Speedinvest was among the first European early-stage VC firms when its founders started to take Silicon Valley's getting-hands-dirty practices from their own entrepreneurs' journey to the Old Continent, said investor Andreas Schwarzenbrunner.
Vienna-headquartered Speedinvest has invested in some 250 companies, including 20 investments in climate tech startups. The firm manages assets of about half a billion euros.
A few key takeaways from Andreas Schwarzenbrunner:
"I think there's a gap between the software digital-focused climate tech companies versus ones that are really into more development of new ideas, R&D, infrastructure, and hardware."
"I think there the investor scene needs to adapt because if you're serious about climate tech, and if you are serious about decarbonization, and reducing emissions, the investor scene, including us, has to realize that there is no way around hardware.
At the end of the day, if you really look at the hard problems in climate tech, there are so many things that can't be solved otherwise. It's about reducing emissions when you use concrete and steel; it's about new ways of electrified mobility and charging infrastructure.
If you look at energy storage and hydrogen solutions, there's no way around building the storage facilities and all those things. Investors need to adapt and realize that if you're serious about it, you have to tackle these problems."
"We also see that this climate tech is basically a maturing asset class ... you can see the rise of investors in climate tech, money that goes into that space. And for us, we also want to double down on this, and we want to continue to invest and even invest more in climate tech companies over the years to come."
**Intelligent Investing with Glenn Leest
Tarmo Virki 0:29
Tell us a little bit about Speedinvest. In the European startup scene, many people have probably heard of Speedinvest, but what's the story of the investment company?
Andreas Schwarzenbrunner 0:41
It has changed in the last couple of years that people heard about us. So typically, it was not really the case. Speedinvest was founded in 2011. So we have now 11 years. We focus on software, digital startups in an early stage, with a focus on pre-seed and seed companies. Over the last 11 years, we invested in around 250 companies.
Started 11 years ago with a very small fund, the 10 million fund, and how this got started. Actually, our founders have been in the startup world themselves. They founded a software startup after uni. It was one of the early companies in mobile content back then when there was no iPhone. And then, basically, they went through the whole rollercoaster. Like dot.com bubble 2000-2001, then it went back up again, and sold the company in 2005, to VeriSign in the US, they moved to the valley, and got a bit like the American valley vibes. And they always thought why there is not actually pre-seed, seed investors existing like in the US, like, very hands-on, that really can help the startups, have operational background and experiences, and entrepreneur experience, and really can help the startups to scale in very early days because their experience with their investors was always quite bad back then. And that's why they said, Okay, this is actually what we think is needed. And they started when they moved back to Austria; they're all actually Austrian, moved back to Austria, they started to do angel investments. And this was basically then the beginning of Speedinvest and led to the first fund of about 10 million in 2011. Yeah, by now, it's above a billion in assets under management. And, and as said, we have invested in 250 companies since then. But this was the beginning. And it really still, I would say, shapes our DNA. So we have a very strong operational focus. That means a lot of our team members have an entrepreneurial background themselves. We also have two teams internally that work operationally with our portfolio companies. One is everything around people, HR, hiring, and the other is everything about marketing, growth, sales; because we identify this, especially in the first two, or three years in the startup phase journey, this is where we can support most. And this is still in the, let's say, in the DNA of Speedinvest. That's a bit in a nutshell - what we do. As said, we started in Vienna but have offices now in Munich, Berlin, London, Paris, and I'm based in Stockholm. So actually spread out across Europe, and it was quite an interesting journey in the last 11 years.
Tarmo Virki 3:58
Sector-wise: is mobile and digital still somehow in focus? Or how have you kind of become generalist?
Andreas Schwarzenbrunner 4:10
We started generalist. And then we realized a couple of years ago, actually, what is it that startups really want? They said there's so much capital on the market, and if you are a great founder, you can choose your investor. It's not the other way around. It's that the founder can choose the investor. We said okay, besides our operational support and focus, what is it that we actually can bring to the table to bring good deals, and this is where we started to form our sector focus teams. And because we realized that, especially in pre-seed- seed, founders really appreciate that A) you have a team that understands their space understands their business model, but B) also have a relevant network in terms of sales and business development for my specific sector or vertical. And that's why we started to form our sector-focused teams in 2017. And that's still the case today. I mean, the teams developed a bit, and new topics came up. Now we have six focus teams. One is deep tech. The second one is SaaS. The third one is consumer marketplaces. The fourth one is industrial and climate tech. The fifth one is fintech. And what did I forget now? Health Consumer marketplaces SaaS deep tech, FinTech, industrial and climate tech already six, so didn't forget anyone.
