E706 | Jo Slota-Newson & Marc Sabas, Almanac Ventures: Systemic Deep Tech for Industrial Decarbonisation

0:00Andreas Munk Holm:Welcome to the EU VC podcast. Today I have Jo and Marc with me from Almanac Ventures. We're going to dive into systemic deep tech investing for decarbonization and I asked the two if they could come on the pod and pitch their VC firm, their new VC firm, to the group of investors that we have in our audience.

0:22Andreas Munk Holm:So Marc, Jo, welcome to the podcast.

0:25Marc Sabas:Thank you so much. Yeah, great to be here.

0:27Andreas Munk Holm:And thank you for accepting the invitation to come and hear for the world who Almanac is. Who of you will go first, pull up your deck and tell us all about you.

0:37Marc Sabas:Yes, so Almanac Ventures is an early stage deep tech VC. We invest at seed and pre-seed across Europe. We're looking for deep tech, so real scientific breakthroughs, scientific innovation that can be applied to industrial systems. And we look for technologies that are really bringing what we see as the three pillars for scalability. So, and that's building the industries of the future. So they bring better performance, they bring better costs, and they build decarbonization.

1:05Jo Slota-Newson:So a little bit about us, it's Jo and me who created Almanac Ventures. Jo, my co-founder, she has 80 years of deep tech commercialization experience, but her background is as a scientist. She did her PhD in Cambridge in nanoscience and then did a postdoc in British Columbia in advanced materials. She was also a co-founder and CTO of a solar cell startup called PolySolar. And the last nine years, she's been investing across the UK as a deep tech investor. And most notably, she has swam 37 kilometers across the English Channel solo. So when she attempted and achieved that, I really felt I had found my co-founder.

1:55Jo Slota-Newson:And as per me, I have a more financial background. I started in finance and banking, then transitioned towards corporate experience, corporate innovation, corporate venture capital. And then I've also been part in three venture capital firms, the latest one focused on impact investing. I think together we have a really good winning combination. Jo has the technical chops to really understand the kind of technologies that we want to be investing in. And that ranges out. It's a wide range of types of technologies. And she's able to dig into that. And I'm able to then to figure out from that type of technology, if it can work, I can figure out if that technology has a potential financial return that makes sense.

2:40Jo Slota-Newson:and as well has a decarbonization potential that we're looking for. The second point around partnering is our track record. So jointly, as I've said, we have had experiences across three venture capital firms, each of us. So we have together, we have invested in around 45 companies, deployed 47 million euros across UK and European startups. And right now that's sitting on a 2.3 times cash multiple between unrealized and unrealized gains. That is awesome.

3:10Andreas Munk Holm:Let me just ask one question. You bring a background of both academia and, of course, investing, and then also the more financial. Could you share a great example of how that has come to real good work or real good use for one of your portfolio companies?

3:26Jo Slota-Newson:Sure. So, for example, for one of the companies that we were going to, we're happy to delve deeper into, it's a company called Reclinker, which does recycled cement, effectively. I believe it's a recycle process. And it's a company that we invested in their seed stage. We have been helping them both understanding how that technology can be applied in different type of industrial settings, mainly with the partnerships, with cement companies and steel art furnaces. But as well, we've been helping them in their next round, which they're doing now, focus on helping them introductions to other investors, whether it be with a decarbonization angle or a deep tech angle, and also helping them make those introductions, but as well helping them how to explain that technology and explain their solutions to each of them.

4:21Andreas Munk Holm:Awesome, Mark. Thank you. Now let's get into the opportunity. Tell me more about the industrial innovation and the complexity that you believe is holding us back.

4:29Marc Sabas:Yeah, so what really drives us is what we see as a massive missed opportunity for innovation in industrial systems. So they're really complex. As you say, they're really difficult to innovate in. If you take the lens of climate investing, industrial systems are responsible for 75 % global emissions, but they only receive about one quarter of global VC climate investment. Even though those investors are super driven to tackle these problems, they're really not addressing them because they are really hard to get into. And these systems are not just hugely carbon intensive. It's basically a lot of 20th century technology, which is really inefficient, ripe for innovation.

