MAGIC Fund Raises $ 30 Million to Expand Global Founders Fund – TechCrunch
Influential entrepreneurs like Paul Graham and Naval Ravikant still preach the need for startups to have founders turned investors on their capitalization table. As Ravikant says, “Founders want to know that the people they take money from have first-hand experience.. ”
Its AngelList platform has helped individual founders-investors find and participate in transactions via collectives. However, some venture capitalists have gone from one level to another by getting founders to create a fund and invest together.
Today one of these, MAGIC Fund, a global collective of founders, announces it has raised a second fund of $ 30 million to continue supporting start-ups in Africa, Europe, Latin America, North America and Southeast Asia.
Since the launch of the company’s first fund in 2017, MAGIC has invested in 70 companies in the pre-seed and seed stages in these emerging markets.. Some of these companies include Retool, Novo, Payfazz, and Mono.
MAGIC Fund has 12 founders who act as general partners. TechCrunch met with Managing Partner Adegoke Olubusi and Operating Partner Matt Greenleaf to learn more about the fund’s thesis and activities.
Olubusi, who had created and left a few startups over the years, also dabbled in angel investing for a while.. In 2017, Olubusi’s current startup, Helium Health, was accepted into Y Combinator. It was there that he met more founders like him who were angel investors with impressive portfolios.. The interesting point? Each founder wanted to invest in other companies during the YC Demo Day.
“About three years ago I was at YC and was going to invest in my own lot. I was pitching that day, but I was also listening to other pitches. However, it wasn’t just me; there were also a lot of other founders, ”Olubusi said.
After construction and exit many startups, some founders are turning into business angels to support startups and their ecosystems. However, most of them tend to go it alone and are forced to cut checks in their local markets, limiting opportunities.
Here is a scenario. In 2016, when unicorns Flutterwave and Kavak raised their seed sets in Nigeria and Mexico respectively, an African biotechnology founder who knew Kavak and a Latin American edtech founder interested in African fintech do have had the ability to assess these offers even if they wanted; the reason being a lack of scope and experience in industry or geography.
Olubusi and the other founders knew it would be a long term limitation if they went solo. So, they decided to create MAGIC. The idea was to bring together global founders with diverse skills in various industries and geographies to assess treats better and creates value for each other. Therefore, they can participate in two unicorns instead of one.
“Instead of investing individually because obviously, we have a somewhat limited capacity in terms of how much time we have as founders because of our respective companies, why not collaborate on a strategy together and co-invest together? “
“The way we thought of MAGIC was a fund of micro-funds built by founders for founders,” Greenleaf continued.
Fund of micro funds but more than money
In some of the personal conversations I’ve had with founders about their investors, a recurring theme has been that the most valuable investors don’t have necessarily sign the biggest checks. This is a theme to which Olubusi also relates too well.
“It was like every time we thought about it, everyone who gave the most money rarely had time for us. It was so common that we all identified it as a real thing. What really generated value for us were other investors who were founders and operators, and other experienced people who were able to help us find the fit with the product market and combat the regulators. It was actually the people in the trenches with us.
Olubusi believes that the initial part of the investment, especially in the pre-seed and seed, is where VCs who are founder-operators find their sweet spot.. They are invaluable when startups are trying to determine product-to-market fit. And unlike traditional investors looking to get multiples on investments, Olubusi argues that for founders-investors, what matters is the value they can generate for startups..
The game of MAGIC is all the more essential as it also plays in emerging markets where operational assistance on the ground is necessary in industries with numerous unknowns and uncertainties.
“There is so much money in the market now and decision making at an early stage in the pre-seed and in the seed should to be left in the hands of the founders. Because think about it really, at assess whether I should invest in a healthcare or fintech company in Africa, it makes sense that those who have spent years fighting in the trenches make these decisions. And what we’re trying to do with the fund is publish as much information as possible and continue to perform at the 100 percentile and say it’s still the best strategy and it’s very scalable.. “
MAGIC Fund 1 stood at $ 1.5 million and Olubusi said the investments were 5x over the three-year period. When some of these companies withdrew, their founders invested in MAGIC and became partners of Fund 2.
MAGIC is also committed Additional investors who, according to Olubusi, are respected for their investment capacities and their support for the ecosystem. For example, Olugbenga Agboola, CEO of Flutterwave, is known across the African tech ecosystem as a founder who goes out of his way to help established and emerging fintech companies. Payfazz’s Hendra Kwik also has such a reputation in South East Asia. They join MAGIC, alongside other founders, as sponsors.
According to the company’s statement, one-third of the entire fund was brought by the founding general practitioners. For his records, diversity plays is considered because 50% of them are black while 33% are women. Some of them include Michael Seibel, Tim Draper, Andres Bilbao from Rappi, Shola Akinlade from Paystack, Katie Lewis and Kirsten Connell from Octopus Ventures.. For its partners, MAGIC called on Tom Chen from Stitchroom, Adeel Yang from Medumo, Michael Lisovetsky and Troy Osinoff from Juice, and Temi Awogboro from Evercare.
Magic Fund 2 will write 100,000-300,000 checks in pre-seed and seed stages focused on FinTech, Healthcare, SaaS & Enterprise, Women’s Health, Development Tools.
What is the fund looking for in the founders? Olubusi gives two answers. First, MAGIC wants to support the founders with incentives to get through the tough times of a business.
“At pre-seed and seed, you don’t have enough data about a business to make an investment decision. Your bet is entirely on the founder and the founding team. What we do know, having done it several times, is that things are getting complicated. So when we look at the founder, we evaluate whether or not the founder has the courage to go through the most difficult times that will arise. “
The second indicator takes into account whether the founder has the will, openness, flexibility to learn and use this knowledge to be successful.. Greenleaf believes that these strategies have unbelievably helped the firm finance exceptional companies and maintain good relationships with the founders.
“Most of these founders don’t see us as their investors. They see us as founders who help them along their journey. I think which is also related to them by keeping it real with us and allows us to see them as people, not fair founders. This is one of the things that has worked in our favor, ”he said.