Kindred, new London seed firm, offers companies carried interest

By Alex Derber, VCJ Correspondent

Europe’s seed and angel ecosystem has developed quickly in recent years as participation in tax-incentivized and other government investment schemes has grown.

So new firms need to stand out from the crowd — which London-based Kindred Capital has achieved by offering its portfolio companies a share of its profits.

“There is this commoditization of capital at every single stage, from seed to late-stage growth, and in a commoditizing market differentiation is everything,” says Leila Zegna, founding partner of Kindred.

After the February closing of its debut fund at £80 million ($113 million), which is large for a European seed fund, Kindred could perhaps afford to compete on price. Instead, it offers its companies a share of its carried interest.

The goal, Zegna says, is alignment with the interests of its companies.

Of course, VCs often promise to put their entrepreneurs first, but Zegna says that by giving 20 percent of the firm’s carry to portfolio companies, Kindred has gone beyond “words on a slide.”

The business model aims to both attract top-quality startups — Zegna says the firm has won every deal it has bid for — and to encourage its investees to cooperate, since each has a stake in the other’s success.

All four of Kindred’s partners were previously entrepreneurs, and while that experience lies behind their founder-centric business model, they have also sought alignment with LPs by putting £16 million ($22 million) of their own money into the fund.

Kindred’s management and other entrepreneurs provided about a third of the new fund’s capital, while family offices and institutions each contributed about a third.

The seed fund focuses on U.K. deals, deploying from £500,000 to £1 million ($1.4 million) per initial ticket. Two-thirds of the fund is reserved for follow-on rounds.

Since Kindred’s first close in late 2015, the fund has invested in 20 of a planned 30 companies, and now counts 50 participants in its carried-interest scheme.

While the firm is fairly sector agnostic, Zegna says her partners’ respective experience tends to skew the deal flow they see toward fintech, marketing and advertising technology, digital health and retail tech.

Valuations in these areas have remained steady since Kindred started investing, Zegna says, although she points out that pricing is less important at seed stage.

“The best founders are more focused on getting the right people in than getting the right valuation in the first couple of rounds,” she says.

Before launching Kindred, its partners had crossed paths as angel investors: All four were on the cap table of Unmade, which uses 3D printing software to offer customized knitwear.

Zegna, along with firm co-founders Tracy Doree, Mark Evans and Russell Buckley then rolled the company into the fund.

Zegna acknowledges that “prolific” angel investing has boosted Europe’s young startups, although she questions whether it’s always the right fit.

“It’s very rare for everything to go swimmingly well. And where you have raised small checks from a long tail of investors, then, yes, there’s a lot of capital, but no one has the motivation to roll up their sleeves and help you,” she says.

While Kindred’s partners consider themselves well-qualified to help due to their backgrounds at startups, Zegna adds that their new challenge of raising a venture fund also contained useful lessons.

“The pain of fundraising forces you to define the narrative and keep yourself honest,” she says. “You can lose sight pretty easily of how difficult it is for founders to come in day after day and get 99 nos for every yes.”

Looking ahead, Zegna outlines Kindred’s ambition to become the top seed fund in Europe, rather than move into larger rounds.

“This is the right size fund for the stage we are active in, and our aspirations for Funds II and III would be to keep them at a similar size and continue to target this stage of the market.”

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Alex Derber is a U.K.-based contributor. He can be reached at

The Kindred Capital founding team (left to right): Tracy Doree, Mark Evans, Leila Zegna and Russell Buckley. Photo courtesy of the firm.