• If you are a larger LP (>£400,000), you’ll be a direct ticket.

• If you are a smaller LP (<£400,000), you will be incorporated via a feeder vehicle that will add up to £400,000+.

• Our management fee is 2% per annum. It is a 10 year fund with the minimum lifespan of the fund being 7 years, with provision for extensions.

• Our carry is 20% (after LPs have received 100% of their returns first). So if you invest £400,000, you will receive the full £400,000 back before the 80%/20% split occurs.

• First close investors receive 15% off carry fees (i.e an 83%/17% split instead).

If you invest £400,000 into our fund:

• 33.3% occurs through the CFEA instrument.

• For instance, if founders end up paying back the FEA (at 1.5x in 5 years or 2.0x in 10 years), that’s £133,200 invested into this instrument, with £199,800-£266,400 returned. FEA returns are near guaranteed returns.

• These returns are tracked through the Stepex portal.

• Some of them will convert to equity at a discounted valuation with a £5M cap.

• 33.3% of that money will be done through pure equity (non-follow on).

• 33.3% of that money will be done through pure equity (follow-on). Crucially, we come in at a 20% discount to the lead investor’s valuation with the valuation capped at £5M.

• From an equity standpoint, we’re approximately targeting about 3% ownership per company at Seed (including follow ons). Accounting for dilution, this means 1%-2% ownership at Series B. If a company exits for appx. £50M, that provides a return of 3-4x (£700,000) on £200,000 invested (total).

• £333,200 → £899,800 = 2.7x MOIC (on the conservative end).

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Other things to note about returns:

• FEA returns will be sent every quarter (great news for those that love early DPI)

• Equity exit returns will be sent back to LPs at Year 7 of the fund (the earliest possible). We generally plan to get our stake back from each portco around Series B (if there has not been an exit before then) but this is evaluated on a case by case basis.

• Returns will be tracked via the official UpsideDown VC webapp.

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We expect to make capital calls every year for 4 years. It is important to note that we will not be deploying all the capital of the fund within these 4 years, since a portion goes on follow-on investments.

UpsideDown aims to recycle all of its returns until Year 7 at minimum. This means, for instance, if there’s an early exit or early FEA returns, they will go back into the fund and be used for further investments. LPs are eligible to receive returns starting on the 7th year.

We will have a relatively large portfolio (120 portfolio companies over 3 years invested), so we naturally do not offer the same amount of intimate support as at our Market Entry Test of just 7 companies. This being said, here’s how we offer support, and here’s how you’d best be able to help on that end:

• Each founder submits a request for help via our operating system

• This request for help is submitted into our database for all GPs and LPs to view

When you get onboarded as an LP, you will be asked how much you want to help the portfolio/GPs and to what extent would you like to help. We anticipate some of y’all would rather be more hands off and some of y’all would rather be a little more involved. There will be questions related to number of hours, which capacity, which areas you are more of an expert in, etc. There is no expectation for LPs to provide any Portco with assistance. We also have a coterie of advisors, friends of the fund etc. who also assist with Portco support.

• LPs have first rights to access the next round of a portfolio company before anyone else does.

• LP money cannot displace UpsideDown’s follow-on allocation at the next round.

• If an LP invests more money into any one deal than they have invested into UpsideDown, they must pay UpsideDown a co-investment fee (2.5%).

• We plan on putting together SPVs for LPs who want to coinvest into any of our portfolio companies at the next round (whether it may be Seed, Series A, etc).

• Each SPV that an LP invests in will come with waived carry.

An AGM (Annual General Meeting) is held annually.

Each quarter, we hold 30 min-1 hr updates with all LPs detailing recent progress, highs, lows, and asks for help.

We will also be available to catch over coffee subject to availability.

Our state of the art no-code webapp (app.upsidedown.vc) is at the centre of everything related to our fund. There will be several screens depending on what role you fulfill:

• A page to fill in the application and get reviewed by our team (Founders and GPs)

• A page to track returns and portfolio company performance (LPs)

• A page to ask for help (Founders)

We will have a fund community, but the platform has not been chosen yet.

The first fund will be UK and Europe. Fund II, will be in UK, Europe and Asia.

Any jurisdiction that we potentially expand to must have the following characteristics:

• A straightforward legal system with access to either SAFE notes or SAFE-like instruments (not Germany)

• ISA infrastructure similar to Stepex (eg. Tribex).

