Deep tech is on the rise in Europe, fueled partially by the match between AI and a neighborhood taste of math excellence. Nevertheless it’s additionally benefiting from a rising group, public assist and growing quantities of funding.
Elaia‘s third deep tech seed fund, DTS3, is an instance: “It’s double the dimensions of the 2 earlier funds,” Anne-Sophie Carrese, a managing associate on the French VC agency, advised TechCrunch. With a primary closing at €60 million, it’s set to achieve €120 million by the point its fundraising is full, which she stated ought to occur by early 2025. It’s already recognized the primary three startups to hitch its portfolio.
Whereas different deep tech funds have emerged throughout Europe since Elaia’s creation in 2002, the agency places relationships it constructed with analysis establishments through the years to good use.
Constructing these partnerships has confirmed to be a stable supply of dealflow for Elaia — in some circumstances, it has even gotten precedence or unique entry to tasks popping out of sure labs. As an illustration, partnerships have led to investments in firms equivalent to Aqemia, Alice&Bob and Mablink Bioscience. The latter, a biotech firm engaged on novel most cancers medicine, struck a deal to be acquired by Eli Lilly, “a really good exit” in keeping with Carrese.
How effectively a few of these firms have been doing is one cause why Elaia needed a bigger fund: It’ll have extra dealflow, and it could make sense to have the ability to accompany essentially the most profitable bets it leads to. Its objective with DTS3, Carrese stated, is to speculate very small tickets in some 40 incipient B2B deep tech startups, and comply with on in 25 to 30 of them when they are going to be leaning nearer to seed stage.
The deep tech fund will deal with computing, business and life science. Pure AI will fall beneath the primary pillar, as will quantum and cybersecurity, however DTS3’s capital is also invested in AI-driven chemistry and biology, as an example. “Way forward for business” is even broader, together with vitality, local weather tech and new supplies.
“It’s actually a multi-sector fund, and within the Elaia group, now we have buyers who cowl every of those sectors,” Carrese stated. “We’ve to make 80% of our offers within the EU, strictly talking, however the remaining 20% is open to the remainder of the world.” In observe although, 80% of that 20% will possible go to firms in Spain and Germany, two international locations during which Elaia has been deploying efforts.
European dynamism
DTS3 indicators the momentum that’s forming round an rising idea: European dynamism, a response to the “American dynamism” nickname coined by a16z.
One among its vocal advocates is Kyle O’Brien, a Paris-based Irish and American nationwide behind two initiatives: The European Dynamism 50 report and tech tour.
European Dynamism “is extra of a motion than a class or business vertical.” O’Brien advised TechCrunch. “I feel, now greater than ever, we want one thing like that to seize the eye of founders, in addition to capital domestically and from overseas. So the concept behind the tour is to draw American buyers to come back over right here and discover what which means.”
Elaia would be the French ambassador of the tour, which can take a bunch of basic companions from U.S. VC corporations to 4 international locations in lower than every week subsequent June, with visits to CERN, a rocket manufacturing unit, ETH Zurich, ASML and extra. To nobody’s shock, the Paris cease includes a ship cruise on the Seine and plenty of AI.
The report, which was printed this Wednesday, highlights 50 European deep tech firms, however extra as an editorialized showcase than as a rating. “The one quantitative side is that we gave every nation various firms proportional to the quantity of VC {dollars} that go into their deep tech system,” O’Brien stated.
No matter methodology, Elaia’s portfolio firms make up a large share of the French contingent of the listing. One identify on the listing is Zama, a French encryption firm that introduced a $73 million spherical of funding a couple of days in the past.
Zama CEO Rand Hindi, a seasoned entrepreneur, co-founded VC agency Unit Ventures alongside O’Brien. The duo has already completed dozen investments collectively, and is trying to do the primary shut of its fund “within the first half of this yr,” O’Brien stated.
Whereas the corporations could overlap in investments, they don’t absolutely see eye to eye on the “deep tech” time period. Whereas O’Brien has changed it with “dynamism” in pitch decks in regards to the tourto LPs, Carrese sees no cause to retire it. “For us, deep tech is a pure match, as we’ve at all times been very near analysis at Elaia,” she stated.
French tailwinds
Elaia’s analysis partnerships additionally leverage France’s experience in arithmetic – one thing that’s been very useful to the nation’s tech ecosystem with the rise of generative AI. Lazarus is a former researcher in pure arithmetic, and he’s not the one math mind on the group, nor in France’s tech ecosystem.
“We’ve pure connections with all the maths laboratories,” Carrese stated, “and we see our former classmates and their college students now turning into AI’s little wizards and constructing essentially the most emblematic firms of the second.”
Moreover France’s skill to nurture such a expertise, there are different tailwinds coming from public coverage. Two names come to thoughts: Tibi and Bpifrance.
Chances are you’ll not know Philippe Tibi, however chances are you’ll begin listening to his final identify extra typically. Like Carrese, he’s a former pupil of Polytechnique, considered one of France’s most prestigious larger schooling institutions. However he additionally impressed the namesake initiative that incentivizes institutional buyers, together with main insurance coverage firms, to again enterprise capital funds, which hasn’t historically been the case in France.
Tibi’s report was issued in 2019, however DTS3 could also be one of many first tangible outcomes of its second part, Tibi 2. Says Carrese:
We have been fortunate sufficient to be accredited on the very first committee assembly final July […] and this has clearly given us entry, in a lot bigger quantities, to main institutional buyers. And that’s nice information, as a result of these are individuals to whom we all know we’ll ship efficiency afterwards [so] we’re wanting ahead to constructing long-term relationships due to this initiative.It’s not only a windfall. We all know now we have companions we will belief for the long run.
This assist can also be well timed, as 2023 wasn’t precisely a good time to boost funds. However Elaia discovered one other key supporter in French public sector funding financial institution Bpifrance. A significant investor in DTS3, in keeping with Carrese, the establishment has additionally been deemed the machine powering French tech’s rise.
All of those components make DTS3’s dwelling turf its ultimate enjoying floor. “We’re actually going to maintain two thirds of our deal movement in France, as a result of this creates a dynamic for the creation of startups which is extraordinary.”