5:12Marc Sabas:But there's a lot of value there. There's a huge amount of economic value there that's not being addressed. And so why is that? We think it's really to do with this complexity, not just the complicated industries need real technical insight to understand the drivers of inefficiencies, the drivers of emissions, but also these systems are hugely interconnected and interdependent. And so you can't just look at simple linear problem solution sets. You have to really be understanding these whole systems in all that complexity to really innovate well. so that's where we come in we're focused on on deep tech so genuine scientific innovation often very interdisciplinary needs kind of real technical nuance and understanding and these technologies are applied to industrial systems where they really bring innovation where they bring performance drivers plus economic drivers plus decarbonization and it's not just about understanding the technology itself it's about understanding the commercial path that really takes that that sort of experience that we have helping early stage often super technical super academic founders going on that journey to be commercial and obviously not every science-based innovation is going to be venture backable we really need to use again that experience and understanding to find really venture backable models really scalable models that are efficient with capex and the other side of the perspective that we bring is to bring the systemic approach.

6:44Marc Sabas:So these interconnectives, as I said, industrial systems, they really need to be mapped out and understood in all their complexity. And so we do that work, we understand where opportunities are lying, we see them really as points of leverage where applying technologies can have outsized impacts working across those systems. And that's both decarbonization, but also financial potential. So we're really driven by both of those missions, which we think really come together and scale together in the technologies we're looking at. So we're investing in early stage deep tech across the industrial systems that we lay out as how we make things, how we use resources and how we live.

7:25Marc Sabas:So technologies like super efficient electronics, photonics, automation, electrification, energy control systems, new chemistry materials. I would love to ask you a bit about industrial tech and

7:40Andreas Munk Holm:the viability of industrial tech for venture because there are some that have burned their hands before or that just believe that no venture works in the non-hardware, non-industrial settings but it's really hard to make it work in the industrial world. Could you talk a bit about that and obviously the people that know me also know that I'm not a subscriber to that view. It definitely requires specialist knowledge and experience on how to navigate it. It's not that the venture model doesn't work there, but I love to hear your take and how you think about that.

8:13Marc Sabas:Absolutely. I mean, it takes real skill to find these opportunities that really do work with a venture model. So even if it's been burnt, absolutely, there's a lot of venture dollars have gone into projects that are just too capex intensive, but maybe they need different financing, different models. so it's really about finding where capital can be used efficiently so it's about finding scalability so we're investing in systems like i guess to take to take an example from a track record but at a previous fund they invested in niobolt so battery technology company that can be a drop-in replacement for existing anodes so it's low capex or a company called cgd which is fabulous power electronics using gallon nitride semiconductors.

9:00Marc Sabas:So we're looking for either systems that can drop in as a replacement in the existing industries or where there are routes to early revenues while the businesses scale towards those kind of bigger, more audacious goals that need really reworking industries from the ground up.

9:17Jo Slota-Newson:I would just add that we're always looking for these venture scalable solutions that have just this credible technical pathway that are able to hit value accretive points or milestones in the medium term, in the short and medium term. And I think that's what kind of separates some of the deep tech projects, which are very, you know, we're heavy on CapEx and we tend to roll out and those that we believe are CapEx efficient in which we can get to a meaningful place in two to five years time.

9:47Andreas Munk Holm:Could you give us some of the case studies? So to say the examples of portfolios in your, the companies in your portfolio that match this description?

9:56Jo Slota-Newson:Yeah, happy to. We've already been investing together and already have a series of portfolio companies. One that I'm happy to talk about is a recent investment done in a UK industrial heat pump manufacturer called Hot Green. Now, this company is made up between a go-to-market innovation expert and a scientist that has

10:24Jo Slota-Newson:And they came at the, they focus on the problem of getting a heat pump to be efficient and low cost enough to profitably be servicing the 200 to 400 degree range. This is very typical use for, for example, food and beverages. And they have developed a new compressor, which is the most expensive part of a heat pump. They've developed a new, an annual compressor, which is the most expensive part of a heat type of compressor that is hyper-efficient while keeping the cost to the minimum. So we invested in this company in their pre-seed, together with Embraco Ventures and Coca-Cola Euro-Pacific Partners.

11:01Jo Slota-Newson:And it really excites us because it unlocks electrification and it unlocks the capability to be applying all of the science in an industrial space in a very big market.