• A robust enough tech ecosystem that would be worth our time to dig deeper into

• Founders in need of alternative financing

We plan on gradually growing:

• Fund 2: £30M

• Fund 3: £60M

• Fund 4: £90M

If you have any questions, do contact jon@upsidedown.vc or sam@upsidedown.vc

• Most venture funds have “winner takes all” style returns that comprise of a “fund of duds”- 90+% failures, with potentially, hopefully, possibly a unicorn in the midst.

• Our fund is particularly well suited to LPs who want venture upsides, but want to cap their losses. We use technology (open banking) to provide a third way that provides an income from even the struggling investments. We are an equity venture fund backing category winners, but also with the facility to mitigate downside risk.

• We get in early with a structure that is uniquely attractive to conviction-driven founders. This gives us early access to excellent dealflow at exceptional valuations (20% discount, and capped at £5M).

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Generally when valuations are down, it is a good time to buy. One top asset manager in early 2023 was increasing their VC allocation from 5% to 9% because their analysis said it was a top asset class in today’s market.

Data shows that on average smaller (<$250M) VC funds outperform larger ones (>$250M).

Top performing funds are typically smaller, many from new managers.

New managers bring unique points of view and are generally hungrier and harder working than established managers.

Because of our unique strategy, return profile, and high volume, this fund gives you exposure to entrepreneurs who cover gaps in the rest of your portfolio.

• Unique stage focus - we are the only VC fund in the UK (and one of very few around the world) to invest in Friends & Family round founders (high potential individuals).

• Unique method of investing - a CFEA and SAFE blended portfolio generate solid returns that blend downside and upside protection.

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UpsideDown doesn’t forecast trends. It diversifies by individual & company to start, and then makes the most attractive follow-on investments based on unique individual company, sector and personality factors, whatever the background trends are.

• Many founders who are just starting out struggle to get access to initial capital, and have to rely on savings, bank loans and credit card debt to start their business (which is a massive amount of risk)

• Most funds targeting pure unicorns (businesses valued north of £1B) and operating off of the VC power struggle to achieve good returns because Mark Andressen famously said, “The key characteristic of venture capital is that returns are a power-law distribution. So, the basic maths component is that there are about 4,000 startups a year in the technology industry who would like to raise venture capital and we can invest in about 20. We see about 3,000 inbound referred opportunities per year. We narrow that down to a couple hundred that are taken particularly seriously. There are about 200 of these startups a year that are fundable by top VCs. About 15 of those will generate 95% of all the economic returns. This means that 15 companies (roughly 0.004%) will drive 95% of the value for the entire industry.

• If there is a failure rate of north of 90% in the startup world, that means every startup that a VC invests in has to be a “fund returner.” So most VCs are in search of “fund returners,” which drives their definition of “venture backable.” In other words, even startups that exit for markedly smaller amounts won’t generate the kinds of returns that most VCs need to stay afloat.

• Because of these dynamics, most startups taking investment from these types of VCs are forced to grow faster than optimal, which is not healthy for many startups.

• We have built a fund that invests in the same unicorns but also generates great returns from investing in the 98%+ of “non-unicorns” which can still delivery great returns.

• Accesses a tranche of exceptionally capable founders who do not have access to Friends & Family with capital and who are rightly suspicious of bank loans and credit card debt. These are conviction-driven founders.

• Enables LPs to achieve downside protected returns while also having access to solid upside

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Returns (exit and FEA) are recycled into the fund, so the earliest you can receive distributions is 7 years.

If UpsideDown VC misses fundraising goals, UpsideDown VC will close a smaller than expected fund size and deploy.

We have yet to construct the fund, but do please sign the official hard commit form linked here.

Once the fund is built, sign the LPA and IMA, fill in a KYC form, and we will start our LP onboarding.

We mitigate the Downside, and retain the Upside. We turn venture “UpsideDown”

If you missed the first close you may still invest without discounts. If you miss the final close, you must wait until the next fund opens (though you can hold your spot in the next fund).

Because VC funds are private, take 10+ years to pay their investors, and often hide their returns data, this is a surprisingly difficult question to answer. It is known that VC funds have a high dispersion, with the bottom quartile (pink diamond) giving negative returns, and the top quartile (dark green square) excellent.

Cambridge Associates research says VC funds have a 10% median, outperforming public markets. Other sources, like Kauffman, put the median net return in the 0-4% range.

VC insiders would strongly disagree on this point, when speaking off the record.

‍The best paper we’ve seen states that “VC firms do not persist in their ability to choose the right places and times to invest”.

It seems that “initial success improves access to deal flow”. This factor “attenuates over time” and in the long term “performance converges” across firms.

‍Research in non-VC funds came to similar conclusions on fund manager persistence.

As Loyal’s paper in Institutional Investor magazine outlines, the high dispersion happens because VC funds are not diversified.