Tarmo Virki 5:44
The industrial and climate tech go together; what's the industrial, and why are they linked?
Andreas Schwarzenbrunner 5:53
So climate for us ... it's for us a horizontal topic, right? There can be consumer topics in climate; there can be FinTech topics in climate, etc. But on the B2B side, we realized that what we looked at, in, let's say, an industrial side, is like almost all the big heavy emitting sectors, right? Manufacturing, logistics, Energy, Agriculture, and mobility all those sectors are causing a big chunk of emissions. And that's why they have big pressure to change the business model, invest in new technology, new innovation, to reduce emissions. And there's a very strong link between, let's say, the old industrial world and everything in climate tech, right? Because at the end of the day, those are the ones that need to adapt to the need to change in order that we will really reduce emissions. And that's why we look at it from a B2B perspective, mostly in these sectors, but on climate in general, we look at it horizontally so that it can be across teams as well. But it's mostly, I would say, consumer marketplaces, FinTech, and Industrial Tech, where climate plays a real role. Because if you look at health, etc., they're not that many.
Tarmo Virki 7:22
Make makes a lot of sense. And I really liked the logic of combining it together with the sectors where the impact is the biggest in a way. That's a really nice approach. How much do you look at looking at your portfolio? How much have you guys done, you know, purely climate tech investments, or maybe climate-driven investments, because, as you said, logistics investment could be climate-driven.
Andreas Schwarzenbrunner 7:54
Yes. It depends a bit on how you define it. I think that different people see it differently. We invested in about 20 companies in the climate tech space. And most of them have been within the last two to three years. So really, in the last two to three years, we put more focus on climate tech; we made around 20 investments. And that's a quite broad mix in topics, from recycling to batteries to carbon offsetting, carbon accounting, and ESG reporting software. As you mentioned, green logistics providers. So it's quite a broad mix of topics. But I would say the ones that we really define as climate tech are around 20 now and rising, that we invested in over the last two to three years. And we also see that this climate tech is basically a maturing asset class, right. So now you can see the rise of investors in climate tech, money that goes into that space. And for us, we also want to double down on this, and we want to continue to invest and even invest more in climate tech companies over the years to come. And I think we have actually built quite a nice portfolio.
Tarmo Virki 9:14
many people say that there is more money than, you know, great founders in climate tech. You also referred earlier that basically, for the great founders, there is always more money, and they can choose their investment, you know, investors in the team. Do you see this balance even bigger issue in the climate sector? Is the climate sector so hot that there is more money than companies?
Andreas Schwarzenbrunner 9:44
That's a good question. Yes and no. I would say on one hand, for a particular subset of climate tech companies, there's way more demand than there are companies, but there's a strong subset of climate tech companies, everything that goes way more into R&D, infrastructure, hardware, etc. where there are not that many investors. So I think there's a gap between the software digital-focused climate tech companies versus ones that are really into more development of new ideas, R&D, infrastructure, and hardware. So I think there the situation is a different one.
Tarmo Virki 10:29
I totally understand that. What could those deep-tech hardware companies do to change the situation? Do they need to take the money from somewhere else than VC sector, or is there some other way? I don't know, is somebody building the VC funds with that 20 focus to do the deep tech.
Andreas Schwarzenbrunner 10:55
I think it's not so much about the companies; I think it's really about the investor scene needs to adapt. There is a strong foundation of, let's say, government money, EU-backed money, and everything on the green transition. Then there is a strong subset of investors in much later stage private equity that invests in infrastructure; there was a big announcement also from Apollo, that they want to invest 100 billion in decarbonization projects. So there's a lot of things already happening, I think, the gap is really on the let's say early stages, from seed to A, where people want to develop a new idea, and if not maybe yet found, say the right business model, customers, etc. And I think there the investor scene needs to adapt because if you're serious about climate tech, and if you are serious about decarbonization, and reducing emissions, the investor scene, including us, has to realize that there is no way around hardware, right, at the end of the day, if you really look at the hard problems in climate tech, there are so many things that can't be solved otherwise, it's about reducing emissions when you use I don't know, concrete and steel, it's about new ways of electrified mobility and charging infrastructure where there's also the way around building the charging infrastructure.
