Former Head of Corporate Development at Google, Anil Hansjee, talks to Tech City about his plans to establish a revolutionary new model of VC funding in the area.

Tech City is set to benefit from a new model in VC funding, courtesy of Google EMEA’s former Head of Corporate Development Anil Hansjee, who recently left the internet giant to strike out on his own – and to launch what he believes will be a transformational model for VC funding.

We caught up with Anil a few weeks ago to get the lowdown on his plans…

Tech City: What prompted you to leave Google after 5 successful years?

Anil Hansjee: Leaving was an immensely difficult decision. I’d had an amazing and fun time – Google is obviously a world-leading company and a centre of excellence, staffed by brilliant people – it’s an exceptional platform for doing business. However, over the past 18 months – I observed that the market wasn’t effectively supporting very early-stage companies at scale and I saw this as an opportunity to reinvent seed funding in a profitable, entrepreneur friendly and value-add way.

TC: Can you explain a little more about how you see this reinvention working?

AH: Well, without wanting to give everything away… Compared to when I was last a venture capitalist with IDG Ventures in early 2000’s, the past few years have highlighted a different environment for digital media/Internet start-ups with more flexibility, more fleetness-of-foot and, crucially, more capital efficiencies as a result of leveraging development and go-to market platforms.

It’s now a lot cheaper for companies to make initial steps and a lot easier to get metrics on progress, and start-ups – whilst obviously still needing capital investment to become world leaders – can afford to be much leaner in the earlier days but many also exit earlier as well.

However, at the same time traditional venture capital has had a hard time responding and many have gone later stage to deploy their larger funds. On the surface, that makes sense because seed investing is currently not very efficient –a very high proportion (40%) of Angels loose money and start-up CEO spends too long trying to raise capital.

It’s also questionable whether they get the right value-add from most VCs at the very early stages: It’s not just about introductions; it’s about adding functional expertise to get key validation of their business. So we have designed a fund for this new digital age delivering an unfair advantage to our portfolio at scale.

TC: So what does this mean for your new venture?

AH: Actually seed investing, as an asset class, is profitable. It’s just that only 9% of deals generate 80% of returns. The challenge at seed is market fragmentation and lack of diversification in portfolios. Our approach extracts the value from this 9% through building a market-approximating portfolio to capture the market risk premium without taking on the idiosyncratic risks so prevalent in Angel portfolios. The difficultly is all about execution – to ensure that there are processes and techniques to attract, assess, and execute deals at the scales required and to deliver real value to portfolio companies at scale.

We have designed our approach using key insights from how Google operates at scale across its search/ads business, business development and developer advocacy work. Even in M&A, Google transacted over 40 deals last year. Velocity and transparency of decision making and portfolio synergies are key entrepreneur benefits that result.

TC: What steps are you currently taking to make this happen, and when can we expect to see the new fund taking shape?

AH: There are three key components. The first, viable clusters for high velocity business creation, are critical –Tech City is a great example of this. The large number of new start-ups in clusters generates exactly the deal flow numbers that our approach requires. A more scaled and systematic approach to seed funding will create more start ups and develop the ecosystem benefitting entrepreneurs, and their investors and the economy.

Second is the team, I am working with a partner already and we are close to signing up the functional experts whom provide the one to many value add and international connections to our portfolio companies.

Third is cornerstone funding, which we are well on the way to finalising thanks to strong connections with family offices whom for which we have designed this fund for and whom increasing have a particular appetite to participate at an earlier stage in investments that reflect the pervasiveness of the Internet across their traditional industries. We expect to move to a position where we can start investing soon but moving to our target high volume scales early next year.

Exciting stuff! For anyone interested in contacting Anil to find out more, you can do so on his LinkedIn page: http://www.linkedin.com/in/ahansjee