BlueChilli has signed off its first $10 million venture capital fund and will start investing in startups as early as this week.
BlueChilli founder and CEO Sebastien Eckersley-Maslin said the early-stage venture fund is designed to provide seed capital to startups which have run the tech incubator’s gauntlet.
He said investment rounds will be broken up into two parts.
The first will be in $25,000 lots in return for 5% equity for startups that have been selected to participate in BlueChilli’s accelerator program. Once the company launches a minimum viable product the fund will hand over the cash.
He says the fund will look at investing in between 60 and 100 startups over the next five years using this method, with about 24 expected in the next 12 months.
But to get things rolling the company will invest between half a million and a million dollars in some BlueChilli startups this week, but it won’t be more than five. The companies will be announced tonight.
The other way the venture fund will assist startups is through co-investment. Once startups finish BlueChilli’s program and manage to raise funds from external investors, the fund will match the money tipped in.
Eckersley-Maslin told Business Insider by structuring the fund in this way it de-risks some of the investment as the due diligence and validation process is transferred onto BlueChilli’s accelerator program and the insights it provides.
“The fund leverages that knowledge,” he said, adding raising externally is a good validation and it sets the company valuation.
The fund, which also has Artesian Venture partners involved, will be run in parallel to BlueChilli’s startup program and is looking for an annualised return of more than 20% over 7 to 10 years. It wants to get in early while valuations are relatively cheap and build a large, diversified portfolio.