Startup creator Entrepreneur First has raised a £40 million fund to invest in Europe's new founders

Startup factory Entrepreneur First has raised a £40 million fund to invest in the startups that are created on its company building programme.

Cofounded in London in 2011 by Matt Clifford and Alice Bentinck, Entrepreneur First provides deeply technical people with £17,000 in pre-seed funding so they can build a technology startup. In return, it takes an 8% equity stake in the company that is created.

The startup factory has produced an impressive array of companies, including AI firm Magic Pony, which was acquired by Twitter in June for a reported $150 million (£112 million). In the last four years, more than 100 startups have been created on the Entrepreneur First programme and they're now valued at $450 million (£336 million).

But there's been one small problem. Not all of the startups graduating from Entrepreneur First have been able to raise the capital they need to continue growing when they leave the startup factory. Clifford, the CEO of Entrepreneur First, told Business Insider that the "Next Stage Fund" will change this.

The £40 million will be used to provide each graduating Entrepreneur First startup with a £70,000 loan note. It will also be used to invest in the Entrepreneur First startups when they raise their seed and series A rounds. The loan note convert to shares when the startup raises their seed round, according to an Entrepreneur First spokeswoman.

Entrepreneur First raised the fund from a mixture of sources, including universities, venture capital firms, and high net worth individuals. The British Business Bank pledged £26 million to the new fund, while Imperial College London, Freston Ventures, Isomer Capital, and a number of entrepreneurs, family offices and funds, made up the rest.

Keith Morgan, CEO of British Business Bank, said. "It is vital to the UK economy that we support innovative, entrepreneur-led startups on their journey to becoming the high-growth businesses of tomorrow. We are therefore delighted to be partnering with Entrepreneur First in their Next Stage Fund, which will provide much-needed capital and support to help realise the potential of smaller companies across the country."

Capital from the Next Stage Fund will be available for the current cohort, EF6, which presents to investors at Facebook's UK office on Tuesday, through to EF10, taking place in September 2018. It will cover five cohorts and will invest in over 100 UK companies.

"When we started Entrepreneur First, we broke the mould when it came to creating defensible technology startups. We're proud to say that we are no ordinary fund: we build the companies we invest in," said Clifford, CEO of Entrepreneur First, in a statement. "The new fund, supported by the British Business Bank's Enterprise Capital Fund programme, will take this on a stage further helping us to continue recruiting world-class technologists at volume to turning them into world-class startups."