The founders of Spotify, Supercell and King Digital as well as the families behind H&M and Stena are backing a Swedish fund that aims to invest in venture capital “blind spots”, such as start-ups run by women and immigrants.
BackingMinds, led by two female Swedish founders, has raised SKr500m ($60m) for its second fund and is now looking for opportunities in northern Europe after its first venture capital fund in Sweden had paper returns of 500 per cent.
The fund, which is not open to institutional investors, was fully subscribed within three weeks from high-profile backers such as Supercell’s chief executive Ilkka Paananen, the Persson family that owns retailer H&M, and co-founder of Spotify, Martin Lorentzon.
“Our job is to look for the blind spots of venture capital [and] find these arbitrages,” said Sara Wimmercranz, co-founder of BackingMinds, told the Financial Times.
Co-founder Susanne Najafi said: “The opportunities are huge. Bias is the most expensive thing you can have as an investor. We lose out on something like 3-6 percentage points in GDP yearly by overlooking female founders.”
BackingMinds seeks out unlisted, early-stage start-ups involving founders, sectors or target customers overlooked by other venture capital firms, which the two women believe act with “herd behaviour”.
The firm’s first investment was in a fintech TransferGalaxy founded by a Somali immigrant, Yosef Mohamed, in the central Swedish town of Orebro, who had grown tired of the time and cost involved in Western Union money transfers. It was recently valued at SKr1bn and has 120,000 customers.
Another early investment was in Dynamic Code, a digital diagnostics company founded by Anne Kihlgren in Linkoping in southern Sweden.
BackingMinds is now looking at other Nordic countries, the rest of northern Europe and France for new opportunities. The second fund has already invested in Brain Stimulation, a start-up from northern Sweden that deals with brain rehab in stroke victims; and a construction industry data company, Combify, started by a Syrian architect who walked the entire way to Sweden.
Najafi, herself the daughter of Iranian immigrants who grew up in Rinkeby, a deprived suburb of Stockholm, said that the firm was also not focused on traditional “impact” investing.
“This is not diversity investing, or charity investing. We find undervalued, great companies in the blind spots where traditional investors have been seeing nothing but risk. The big change will come with the returns, because the venture capital industry follows the money,” she added.
Other investors in the new fund include the founders of private equity firms EQT and Nordic Capital, Thomas Hartwig, who is co-founder of King — the company behind Candy Crush Saga — the founders of software company Sinch Robert Gerstmann and Kristian Mannik, and the Olsson family behind the Stena group of companies, including the ferry operator.