Investor AMA: How to fundraise with Reece Chowdhry, RLC Ventures

RLC Ventures is an award-winning VC fund, investing in the UK’s most ambitious and forward-thinking entrepreneurs, at the beginning of their startup journeys.

Since they launched in 2016, they have backed software companies that are transforming the worlds of Work, Play and Learn. This can mean anything from an EdTech business, to a game studio, or a productivity tool. In fact, in 2020 they participated in a £570k seed round into BGV portfolio company Organise.

‍Reece Chowdhry, CEO and Founder of RLC Ventures, has a wealth of experience in building and investing into companies. His career spans working at EY in the technology consulting department, building three software businesses, and being a very active angel investor, investing in around 60 companies.

In this Investor AMA, our monthly series showcasing investors in the tech for good ecosystem and early-stage venture capital space, Reece shares some insights into what VCs are looking for in founders, practical tips for how founders can make meaningful connections with investors, and discusses RLC’s unique venture pledge. ‍
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What motivated you to establish RLC Ventures?

My career started at EY in the technology consulting department. After spending five years there, I left and built three software businesses - similar to what you’d think of as venture builders today. We then sold those businesses to private equity. I became a very active angel investor along the way and invested in around 60 companies - everything from idea to IPO. I think my motivation was really working with great people, because at the early stage, it's very people focused. My passion is building something from nothing. That's why we've always firmly focused on early-stage investing. We make around 15 - 20 investments a year, typically investing in rounds up to a million pounds or seed rounds.  As a firm, our high-level thesis is changing the way people work, learn, and play. That could be anything from an EdTech business, to a game studio, to a productivity tool. We have co-invested with Bethnal Green Ventures a number of times now. Most recently, in Chatterbox and Organise. I think raising funds is a real challenge, and hope I can bring some insight into what we look for and what VCs generally look for. We’re very transparent as a firm, and my first tip of the day is this: We put all of the investors we know on a list on our website. It's called the UK Funding Ecosystem and it's got accelerators and venture capital firms.
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Aside from the future of work, play and learn, are there any other areas you are excited about, and have you invested into any?

For us, our whole methodology is driven by the personalities of the founders. We have internal tools that we developed over the years to help us evaluate and understand what great founders look like. These are not decision-making engines, but if you think about the early stage, there are certain things we look out for. For example, they might have some customers, and an MVP, they might have a product. We surveyed 100 VCs, and 90% of them said that the founders themselves are the people that drive the outcomes of the business. Let’s take a real life example, Mursal from Chatterbox. Her family is from a refugee background, and she's solving a problem that she's really experienced. She's then built something that people are using and she had BNP Paribas on board at the time she came to us. She’s a really good example of someone who I think we really like to back - solving a problem that is worldwide. Also, given the current situation in Ukraine, you can see there is a real use for it. I think that that's something that we really get excited about.Something we don't get excited about is when people are not clear about why they're coming to us, or when they haven't clearly read the website. For example, coming with a £3 million round which we'd never invest in, or they are only at the idea stage. We really, really like to see something, even if it's very little. We like to back businesses that scale very quickly, typically software businesses. And we're really focused on that first 12 - 18 months. That's why our graduation to series A and seed rounds is in the top quartile in the industry. We just really understand that space and how you get to the next round of funding.
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What is RLC Venture’s “secret sauce” and what support do you provide to founders?

We're very, very honest about this, and I think it doesn't work for everyone, we're ruthlessly hands off. We expect our founders to build the companies that they want to; we won't get involved, and we very rarely take board seats. But what we're really, really good at is once you need something, we're there for you. We have a Whatsapp group with every single founder and there's a partner and an associate on every single deal. Our commitment to founders is that we will get back to you within one hour of you messaging us on any platform. We also have a really big Slack community of founders. So if you need an introduction, or you need to find your next engineer, or you need some time with a CTO - we're there for you. Everything for us is lightning speed and very efficient and that works for a certain type of founder.I think most people get into entrepreneurship so people don't tell them what to do! So that's kind of our methodology, we're not going to tell you what to do, we expect you to figure it out. But we'll be there for you every step of the way. For everything from next rounds, introductions, to hiring, to being part of the community. We have monthly events where founders are teaching each other topics like sales - we did one on buyer hacking last month. It's very bespoke around who you are as an individual rather than a blanket approach.
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How would you classify the rounds you usually partake in?

