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Deep tech is on the rise in Europe, fueled partly by the match between AI and a neighborhood taste of math excellence. But it surely’s additionally benefiting from a rising group, public assist and rising quantities of funding.
Elaia‘s third deep tech seed fund, DTS3, is an instance: “It’s double the scale of the 2 earlier funds,” Anne-Sophie Carrese, a managing companion on the French VC agency, instructed Trendster. With a primary closing at €60 million, it’s set to succeed in €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 deal circulate for Elaia — in some circumstances, it has even gotten precedence or unique entry to tasks popping out of sure labs. For example, partnerships have led to investments in corporations corresponding to Aqemia, Alice&Bob and Mablink Bioscience. The latter, a biotech firm engaged on novel most cancers medication, struck a deal to be acquired by Eli Lilly, “a really good exit” in line with Carrese.
How effectively a few of these corporations have been doing is one purpose why Elaia wished a bigger fund: It should have extra deal circulate, and it could make sense to have the ability to accompany essentially the most profitable bets it leads to. Its purpose with DTS3, Carrese stated, is to speculate very small tickets in some 40 incipient B2B deep tech startups, and observe on in 25 to 30 of them when they are going to be leaning nearer to seed stage.
The deep tech fund will concentrate on computing, business and life science. Pure AI will fall below the primary pillar, as will quantum and cybersecurity, however DTS3’s capital is also invested in AI-driven chemistry and biology, as an illustration. “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 staff, we’ve buyers who cowl every of those sectors,” Carrese stated. “We have now 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 probably go to corporations in Spain and Germany, two nations wherein 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 in every of 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 instructed Trendster. “I believe, 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 return over right here and discover what which means.”
Elaia would be the French ambassador of the tour, which can take a gaggle of common companions from U.S. VC corporations to 4 nations in lower than every week subsequent June, with visits to CERN, a rocket manufacturing facility, 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 corporations, however extra as an editorialized showcase than as a rating. “The one quantitative side is that we gave every nation numerous corporations proportional to the quantity of VC {dollars} that go into their deep tech system,” O’Brien stated.
No matter methodology, Elaia’s portfolio corporations make up a large share of the French contingent of the record. One identify on the record is Zama, a French encryption firm that introduced a $73 million spherical of funding a number 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 finished a dozen investments collectively and is trying to do the primary shut of its fund “within the first half of this 12 months,” O’Brien stated.
Whereas the corporations might 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 concerning the tour to LPs, Carrese sees no purpose 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 staff, nor in France’s tech ecosystem.
“We have now 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 corporations of the second.”
Apart from France’s skill to nurture one of these expertise, there are different tailwinds coming from public coverage. Two names come to thoughts: Tibi and Bpifrance.
It’s possible you’ll not know Philippe Tibi, however chances are you’ll begin listening to his final identify extra usually. Like Carrese, he’s a former scholar of Polytechnique, certainly one of France’s most prestigious greater schooling institutions. However he additionally impressed the namesake initiative that incentivizes institutional buyers, together with main insurance coverage corporations, 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 section, 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 because of this initiative. It’s not only a windfall. We all know we’ve companions we will belief for the long run.
This assist can be well timed, as 2023 wasn’t precisely a good time to lift funds. However Elaia discovered one other key supporter in French public sector funding financial institution Bpifrance. A serious investor in DTS3, in line with Carrese, the establishment has additionally been deemed the machine powering French tech’s rise.
All of those components make DTS3’s house turf its superb taking part in floor. “We’re actually going to maintain two thirds of our deal circulate in France, as a result of this creates a dynamic for the creation of startups which is extraordinary.”