If you look at energy storage and hydrogen solutions, there's no way around building the storage facilities and all those things. Investors need to adapt and realize that if you're serious about it, you have to tackle these problems. And that's why I think a lot of funds will adapt, and some won't do that, which is also fair if you say this is not what you'd be investing in. And I think this will, on the other hand, but then also up a new field of investors that have the that we already see, right, in the last two-three years, a lot of new climate tech investors popping up and I think they will also be a new investor scene for that space popping up.
Tarmo Virki 13:09
You are talking about being serious about the scene and so on. That always reminds me of the latest environment reports as we are reading about the seriousness of the problem the sector is trying to solve. You take out the latest IPCC report and see that, basically, pardon n my French, but we're fucked. Can startups actually change the world here?
Andreas Schwarzenbrunner 13:41
I mean, we have to try, right. What's the alternative? The alternative is giving up. Now, I don't think that's a real alternative. I think we really, really need to try, and we have to pull the trigger on multiple fronts, right? This is really on policymaking. This is about the investor scene, but this is also about fostering and supporting entrepreneurship and new ideas, new technologies that can solve those problems. And it's also about the corporates and especially, let's say, heavy emitting industries that need to adapt fast and can also be a huge driver for new technology ideas and those startups as well. So I think at the end of the day, it's a mix of multiple fronts. And then also the fifth one is obviously each one of us as individuals who can adapt the lifestyle which is obviously always the hardest because I always believe that if you really want to change stuff, you need to give people a better alternative because otherwise, they won't do it. And at the end of the day, I think it's a mix of all of this, and we need to try, and we need to try harder. there because there if you don't think that there is an alternative to that
Tarmo Virki 14:59
Yesterday I saw statistics from Bolt where they said that 80% of the consumers would not pay even 1% more for a sustainable alternative, which was quite stunning.
Andreas Schwarzenbrunner 15:21
I think it varies a lot between different countries. I think the percentage of people who are willing to pay a premium, green premium is, I think, much higher. But yes, I think very much in line with what I think is that if you don't have a real alternative, it also thinks the question of price is always a bit about how we are pricing in externalities, right? Because at the end of the day, people pay prices where there's not everything priced-in what they're actually causing by doing that. And that's why it's always a bit of an unfair comparison because on so many fronts, we are subsidizing old industries, or we have low taxes on specific sectors and industries. And so at the end of the day, also the question is really on how we really price in CO2. And then I think if you really do this properly, a price comparison looks different.
Tarmo Virki 16:25
It probably depends a lot on the sectors. I think the classical thing is nuclear energy where nobody really counts those 1,000 years; somebody has to keep the waste somewhere; it's kind of outsourced cost to the government or something like that. And, and probably many other sectors also, but by bringing the real costs to the product would probably help in many products to, you know, turn consumers more aware of their sustainable choices.
Andreas Schwarzenbrunner 16:57
That's it. That's a big, big, big part of changing the system, right? It's like being information in a place that people really don't know. What is it that we're actually talking about? And it's that I don't know; it's my impression that a lot of people just lack that kind of information. And about what is actually causing what, and if I buy this kind of meat, is it bad? Or is it? Is it? Is it good? Or even there's the end of the date? There is no bad or good. And how do my consumption and my behavior affect the planet? And I think there's a lot of wrong info out there. And there's a lot of miscommunication as well. And I think that makes it really hard for people to really understand it. Because I don't know, how about you, but so many people I know, our friends I know, we're really I would say smart, educated people, but don't really have the information to really charge what is it actually that that that I should to can do.
Tarmo Virki 18:13
I think greenwashing is really extensive these days in Europe. I see that the bigger the company, the greener its messaging is, while there is probably a local competitor who has done everything green from day zero. But then comes a global conglomerate whose big advertising slogans are all green.
Andreas Schwarzenbrunner 18:37
I always wonder if this is good or bad because I think at the end of the day, better greenwashing than nothing, maybe? Because at least it's out there, right, but of course, at the end of the day, it often doesn't really have a big effect.
Tarmo Virki 19:09
That's true. If you go to the events these days, when the events actually are again happening, and you can meet people in 3D -- what kind of companies you're looking at, what kind of stories, what kind of sectors? As this podcast is about the green economy and the green future, focusing on maybe climate tech space.
Andreas Schwarzenbrunner 19:36
In Climate Tech, we actually look at roughly six target sectors: it's the circular economy, smart electrified mobility, construction and buildings, energy transition, and measuring financing in the green transition. And the sixth one is food and agriculture.
