talk about the business at all and you just tell us like what you've achieved for what you've done to now and the stuff we learn from that is completely different to the stuff you learn from when they do the team slide in a pitch meeting and and we're looking for stuff in there where we're like oh wow you know that thing that you did on the side was just crazy impressive um yeah really cool i know yeah and it's um and it seems to be working right like fund one i read is top five percent for its vintage dpi and tpvi um tvpi which is amazing right like that's really a remarkable performance so whatever you're doing think something's going something's going right or well given those metrics given the stats how did you find fundraising for this for this for the second fund yeah so i i think um like fundraising for a venture an emerging manager venture fund is is never going to be an easy process and i think that we had incredible support from our investors in fund one which made it easier um and i think combined with the track record meant that um we like from a timeline perspective we so we finished investing fund one in q1 last year and we had a first close of fund two in q1 last year and so the the key objective when you go out to raise another fund is to make sure that you have like no gap um and we didn't have a gap um i think the interestingly i think the the lp market in europe has like matured quite a lot from the time we did our first um at the same time the backdrop was quite like a lack of liquidity in the market like a lot of investors that new investors that we spoke to or individuals or their their key theme is waiting for exits to be able to like recycle capital intervention and so um if i'm really honest the The real, the real, it's, it's hard to compare our experience of fund one to fund two, because we were so different.

12:36Jon Coker:Um, but yeah, it was, it, it was, it took about the time we thought it would take, but that is quite a long time. Yeah. Yeah. I mean, yeah, every, every manager says the same thing, that it is just like such a long process and you end up meeting so many people. Um, and so it, it, it sounds absolutely brutal. And I went for dinner with a bunch of emerging managers, maybe a couple of weeks ago who all like very small you know 15 20 million funds and they just like pay themselves no money they are working so hard i mean it's like truly grueling is my impression of it it's like wow these people like they're like founders it's like they're doing founders but it seems a lot lonelier because you never get to build the team past a certain size the timelines are a lot longer you can't just like ship a product and hope it takes off it's like you've got to wait years to start seeing success so I guess like how does it feel now like you've done it you've closed it how does that feel yeah it feels great I mean the main there's two parts one I think we've got just an awesome group of investors like the enthusiasm even you know chatting to them about the fact that we're going to announce it and and and their enthusiasm for that is is has been great and and I'm excited about that and then the bit that the reason that we do this job is to to get to work with founders and so um when you're fundraising you know you have to spend more time fundraising there's some of your time is spent doing that rather than meeting amazing new founders and working with the ones that you backed and so i just i'm i'm loving being able to like really focus on that and and um what's it been like being an impact investor it feels like there's been a long it's like a lot has changed in the world of impact investing since i guess you started i don't know it feels like it's sort of become less vogue or less in fashion in a way that it was like you know four or five years ago it was much more like everybody was behind it and there was a lot of talk about climate tech and sustainability and i don't know if it's geopolitics from the u.s but there's definitely been a sort of vibe shift what's it been like you know building and growing a firm like yours which is so mission driven yeah it's it's been a a bit like from a like the background noise it's quite been like a roller coaster um we when we started so camilla and i came out of a generalist VC and set our stall on building a highly commercial but impact focused venture fund and when we did that early conversations so this is kind of 2019 2020 early conversations were like what what are you doing like just raise a generous fund like why would you add this complexity of impact to what you're doing and we're like well then that's not the point that we're doing this because we believe this is like the future and an incredibly important thing to do and also we think that we can drive incredible returns doing this and then and then literally like three or four years later that um the kind of climate tech world took off and impact became much more and then people like oh wow you you kind of got that timing right and we're like no let me go but that isn't why we were doing this and then i think you go forward another two or three years and it's come off again like you just said and so um i i think the important thing is like we the stuff we're investing in is is is not reliant on any kind of soft funding like it's not that's not what it's about it's about like identifying opportunities where it is a kind of no-brainer when you see it when technology both in terms of the the what it delivers for people or the environment and then what it will do economically and and that i so the but fortunately for us while the background noise has kind of gone up and down we're being able to ignore it and you can still see it in the performance of the companies now is um yeah it's unconnected to that backdrop of of a slight softening in there and has it has it shifted the way founders are talking about it like you know in 2021 2020 2022 was it a bigger thing that founders were trying to talk about as well you we are an impact or mission-led business.

16:48And have you seen any change at that layer of the ecosystem where now, and I know climate tech's not the perfect example, but we've seen people move away from climate tech to sort of sovereignty and resilience. And a lot of the same companies have almost gone through this sort of rebrand of their messaging. Have you seen any difference in that layer of the ecosystem when it comes to being an impact-led company?

17:11Jon Coker:Yeah, I think the thing that's happened is that

17:18You can't get away anymore with a message that doesn't hang together on like, this is why customers are going to buy from us.

17:29Jon Coker:This is why we're better. This is why we reduce the cost for them. This is why we deliver them a better product. and at the same time we massively reduce waste or we massively improve the efficiency of the operations or if you're in a consumer business focused on health, they will feel the difference and they'll experience that difference. And so I think it has really sharpened founders' need to articulate why what they're doing changes, like possibly changes the economy. and what that does I think is it means that the best companies kind of rise to the top. I think there was a period of time where there was a lot of climate tech capital that was funding stuff that is harder to hold that argument together.

18:23Jon Coker:um yeah i i think it it's just it's extremely important that we have enough capital to to fund what with the transition that we need to go through at the same time it's also extremely important that that that that capital makes good returns um because otherwise it will dry up by definition and i feel like we're in a moment now where the best companies are getting funded and they will prove that amazing and um what advice would you give to somebody who's thinking about embarking on the journey that you've been on of right of like you know you had a great career and as you said generalist firm you then left to sort of start your own firm with a very strong and probably unpopular thesis at the time which i think all best investors do right you you know you carve your own path you forge your own way forward and you you build a thesis that is unusual and you've been successful in the sense that you've got good returns you're now under a second fund what advice would you give to somebody who's maybe a successful partner at another firm or maybe an even earlier stage vc who's thinking about following in the footsteps that you've walked already and is thinking about raising their own fund and doing their own firm what's something what's advice would you give them yeah i i think um uh it's it's actually i so i give the same advice regardless of whether someone whatever someone's thinking of doing if they're thinking about doing something on penural and that is you need like a really clear point of you um that is that is you can build true expertise around because no no one wants to hear like something that is just like a bit kind of run-of-the-mill it's just not interesting yeah and then you can create content around it you know you're you will know that more than better than than most and and um and you can build a reputation around it and then you can stand for something and that enables you to stand out from everyone else so that's i say that to people who ask like how to get into VC as an employee or like how to get into into companies I'm like you need something super specific that you are known for and you can double down that and the great thing about the world today is it's easy to to to kind of push content out and like become an expert in it so that that would be the number one thing and then the number two thing is it's just like know that this is gonna really like it's gonna take a lot like you're gonna have to work harder than you can kind of imagine for longer than you can imagine and you're going to need to like be ready to feel pretty uncomfortable financially um to get there and and those two things together like a very clear point of view and and resilience i think whatever happens whatever someone's trying to do they'll end up with something and then they can build for another amazing that's great advice and yeah the thing I love about Ventures is it's just so long term yeah it's like if you embark on that journey that's it for like 15 years you know it's like that's how long it's going to take until you really get meaningful liquidity or yeah well anyway look John thank you so much for joining me it's amazing news congratulations again and I look forward to seeing you kind of further deploy the second fund and uh and yeah take it from here thanks very much really enjoyed the chat and Thanks for having me on.