11:12Marc Sabas:So we've also made an investment in a company called Reclinker. so they're a spin-out from the university of cambridge here in the uk they deal in recycled cement so yeah big heavy ugly industries doesn't sound very venture backable but they've actually got an amazing really low capex model which really excites us so they are founded on some innovation that was published in a nature paper so they actually link cement recycling to steel manufacturer so the recycled cement powder gays in as the flux on top of the electric arc furnace yeah in the steel manufacturing process and they tune the heat and conditions to turn the material back into a clinker that goes back into really high quality cement so they're creating much better quality recycled cement than other systems but they're cutting out the chemistry step that emits co2 and they're piggybacking on the energy the heat in the steel manufacturing furnace which simultaneously decarbonizes the steel making process and the cement making process.

12:14Can I ask both of you, because you don't, and correct me if I'm wrong, but you don't

12:20Andreas Munk Holm:have an operator background either of you in deep tech, am I correct?

12:23Marc Sabas:So I spent some time after academia, where I was working on really applied technologies. I spent some time in startups. So I was CTO for a renewable energy startup building integrated PV, which was great to kind of get out there selling technology and managing R &D projects and so forth. And I worked with other early stage companies kind of on a consultancy basis. And then, yeah, in the trenches kind of building an investment platform in my career as well. And I guess, Mark, you've certainly built venture funds for that corporate background, which is super valuable to have as well.

13:00Jo Slota-Newson:Yeah, so I also have entrepreneurship experience building a project from scratch inside a big multinational, in this case Telefonica. And I also have experience creating a social cooperative project more on the social impact side in Africa.

13:16Andreas Munk Holm:I asked you because I wanted to ask you to comment a bit on that age old debate of do you need to be an operator to be able to invest in deep tech startups and have seen that route and gone on yourself or do you not? Like, what's your take on this and what do you see when you resonate with founders and when you maybe don't?

13:36Marc Sabas:Yeah, I think venture teams work really well when they have a lot of diversity of thought and experience and all of that. So I think it's essential that we've got some real technical expertise and understanding the venture. But I think having some of that operational experience is really important.

13:55Jo Slota-Newson:I believe the point around bringing complementary knowledge in a venture capital team is what really makes it helpful and powerful. So, for example, I've spent time working with corporations and I understand how corporations engage with state-of-the-art technologies from the early stages to Series A. And that really helps then understand how decisions are made, how messages are passed up and down, how they need to be socialized, how they need to look for internal champions into the organization. So that's an additional help that we can bring to the startups. But as well, Joe has direct operational experience, having worked in a solar cell startup as a CTO in the past.

14:36Jo Slota-Newson:So we're able to mix both worlds.

14:39Marc Sabas:I mean, it helps, right? So to be able to have a really in-depth technical conversation as a fellow PhD with technical founders is super helpful. It's also super helpful that they know that I've been there in the trenches with them as well. Yeah, we've sort of seen what it's like on the inside of a startup. And I think it definitely builds a lot of credibility and helps empathy.

15:01Andreas Munk Holm:Now, before we close, I'd love to ask you, because now we've spoken a bit, I think, or in quite good depth about what you do and where you invest and about the opportunity. But we haven't touched much on your investment strategy specifically. So can you talk a bit about just really quickly map it out, like how many investments, what size tickets, what size fund, all these things?

15:24Jo Slota-Newson:Yeah, so we're looking to come in very early. on a first check basis to what we could call pre-seed and seed. Basically, in our world, we would be looking at TRLs from four to six or four to seven type of projects. We were happy to look at projects across Europe, the European landscape. In the end, we look a lot into innovation hubs and innovation circles. We hope to be that first check and then continue to support that company in those early stages, which in some reports have been mapped as the first valley of death, which is going from lab to a first product that can be put in the field. And we hope to be doing that with tickets that range from$300K to$1 million.

16:08Jo Slota-Newson:And we want to do that to have a portfolio around 25 to 30 startups, in which we're going to as well need some money for follow-on.

16:17Andreas Munk Holm:Beautiful. Joe, Mark, thank you so much for joining me on the podcast today. I really hope that you will be able to pull this off because I love seeing the emerging managers come to the market.

16:28Jo Slota-Newson:Thank you for joining me on the podcast.

16:30Andreas Munk Holm:Thank you so much.

16:31Jo Slota-Newson:Thank you very much.