About Vsquared Ventures

How would you describe Vsquared Ventures and your investment thesis/guiding principles in one sentence?

At Vsquared we back bold entrepreneurs who are engineering groundbreaking technologies that address some of the world’s most pressing challenges to become global leaders.

Can you tell us a bit about yourself and the main partners in the team?

I joined Vsquared Ventures, one of the leading European deep tech funds, in 2021. All of us Vsquared partners have been at the forefront of deep tech investing for nearly a decade, before deep tech was at the top of the agenda. The entire Vsquared team consists of experts with diverse backgrounds, combining scientific, business and entrepreneurial experience, which is the perfect set-up to discover and understand the deep tech companies we invest in. We just recently closed our second main fund at €214m and have invested in over 30 portfolio companies, who are led by incredible entrepreneurs.

Entrepreneurship, and how to enable it, has always been something I have been interested in. After finishing my PhD I joined Rocket Internet, where I immersed myself in one of the rapidly growing startups being built by the company, called Helpling. During my time there I was in charge of building out new markets in the Nordics. As we expanded to more than 10 countries in less than a year, this experience taught me how to scale companies incredibly fast. Wanting to explore this capability further, I switched into VC to support a diverse set of companies on their growth path, both with capital and advice. I joined a €100m CVC investing in general topics, before heading the investments of Nordic Impact. Here my journey into quantum computing, new materials, green chemistry and AI began, which led me to co-found the deep tech fund Propagator Ventures in 2018. At Propagator we built a successful portfolio across Europe and North America, including companies such as Genesis Therapeutics, Zapata Computing, Sanctuary and Modl.ai.

Can you tell us a bit about the fund’s history?

Vsquared is a pan-European deep tech fund. Investing in deep tech companies, we focus on six different areas, which we call Generational Growth Themes (GGTs). We chose this name as we consider them topics that will become main drivers of future generations’ development. The GGTs are: new space, energy transition, robotics and manufacturing, new computing and sensing, AI and next-gen software, and tech-bio.

Vsquared was one of the early deep tech funds in Europe. We just recently closed our second main fund at €214m, bringing our AUM to €450m, cementing our position as the largest early-stage European deep tech fund to date. With over 30 portfolio companies we have built one of Europe’s strongest deep tech portfolios, including industry disruptors such as Isar Aerospace, IQM Quantum Computing, Zama.ai, Customcells, Neura Robotics and The Exploration Company.

In essence, we identify teams that build groundbreaking technologies, create new markets and become global leaders.

Can you give us the key characteristics of this new fund?

• Size (targeted & closed) and horizon: We recently closed our second main fund, Vsquared II, at €214m. This brings our AUM to around €450m.
• Industry/Technology focus: We focus exclusively on deep tech. Within deep tech we focus, as mentioned, on our 6 GGTs: new space, energy transition, robotics and manufacturing, new computing and sensing, AI and next-gen software, and tech-bio.
• Geography focus: As a pan-European fund our focus lies on Europe, but we do opportunistically consider other geographies, e.g. the US.
• Maturity focus/stage: Vsquared focuses on early-stage companies, ranging from pre-seed to Series A.
• Ticket size: Our average first-time investments range between €500.000 to €5m.
• Do you lead investments and do you have any typical deal terms? Yes, we do lead investments and, due to our experience with deep tech companies, often end up building the syndicates that invest.
• Can you follow on in later rounds? Yes, we have significant follow-on capacity.

Why do you think now is the right moment to launch this second main fund?

European deep tech is at an inflection point and is increasingly gaining relevance, both regionally and globally. Brave and smart investments in deep tech startups are needed as we are facing massive societal challenges: climate change, an aging population, AI safety and privacy. And only deep tech can tackle these.

At Vsquared, we recognized the potential of European deep tech as a highly attractive investment category early on. We observe and very much welcome the growing consensus that the deep tech investment category has significant substance, both in terms of returns potential and in offering a competitive advantage for Europe as a continent.

Great deep tech founders and companies have been and continue to emerge in the European deep tech ecosystem – think of DeepMind or BioNTech. With Europe being the home to some of the leading research facilities in the world, groundbreaking technologies have always originated from here. At the same time there is a clear need in Europe to invest in technologies that will make us futureproof, both as a society and as a region. Until recently the missing ingredient has been funding, especially in the growth stages, but this is changing. There is an opportunity now to build something really big. I believe that the next global deep tech leaders, may it be in space, quantum, robotics, or any other deep tech field, can and will also come out of Europe. This is why it was exactly the right time to launch this fund now.

What is your unfair advantage? What do you bring besides money?

We as a team have substantial experience in deep tech investing at a time, where many VCs are only starting to venture into this space. We know that it is different to build successful growth stories and companies in deep tech: it requires a different network, perspective and competence. This ranges from how you analyze and evaluate the technologies, the network needed to conduct effective due diligence, and the way you need to think around scaling a deep tech company. For example, scaling is not necessarily linear and cash planning is completely different from general tech. You also need access to different capabilities and networks to effectively assess and due diligence an opportunity, such as manufacturing skills and understanding of customers’ technology cycles. Having been involved in the sphere for this long, we can offer our founders access to a vast network, not only in VC but also within their respective industries, and also guidance on challenges that they face.