To some extent, the lines are blurred these days between pre-seed, seed, and series A. To categorise, we usually invest in a round that is £1 million or under. Sometimes it goes a little bit over, like Chatterbox. Our checks are usually up to 300, as leads or non-leads depending on the situation of each founder. The reason for this is stage ownership. My advice to founders is to really understand people's funds and their dynamics. A lot of people just don't understand that. Every VC wants a return on their investment - every single investment. So you need to do simple maths. Take a £200 million fund, to see a return you need at least 10% of a $2 billion company. That's what they're aiming for. Think about it from their perspective, if you're coming in and saying, hey, I want to build a £1 million company, that's not going to move the needle for them.You have to be understanding of who's in front of you, what is their economic interest? What are they trying to achieve? What has their previous investment thesis been? There's too much of a blanket approach with founders applying for the website, not reading and not understanding what we invest in, and not looking at the other investments on Crunchbase. Not doing the research! Everyone's got an in somewhere, right? Everyone knows a founder that we've invested in, or a co-investor, or an angel. There's always a route in, which shows a bit of entrepreneurial flair. I know a lot of people say we should accept cold intros, and do, but if someone's got a dynamic route, that shows, and I know it’s a bit of a cliche word, but a bit of a hustle. VCs are inundated, and can get 3000 applications a year. Founders have got to see it from our side as well, in terms of getting back to people responding, but we try.
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Can you tell us more about the Venture Pledge?

We're not an Impact Fund, like Bethnal Green Ventures, but we are committed to giving a percentage of our carry (our exit profits) to causes of our founders' choice. All of our founders will pick a charity to back, for example cancer research or something close to their heart. We sold a company a couple of years ago, and we distributed about $50,000 to a charity in India that the founders decided to select. For us, that's core to our values as a firm. A lot of impact funds say they invest in impact, but then they don't do anything at their own company. We don't claim to be impact investors, but we think the Venture Pledge shows what we believe in. That's just a small thing, and we're really passionate about it and. We hope other people do it as well.
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What emerging trends is RLC Ventures interested in when it comes to the future of work, play and learn?

As a firm we never get too caught up in trends. We have our own thinking on trends. Looking at the best businesses in our portfolio, the ones that went on to do Series B, hundreds of millions, IPOs, and exits,  never ever started off where they ended. They turn three times, and nearly run out of cash four times. I've had founders start a company, leave it but get another person to come in and run it, and then still be successful. The biggest risk for us are the founders. The number one reason why a company in our portfolio ends is the founders falling out with each other, and not wanting to carry on the business. So when we see a dynamic team, who are entrenched in a problem, who have worked together for a long period of time, who are full-time - I think that really gets us excited. That's something that I would emphasise because I think sometimes there's a few flags, which get brought out.In terms of what areas we get excited about, our three verticals are very broad. Within those verticals there’s a few things we’re investing in at the moment. For example, in the game space. We’re doing a lot in the crypto game space. We're quite knowledgeable in that space compared to a lot of other firms. In the ‘learn’ thesis, we've just invested in a business called Juno, which is an app for financial education for women. There's certain themes that we do like in  particular, but not anything we’re too wedded to because markets change so quickly.
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Do you have any final top tips that you would give to first time entrepreneurs who want to approach RLC ventures for investment?

I might sound like a broken record but my top tip is to make sure you read the website. It’s very clear if you're the right fit for us. Really try to understand our existing portfolio, or even reach out to existing portfolio. Most founders in our portfolio will take an intro and guide you a little bit more about what we look for. If you think about selling to customers or clients, you have to hyper-personalise. It's better to do a few very targeted, well researched people, than just spraying everyone. A lot of people just go on UKBAA and spam every firm, and you're never ever going to get someone to invest on the back of that. Do your research and use your initiative to think differently. You have to find a way to get to your outcome. Do what you need to do to get to that goal.

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