pv magazine: How long has Vireo Ventures been around, and who is behind it?
Felix Krause: We launched the Vireo Electrification Fund at the end of last year and have already made two investments in energy startups. Prior to the launch of our fund, Matthias Engel, Mischa Wetzel, Thomas Labryga and I helped to establish Innogy Ventures, Innogy's former corporate venture capital fund, with a volume of €130 million ($138.9 million). Before becoming managing director of Innogy Ventures, Matthias worked at RWE in the area of mergers and acquisitions and thus accompanied the transformation of the energy industry at an early stage, Mischa helped set up the Creative Industries Fund of IBB Ventures here in Berlin, and Thomas worked as a management consultant along the entire energy value chain. Among other things, he accompanied the IPO of Innogy. Sven Heiligtag has spent the last 20 years in the energy world at McKinsey, most recently as head of the German energy division and building up the Japanese energy division. During this time, he has worked with a wide range of incumbents in Germany, Europe, the US and Japan, both in the traditional energy industry and with startups and organizations in the broader energy and startup ecosystem. I myself started my own business in the photovoltaic sector in 2009, developing PV projects in Germany and the UK. This was followed by founding Milk the Sun. In 2020, we opened a new chapter as early-stage investors and started directly to build our own investment portfolio of energy startups. Individually and as a team, we have completed well over 100 startup investments.
What kind of startups have you already invested in? Do you plan to invest in the future?
We firmly believe that the energy sector is one of the most attractive areas to invest in at present. It is large, growing rapidly, subject to radical change and therefore offers investors an above-average return on climate and investment. That is why we invest in young companies that are driving the necessary transformation of the energy world and in particular the upcoming electrification of various sectors around the fields of green energy, hydrogen, mobility and smart buildings. In doing so, we are looking for dedicated teams that we can support with our network and experience. We typically invest in startups during the so-called pre-seed or seed phase, where we can offer the greatest added value. We often accompany the companies from prototypes to market entry, the subsequent growth phase and to internationalization. We then also support them in organizing further rounds of financing. Since our first closing in November 2022, we completed two investments. Unfortunately, these are still confidential, which is why I am not yet allowed to mention any names here.
In November 2022, you have launched a fund? What is its volume, and how many startups do you plan to invest in?
Our fund will have a total volume of €60 million. We plan to use this to make investments in up to 30 European startups in the energy industry over the next four years.
Why do you place such a strong emphasis on sector coupling?
Sector coupling, – that is, the holistic view of the energy system in interaction with heating/cooling generation, mobility and other areas – enables the decarbonization of all economic sectors through renewable energy. Although this sometimes comes with higher investment costs than conventional energy, significantly lower operating costs are applicable, with almost zero marginal costs per kilowatt-hour. This, as well as the fluctuating availability of renewable energy, will enable and also require completely new business models – and this is where sector coupling comes into play. The intelligent coupling of sectors through the use of energy-efficient technologies such as heat pumps, combined heat and power plants or electric cars can lead to a significant reduction in energy consumption. The use of large and cost-effective energy storage outside the power sector creates a high degree of flexibility in the power supply. This makes it easy to compensate for fluctuations in renewable energy. Of course, this only works if all systems are smartly linked and controlled. In the past, for example, we have invested in companies that intelligently control the charging of electric cars or that manage the cooling needs of stores, among other things. We believe that we are still at the very beginning of this development and that there will be many exciting opportunities in the coming years.
Why are you primarily focusing on young companies in Europe? Wouldn't start-ups in the US also be interesting after the adoption of the Inflation Reduction Act?
The Inflation Reduction Act is certainly acting as an accelerator for renewable energy and related sectors in the US. Nevertheless, we are convinced that Europe offers a fantastic environment for early-stage investments from an investor perspective. In Europe, we have excellent research facilities and a lot of know-how, especially in the renewable energy sector. We therefore assume that many of the required technologies will be developed in Europe and that these will then have the chance to scale up in the US as well. As a result, we also benefit indirectly from the IRA. But of course the EU will have to find an appropriate response with a similarly strong and long-term program. Young companies in the EU will then also benefit directly from this.
The advisory board that advises Vireo Ventures on investments was recently established. Who is represented there?
We are very happy to have gained seasoned and experienced experts for Vireo Ventures for our advisory board. Going forward, we will be supported by five top-notch personalities from the business world: Christopher Burghardt, former vice president Europe at Charge Point and vice president at First Solar, and now a member of the advisory board of various venture capital and private equity firms. Carl-Peter Forster, formerly a board member at BMW and General Motors, CEO of Tata Motors, and currently board member in various companies, as well as his own startup investments. Samuel Leupold, former CEO of Ørsted Wind Power and current chairman of Corio Generation, and on the boards of Enel and Schlumberger. Louise Hahn is a board member of European Energy A/S and formerly MD at Ørsted and GlobalConnect. Marie-Theres Thiell, former CEO of Innogy Hungary and member of the supervisory board of Westenergie and Bayernwerk, among others, is also on board.
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What impulses do you hope and expect from these high-class experts?
With our advisory board, we cover the various European (and global) European markets geographically as well as the sectors relevant to us, in which we invest. We will benefit from the cumulative market understanding of our advisory board, and together with them we will critically scrutinize our investment theses on a regular basis and adjust if necessary. In addition, we provide our portfolio companies with first-class access to expertise, industry know-how and networks via the advisory board members.
Do you have a goal for how many investments you want to make this year?
In my time as an investor, I have never seen so many exciting start-ups and investment opportunities at once. It seems as if many have taken the current energy crisis as an opportunity to get off the ground with a startup right now. It is therefore not easy for me to give a concrete answer to the question, but I would expect six to seven investments until the end of this year.
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