Investment Strategies, Advice & Upcoming Trends

What do you look for in entrepreneurs? / What will convince you to invest in a company?

Founders themselves need to have three characteristics: ambition, skills and integrity. In order to invest in a company, beyond looking for the right team with the right ambition and entrepreneurial mindset, we always look for technological differentiation and the scale of the market opportunity.

As a deep tech fund investing in groundbreaking technologies, how do you assess and mitigate technical and market risks?

We do in-depth due diligence on both technological and market risks and opportunities. We don’t invest in science risks but enter when the technology is only facing engineering challenges. As many deep tech companies are in emerging markets, we also need to seriously assess market risk, especially regarding timing and customer pull. We work across our network and do deep dive references to assess both components.

Can you give examples of companies you previously invested in and why?

Let’s take a look at two investments from 2023, Atrandi, a tech-bio start-up enabling next-gen sequencing, and the full stack robotics platform Neura Robotics.

Atrandi offers next-gen microfluidics for faster, better and cheap sequencing. Why we invested? Its novel technology platform enables new insights into the disease understanding at single cell level and new venues for drug discovery. Atrandi has all the ingredients to become a global leader in its field: an outstanding team that already has the proven ability to deliver the best products on the market. We are only seeing the beginning of the capabilities of next-gen sequencing of single cells. With higher dispersion and frequent usage of these capabilities, the company is positioned at the cusp of a biological revolution and will become a go to solution for multiple applications serving a >50bn USD market.

Looking at another deep tech vertical, robotics, we also invested in Neura Robotics last year. Neura is a full stack cognitive robotics platform, There were several factors that convinced us to invest: Product differentiation, business model innovation in their field, an immense market opportunity, and a founder and team with a big vision. they have a unique proprietary component strategy, enabling them to control the technology stack and offering industry-leading margins. In terms of their business model, the company is the first robotics company to offer a platform model. This enables them to set up technology-partnerships with large automation companies, offering them access to Neura’s robotics platform and technology stack, providing them the opportunity to build their own customized solutions. With Neura being the first company to act as a global robotics platform, this opens up access to a trillion-dollar market opportunity.

What is the best way for founders to approach you and what will convince you to have a first meeting?

At Vsquared we are highly thesis driven. We constantly search for teams building technologies that can truly be revolutionizing – we want to invest in massive opportunities. Often this means a convergence of us finding an area that offers this massive opportunity, and then meeting an outstanding team that has a corresponding ambition and vision.

My recommendation to deep tech founders would be to try to position yourself where you want to be found. Partner with other companies in your sphere, talk within your existing network, find out who the right investors will be for you, and try to find experts who will act as your ambassadors. Good investors don’t rely on incoming leads, they are always out there scanning and focus a lot on the network they have built up over time. If you as a startup are present in the right places and advocate for yourself when you speak to the right people, investors will become or be made aware of you. Hearing about a company multiple times, as you are out there searching for a new opportunity, may it be from users of the product, your industry network or other investors, is always a good sign, and will often make you want to meet the company.

What is one advice you would give deep tech founders?

Think commercially. You will stand out if – next to your technology vision – you have an excellent understanding and execution plan on how to get your product to market, how to scale, how to build profitability and to win the market.

Who are your LPs and how did you convince them to invest their money in deep tech?

We have a diverse set of LPs from all over the world. These range from founders and family offices all the way to institutional investors. Currently there is a lot of awareness for the massive opportunity in deep tech. Being one of the only deep tech only funds and having already gained experience in deep tech investing, connecting with relevant LPs and really being able to explain the opportunity helped translate interest into a partnership.

What do you think will be the next big thing in deep tech?

Technology developments move in cycles. Oftentimes a big focus on hardware is followed by a focus on software that is built to support and enhance the functionality of the hardware. We have seen huge innovation on the hardware side in deep tech the last decade, and while I believe that this will continue, we are currently seeing a lot of interesting software plays coming up. One of our recent investments for example was into Synthara. The Zurich-based startup has developed a drop-in software solution, ComputeRAM, to bring in-memory computing to mass markets, enabling portable devices like wearables and sensors to handle AI-workloads efficiently. That being said, we continue to find hardware and especially hardware/software combinations highly interesting. This is, for example, wonderfully exemplified in the tech-bio space, where we see computational innovation merge with wet lab capabilities and further enabled in scale through hardware.

What trends are you currently seeing in the deep tech investment landscape?

As stated before, we are clearly seeing a very solid interest in deep tech. Now it’s important to ensure that this interest continues, which requires further education around the topic, as many myths around deep tech have not fully been dismantled.

Despite the heightened interest on the LP and VC side for deep tech in Europe, it is often still quite challenging for deep tech companies to find a lead investor. While many generalist funds want to invest in deep tech, they tend to be cautious to lean out and build conviction therefore wanting others who are more experienced to lead. My advice to founders to circumvent this: Focus on pitching your commercial vision, as the tech is only an enabler. And of course, always keep us deep tech focused funds top of mind!