I would say those are the main areas to look at, and within these, we really look at companies that can create value through technology, particularly not saying software purely but creating value through technology, and have a strong technological component in a large and growing market that really have at the same time a positive, let's say social-environmental impact. That is, roughly, what we're looking at. And, and within those areas, obviously, trends come and go. So we spend a lot of time. We might move on to another topic if we've made investments. So we spent, for example, the last two years a lot of time on waste and recycling. And we made two investments in that space and still would be, I guess, open to doing more. Still, at least we have done two investments now. We've done our research, we've looked at the space, in particular, is the other one is also solar. We made two investments in the solar space, where we spend a lot of time on. And there will be other topics where we are now we have, for example, let's say two examples where we now really tried to smarten ourselves up and look into this food is which for us is a bit something we're not experts in and the other one is everything around hydrogen where we really want to understand okay, what is it that actually pristine area where we could invest in. So topics come and go, but I would say always we fit those six sectors and how those six sectors will be transformed in order to transition to a zero-carbon economy.
Tarmo Virki 21:44
Putting together the energy transition and your Austrian roots, I have to ask how the current geopolitical situation in Europe is impacting your drive to invest in the energy transition? Or do you see there some kind of peak in the interest in that sector?
Andreas Schwarzenbrunner 22:08
Because we in Austria and Germany are dependent on Russian oil and gas? The way I look about it is everything. So what is happening in Ukraine is accelerating things on the Green Deal, right? So if you look at all the topics within the European Green Deal, especially the ones about the energy transition, all those things will happen now, much faster than they are planned. That is my assumption. And I think we can see that, especially now, for us being present in Germany and Austria and having a lot of Germans and Austrians in the team is that that there is a public debate about what are our alternatives?
And how can we increase the share of renewables while at the same time decreasing our dependence on Russian oil and gas? And this is now happening; there is strong public pressure to adapt and do that. And that's why I think, for startups in this space, let's say energy transition in general, this is a big wave they can ride and that's why I think there will be a lot of investment going into everything around renewables, everything around hydrogen, and everything around energy savings because it's the other part of the component. That's the other component. Right? So it's not only where do we get our energy from, but also how can we reduce our energy consumption? And I think those two things will happen now on a massive scale. It's my feeling,
Tarmo Virki 24:09
it must be one of the first places or the first time ever in the EU history that something is happening faster than planned, right?
Andreas Schwarzenbrunner 24:17
Yeah. We don't know yet. Hopefully, it will, or maybe now it will happen in time.
Tarmo Virki 24:26
For the EU that will be a big deal. You made this interesting point that the crisis is kind of so immediate that there's actually no other option than to try to fight the situation. The kind of, you know, the nature of the entrepreneurship or nature of VC investment that, you know, giving up is not an option. I really liked that logic, and I think that's probably something that the listeners will also take home from this episode. Looking ahead into this year, what makes you tick? What's the interesting thing going forward now? Is it the energy transition you're really excited about or?
Andreas Schwarzenbrunner 25:26
As said, I think those are those six sectors. And within that, we are opportunistic because, in the end of the day, it's about having a strong founder team, a market that we think is interesting, and a business model that works. If you are too picky, or if, let's say, if you are already in advanced, like too narrow, it's really difficult. So that's why we say Okay, those are the areas we want to invest in. Those are the things we want to see: a strong technological component, a fast-growing market, a big and growing market. And they have an environmental and social impact. And if we look at those areas, and within the six sectors, you look at these, and between those six sectors. There we want to be flexible because, in the end of the day, it's also a lot about teams driving it. And, and for example, I mean, we spent a lot of time on also recently on, on the topic about heat pumps, right. And that was, I could not think about it years ago: I would have said that we're excited about heat pumps. If you have the right opportunity, that you think makes sense. And there's a cool team taking it to the market. And it's a really cool area.
Tarmo Virki 26:50
Heat pumps, something to take home with from this, from this year, basically, or this winter heat pumps...
Andreas Schwarzenbrunner 27:01
... nobody really thought about heat pumps until this year. Right?
Tarmo Virki 27:07
I mean, in the north, we always think about heat pumps and yeah, but looking at the rest of Europe, not really. That's true. Thanks, Andreas, for this chat. And we'll see you at next startup conferences. Thank you.
Andreas Schwarzenbrunner 27:26
Yes, thanks. Thanks for having me. Bye.
Tarmo Virki 27:28
Bye. Join us again for the next episode. Thank you for listening. If you liked the show, please give us a good rating and leave the feedback in your podcast player so others will find it too. We will be back next week. Turn on to Naturebacked podcast.
Transcribed by https://otter.ai