VC deal sourcing is a fascinating area.

Many people ask me how I find the startups to feature in this newsletter, and the answer is a combination of referrals from my network, inbound pitches, and the occasional bit of cold outreach from myself to interesting founders.

An increasing number of early-stage VCs go further, using in-house, proprietary platforms to identify high-potential founders early.

Eka Ventures was early to the data-led pre-seed sourcing game, having developed its first such tools in 2021.

As the firm has just announced the close of its second fund, it seemed like the perfect time to ask general partner Camilla Dolan more about finding the best pre-seed founders, and keeping that unique edge as more rivals’ tools come online.

Read on for our conversation…

– Martin

Eka Ventures was early with proprietary tools, but can it keep its edge?

Camilla Dolan is co-founder and general partner of Eka Ventures.

Dolan founded Eka in 2018 with Jon Coker, who she met when they were both at MMC Ventures.

With a focus on consumer markets and impact, Eka was founded to create social, as well as economic, value.

Eka takes a heavily data-led approach to sourcing startups and assessing investment opportunities, having developed a data platform that Dolan says now sources around half of their investments.

This week, Eka Ventures announced the close of its second fund, which clocks in at $107 million (£80 million). The fund invests in early-stage startups broadly in the health, wellbeing, and sustainability spaces.

This conversation has been edited for clarity.

MB = Martin SFP Bryant, CD: Camilla Dolan

MB: You’ve just raised Fund II. What are your plans for deploying it?

CD: We have three key investment themes. One is around life: affordable and accessible products and services that enable people to live a good life. That’s all the way from inclusive financial services, into legal services, and education.

And then there’s preventative healthcare: investing in a shift from a very treatment-led, reactive healthcare system, where often they don't even know your name and they definitely don't know where your last health record was, into a proactive, preventative healthcare system.

And then finally, there’s sustainability, with a real focus on decarbonisation of our major consumer supply chains.

Our plan is to invest at pre-seed. And when we talk about pre-seed, we mean really, really early. A number of the investments we've made have been at the point those companies were incorporated.

For example Hesta Health, which was our first investment out of Fund II. And we have a maniacal focus on just finding founders that are totally obsessed and excited about the problems they're solving.

MB: What’s your approach to sourcing startups at such an early stage? Is this where your proprietary software comes in?

CD: It's probably the thing we spend most of our time thinking about outside of working with portfolio companies.

We think about sourcing in three different buckets. One is the data platform we've developed in house. That scrapes tens of thousands of companies a year, and then we have a process of classifying them. So are they on thesis? Do they fit within our three themes of life, health, and sustainability? And do they fit within our criteria, as in, have they been incorporated within the last few years?

Increasingly, we're building data around the signals related to those companies, and then we filter those down into the ones that are relevant. We meet about a thousand a year, and out of those, we make six to eight investments.

The other sourcing strategies we have are around research. We have a head of research who looks at themes. For example, doing a deep dive on the women’s health space. We've made three investments in that space in Fund II that we're really excited about: Ditto Daily, Cyclana Bio, and Hesta.

And then the third is network. I think we're really fortunate that we've worked with lots of great founders, operators, and other investors, and they share lots of excellent investments with us.

MB: Proprietary software is something an increasing number of VCs are talking about. How much of an edge does that software give you, and is it something all VCs need nowadays, particularly at the pre-seed stage where there are so few signals to make a decision from?

CD: There are lots of different flavours of how you can invest as a VC, and I think you have to find the strategy and approach that works for you.

For Eka as a firm, we think a data-driven approach is the one that best suits our style and our personality, and it's where we can build real capability. We’re starting to see some proof points around that.

We definitely think it's going to become more and more competitive. We know a significant number of funds are building platforms.

We started building this platform in 2021. Then we would often get to companies, and we'd be the only fund that had reached out to them from certain data sets. When we reach out to those kinds of companies now, they're now getting 30 or 40 emails on the same day.

So I definitely think that the landscape of data-driven sourcing is maturing, but we just think there's so much more opportunity there, and it's definitely something we're planning to double down on. We think we can keep an edge by building different data sources and different approaches. As much as the data, we think it's the way that you operationalise and integrate that process into the investment process.

Hamish and Sunaina, who lead on our data platform, they're both core, integrated members the investment team. They support from building the platform all the way through to supporting on making investment decisions and portfolio support. And we think that's super important, as it helps them really identify the right types of founders.

MB: Given you’ve been involved in early-stage investing for over a decade, what are your thoughts about how the pre-seed market has evolved?

CD: I think it really depends which segment you're in. There are some investment sectors that are very hot, and there are some that are less hot.

Jon started investing in 2009 and I started investing in 2013, so we've definitely seen a maturity in the market, and significantly more capital come into the pre-seed and seed market in the UK and in Europe, which we think is really fantastic.

We're extremely positive around the state of the market and the potential for companies to get funded. Our thesis is that we invest in consumer impact at pre-seed. Those companies aren't always most competed for. With 70% of the investments we’ve made, we were the only term sheet at the point in time that we issued it.

Thankfully, those companies have gone on to raise really strong capital after that. For every £1 we've invested, they've raised roughly £10 of follow-on capital from really strong tier-one investors like Index and Accel. There’s definitely lots of opportunity in the market.

MB: Why focus on the kinds of companies you do? What’s the appeal?

CD: Health is over 10% of global GDP every year. It keeps going up, and we've got this treatment-led system that can't really manage the demand. And then on the other side, the majority of healthcare issues could be prevented.

So we just think there's a mega opportunity for consumer technology to be used to shift that system from treatment to prevention, lowering the cost and increasing the capacity to deliver healthcare. That's a multi-trillion dollar opportunity that's not going away. So it's just hugely exciting. And I think AI, sensors, and robotics accelerate all of those trends and really makes what may not have been possible 10 years ago possible now.

And then in energy, trillions of dollars are going towards decarbonisation and the energy transition. And that is an area that the recent geopolitical situation has put even more for the focus on, with the recognition and that our energy systems are absolutely critical for an economy to function in the future.

So we're really looking at these two huge opportunities that are both at the forefront of what is on people's minds, and also at the forefront in terms of what is now possible with the technology that's in existence.

From a personal perspective, you only have one life, and I think Jon and I both feel that there is nowhere we would prefer to dedicate it to than to founders solving really important and complex problems, and building the infrastructure that defines the future of the economy.

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