Alternative investment firm Ilavska Vuillermoz Capital is now partnering with Switzerland-based research organisation CERN after launching its climatetech fund. This will bring research investors and companies together. Quentin Dupraz also explains why IVC prefers founders with ups and downs in their lives.
What does IVC’s climatetech fund look to target specifically?
Our fund targets early-stage technologies with applications in the sectors that are the most CO₂ or greenhouse gas equivalent (GHG eq), emitters at a global scale.
Industry and Energy are sectors we target specifically as technologies there will be a necessary enabler to the conundrum of re-industrialization and decarbonization that Europe is orchestrating simultaneously. We’re talking about addressing industry and manufacturing activities of all sorts with technologies, to curve the production of goods and all the underlying processes that currently represent 30% of GHG emissions. The Energy Sector is also, still heavily dependent on fossil fuels. On Luxembourg’s scale, for example, only 12% of the electricity that is produced locally is from renewable sources, and regarding heating, around 80% is fossil fuel-based.
We are for example looking at thermal storage solutions converting electricity into heat when there is a surplus. It is then stored and used when needed in industrial applications to solve the current reliance on fossil-based heating.
Another theme is going to be transport. We can see it with the penetration of electric vehicles in our society. This is the first step, but the growing number of cars per available ChargePoint due to power grid constraints supports the emergence of optimization technologies and/or new business models. Tackling the hard-to-decarbonise sectors, such as the aviation industry, is also an element of focus.
What are the criteria that IVC uses to evaluate potential investments in climate tech startups?
In short, what we’re looking at is passionate individuals who have the capabilities to have big disruptive ideas and who can execute those ideas and create something that is needed in certain markets. The broad way of how venture capitalists are looking at investments, if you want to break that down into subcategories, is that we look at the team, we look at the product, we look at the market, we look at the financing.
We distinguish companies that we believe are bankable by a fund like ours. I would never invest in an only engineering-driven team because, down the line, we definitely know that once the technological risks and the scaling risks are solved, the challenge is going to be commercial. There is definitely a need for the founding team to have this commercial angle and this mindset of people who fight to get things sold and who insist until they get contracts done. It’s obviously tough to distinguish that in the mindset of certain founders, but we have the techniques to do it.
What are those techniques?
We are not looking at a person or a type but at their behaviour. I’m talking for myself, but I like to see in people’s profiles that they had, let’s say, struggles or shifts in their lives. It can be at school or changing jobs, it can be in their private life. We are looking at nonlinear profiles, and we’re assessing how people are reacting to these shocks or to the constraints that they have had in their lives.
Because down the line, we are investing money in people more than products at an early-stage maturity. You can often adapt a product or a technology, but you cannot change the behaviour of a founder. If the product is not good, and if you back the right founders, they will have the agility to adapt the product, not the other way around. That’s why this human component is key for us. It’s not science. There is a bit of gut feeling involved in this, I have to say.
How do you feel about regulations and regulatory market risks associated with climatetechs?
I love regulations. You know that at IVC we have a fintech fund and we made some prominent investments, in N26, for example, which is one of the largest unicorns in Europe. For the past two years, they have been heavily regulated.
Regulations are usually synonyms of importance when a market or an actor is becoming noticed, translated into large potential in our venture jargon. In the case of N26 for example, it went through this process but has now a time advantage over all the other growth stage fintechs that may face the same.
Are there plans to engage with stakeholders deeper than purely by investing?
We partnered with the Luxembourg Institute of Science and Technologies (LIST). They will be involved in the assessment of technologies and companies. The advantage of such a partnership is to allow the startups we are going to invest in to access their labs and facilities. We have just signed a similar partnership with CERN in Switzerland, allowing our startups to access CERN’s fundamental technology libraries to develop their applications. It will bring synergies between research, investors, and companies. The idea is to leverage that ecosystem to develop the technologies and to surround yourself with the people who are capable of supporting the companies.
How did this come about?
Venture capital is a people business. That’s its specificity compared to some other substreams of finance, where sometimes it’s mostly about numbers. In venture, it’s about people first. So, for us, it came out of connections that we activated in our mission to engage beyond investing.
