Flying Fox Ventures has pledged to share all future profits with all the start-up founders they back, so they can make financial gains even if their companies don’t.
Start-up angel investment fund Flying Fox Ventures is getting ready to deploy its second rolling fund with an unusual twist: founding partners Rachael Neumann and Kylie Frazer have pledged to share their future profits with all the founders they back.will allocate 5 per cent of its carry to all portfolio company founders.
As angel investors, an exit could also be triggered by a later-stage investor buying out the earliest investors to achieve a certain ownership percentage, without diluting the founders’ stakes., combining Ms Neumann and Ms Frazer’s previous ventures, Working Theory Angels and Eleanor Venture. Last year, it deployed $12 million and has so far invested in 40 companies across 53 deals.
“We’re lucky in that capital efficiency is in our DNA, we’ve always been attracted to companies that can operate in tighter markets, that will be a continuing theme for the coming year.”Ms Neumann said the profit-sharing deal would help create a financial safety net for their founders and diversify their investment portfolio, while they are busy building their own businesses.
Chrys Chrysanthou, a partner at Kindred Capital, said it was still early days for the firm’s 2016 pre-seed/seed fund in terms of actual returns, but the model has already created benefits for the players in its ecosystem.
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