Paris, Düsseldorf Aude Guo is developing a high-tech insect breeding program with which the world’s population can be fed in a climate-friendly way. Daniel Metzler wants to secure strategically important access to space for European companies with his rocket.
You are one of the founders in Europe who care about breakthrough technologies. Both came to the Paris deep-tech conference Hello Tomorrow to appeal once again during a panel discussion: If Europe wants to be sovereign when it comes to future technologies, it needs more support.
There is an unprecedented venture capital boom in Europe. But that only has a limited impact on founders like them: “The really big financing rounds for deep tech take place elsewhere,” says Guo. “What really moves us forward are government contracts,” says Metzler.
Deeptech includes robotics, quantum computing, material development, synthetic biology, artificial intelligence and space technology. Start-ups in this area use the latest research technology or develop them themselves.
They try to solve the most difficult and at the same time most important challenges – but they see the lack of support as their biggest problem. Aude Guo and Daniel Metzler are also meeting in Paris this week because they are hoping for French President Emmanuel Macron. When France takes over the EU Council Presidency in early 2022, it wants to put technological innovations at the top of the agenda. His goal is to set up ten technology companies in Europe with a valuation of 100 billion euros by 2030.
An important focus is on companies such as Guo’s Paris-based biotech company Innovafeed and Metzler’s Munich start-up Isar Aerospace: “Deeptech is the key to overcoming the social challenges of our time,” says Cédric O, Macron’s digital minister of state in his initiative ” Scale-Up Europe ”and agreed with the founders in the discussion on many points. He also names quantum computing and artificial intelligence as crucial for the future of industries. But even with a clear goal, it is a complex undertaking.
Why there are relatively few funds for deep tech in Europe
Last year, according to the Dealroom database, 9.4 billion euros were invested in European deep-tech start-ups – and 33 billion euros in US companies. Even if the investment sum in Europe should more than double this year, as experts expect: “Europe still has a lot to catch up,” says Aude Guo.
Deeptech investor Lise Rechsteiner is looking for candidates for the portfolio of her venture capital firm Vsquared Ventures in Paris. She agrees with Guo: Paradoxically, money is still the biggest bottleneck. “Most of the capital goes to late-stage companies and focuses on specific topics such as the digitization of industry, data analysis and automation.”
Stan Larroque can also report how hyper-driven venture capital financing is: For a long time, hardly any investor has been interested in his company Lynx, which has been working on glasses that combine virtual and augmented reality for three years. Then Mark Zuckerberg announced the Metaverse – a virtual world – as the next development step for the Internet. “Since then, investors have suddenly been calling me on their own initiative. That never happened before. “
According to Lise Rechsteiner, Europe still lacks early-stage investors with a focus on deep tech who finance a wide range of research-driven topics. Long development times are often cited as a reason, but classic venture capital funds only run for ten years.
She is a partner at V Squared Ventures, which invest in deep tech.
(Photo: VSquared Ventures)
Investor Christian Angermayer does not accept the argument in the discussion in Paris. “It’s a myth that deep-tech startups are slow to develop,” he says. If you are not fast enough, the competition will overtake you anyway. He refers to Isar Aerospace, where he was one of the first investors with his family office Apeiron.
Its so-called “micro launcher” is scheduled to start in mid-2022 – just four years after it was founded – and will in future put small satellites into low earth orbit. There is huge interest from the automotive industry, for example, because new types of navigation systems based on LEO satellites are central to autonomous driving. “A company like Isar could go public in the US,” says Angermayer. At the current status of the valuation – around half a billion euros – his investment would have increased a hundredfold.
State funding pots and orders
Aude Guo and her co-founders were also lucky: For their search for alternative proteins, there were public funding programs in the initial phase from 2016. With this support, in turn, it was easier to get the first venture capital. This start-up aid is missing for other important projects – then things get complicated.
According to Daniel Metzler, it does not always have to and should not always be funds that governments use to provide support. For a company like Isar Aerospace, government contracts are more important, with which the start-up can plan and at the same time convince private donors. Metzler also calculates how such orders will pay off for taxpayers: “If the government gives us an order for eleven million euros, that gives taxpayers ten times the return.”
In addition to the equivalent consideration, 100 million euros would flow back to the German taxpayer – through salaries that Isar Aerospace pays, as well as through the increased goodwill and the resulting capital gains tax in the event of an exit.
Investor Angermayer supports this: The state should simply treat deep-tech start-ups in the same way as established companies and ensure fair competition, he says: “Then I am sure that many young companies will be able to overtake the established players.” In space travel, for example Orders should not go to aircraft manufacturer Airbus out of habit.
Cooperation with large companies
In addition to the state, large companies can also be important anchor customers for deep-tech start-ups. Even those who can prove customers from the industry, get venture capital faster, like the robotics founder Marc Dassler with his company Energy Robotics.
For his inspection robots, which can inspect oil and gas systems, he found the Shell oil company as a customer early on. Nevertheless, he can report: Many potential customers see too much risk. Therefore, according to Dassler, politicians should intervene: “Tax breaks and depreciation options for companies that participate in deep-tech start-ups would create more incentives for investments.”
The French gas market leader Air Liquide is a company that has already recognized the great opportunities this collaboration offers. The multinational company has commissioned a venture capital fund and a so-called accelerator program to support deep-tech start-ups.
The Group’s Vice President, Emilie Mouren-Renouard, emphasizes the advantages for everyone involved: The partnership naturally helps the young companies to grow. “But working with the start-ups also creates an entrepreneurial way of thinking in large companies, which helps us to accelerate innovations.” In the end, the taxpayers benefit from this too.
Cooperations with universities
The deep-tech entrepreneurs also say that something has to be done about the framework conditions for research cooperation. Guo’s largest vertical insect farm is 20,000 square meters. In order to make mass breeding as resource-efficient as possible, her employees research the optimal combination of temperature, humidity and light using 3000 sensors and artificial intelligence.
Cooperation with universities and research institutes is central to Innovafeed, says Guo – and often difficult. For example, universities have completely different incentives to research: While universities want to publish as much as possible, a start-up has to protect its knowledge: “There is a lot of discussion about confidentiality agreements, how one shares intellectual property and what one can publish and when.”
Her start-up, Innovafeed, produces insect-based foods.
(Photo: Innovafeed)
The lengthy application process for research funding is also unsuitable for start-ups. Politicians have to help here. According to his own estimates, Daniel Metzler currently spends a fifth of his time teaching politicians the opportunities offered by deep tech and fighting for better competitive conditions.
Time that he would rather devote to technical challenges in the year before his first rocket launch. With Macron’s presidency, all the participants in the discussion in Paris are hoping for a turnaround. “What we have lacked in Europe so far is an understanding of urgency,” says investor Angermayer.
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