If you do a Monte Carlo simulation taking the deal by deal returns shown earlier, you can with a few assumptions (ask) get a good match to the real fund returns (compare column 1 and 2).

If you then increase the size of the fund to 150 investments you get the results shown in column 3.

If diversified enough, VC funds give low volatility returns. If you believe the Cambridge Associates data set is accurate, the results also consistently outperform public markets returns in the long term.

If home runs happen only in 1 of every 25 deals, the median fund with only 10-15 investments will not have a home run. The median fund with 150 random venture quality investments is statistically ‘guaranteed’ to include multiple home runs, likely including one greater than 20x.

A recent Kauffman Fellows publication using AngelList data concluded “at the seed stage. Indexing beats 90-95% of investors picking deals”.

The combination of robust downside protection and exposure to upside gives this fund a higher chance of above average returns.

Sam, Jon and George are embedded in the venture world. They take particular note of those referred to by other funds and industry veterans. Because we are early-stage investors, many later stage investors pass us validated deal flow. We also receive from accelerators, startup communities and cold outreach.

We invest in Capital Efficient Software, Artificial Intelligence, Consumer Goods. However we are well informed with venture landscape, technology and startup ecosystem, so our investment criteria will evolve over time.

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• Most of the time we come in first cheque.

• The SAFE note comes in the same terms as everyone else equity-wise, so it’s a very clean fit on the cap-table.

• A CFEA generates momentum for a founder from a fundraising standpoint based on the simple psychology of “if another investor did the initial due diligence on this founder, then I’ll come on in as a second/third cheque and keep my job.”

Friends and family round, pre seed and seed. Our sweet spot is a company with a £6M valuation (at qualifying round), but we are generally flexible.

Depends on the type of business, stage and long term potential. Examples:

• Consumer Products of any stage generally receive a CFEA because of quick income/revenue generating potential but lower chance/valuations in terms of exit potential.

• Seed stage AI/SaaS likely receive a pure equity instrument.

• Friends and family round founders will most likely receive a CFEA.

• Flawed founders don’t receive any offer.

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1) One or two rounds of deck analysis

2) One rounds of call with founder, we dig very deeply into the founder dynamics, motivations, skills and ability to iterate. Our questions are not assuredly unlinear, designed to extract data points which inform decision making. We are proudly and obsessively founder first - we back people.

3) One in-depth call about product, tech, go to market strategy etc...

4) Stepex DD (to analyse FEA payback ability)

So anywhere between 3-5 rounds, but all happening relatively quickly.

Jonathan Sun started his career as an Edtech founder (worked with a team to create an app that matched high school students to their best fit universities using Natural Language Processing). In parallel, he became a community and ecosystem builder in his spare, where he used to run communities for founders and now runs communities for investors. Understanding the pain points of non-unicorn founders and investors has led Jon to start UpsideDown VC, with this unique model and thesis.

Sam Merullo is an Exited Founder and Family Office Venture Investor. He started his career as a lawyer at Allen & Overy LLP and has sat on the Venture Scout IC at Backed.VC and as a Venture Partner at Love Ventures. He has direct Operator experience and was the UKI General Manager for Lime, the micromobility behemoth. Prior to that he founded and exited ScootFleet Group, sold to Rico Group in 2016. He remains an active Mentor at the Founder Institute and is well embedded in the startup and venture ecosystem. He is a Chair of the Trustees at Thomas’s Academy having previously been a Governor and Trustee.

George Quentin is an experienced iOS engineer. He got his first stint in startups working on MyReaderBuddy, helping kids learn how to read using broken down phonics, finger pointers, and gamification. He’s worked at Plum and then Dojo, and is established as an ecosystem builder, helping run London New Tech for 2 years. He’s and angel investor and graduated from Angel Investing School.

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Our commitment to the fund is £450,000

We’re building our community of professionals, entrepreneurs and industry leaders. Please reach out to us if you're interested or would like to discuss any partnership with us.

1) An LPA - a partnership between us and you, where we manage the business and you contribute capital.

2) An IMA - sets out the terms and conditions by which UpsideDown VC agrees to pay advisory and management fees to the investment manager entity.

On a case by case basis and only when necessary.

Eversheds - they are helping us with fund formation, LPAs and IMAs agreements. They are in partnership with Thema.

• Chisos Capital (direct) - uses ISA/SAFE hybrids to invest in highly talented individuals in the US.

• Indie VC (indirect) - pioneered the flexible debt/equity model of investing.

• Slow Ventures (indirect) - uses a similar “invest in individuals” format.