Jarna Hyvönen, Volare on Why Climate Hardware Needs a New Funding Playbook

0:00Andreas Munk Holm:Welcome back, everyone, to the European VC podcast. Today, we have a special one for all of you. But before we introduce today's guest, I just want to ground the episode in the reality of European climate tech, especially how it is for women founders, because despite the urgency of the climate transition, women-led teams still receive a tiny share of climate tech venture funding. In 2024, all female founding teams raised just over 1 % of total climate tech capital and mixed-gender teams raised around 7%. So these are, of course, far too small numbers. In this light, we decided together with the team at the table, who Carmel, my co-host for today, will tell you a lot more about in just a second, to dedicate a series to some of the most incredible women building in climate.

0:42Andreas Munk Holm:Carmel, you're working directly on closing this funding gap. Could you just tell everyone about yourself and the table? Yes, of course. Thank you, Andrea. It's great to be here. So I call myself a recovering entrepreneur. I've done everything from brick and mortar fashion through hospitality tech and shifted to climate seven years ago. I focus on working with early stage founders, mostly women building in climate. And I do angel NLP, very small tickets. And the table came from that work of mine together with Julie Blaine. We have a community of over 370 investors, a community investing and co-investing in women building in climate.

1:20We look at it as sector agnostic, climate positive. And we're in parallel raising the table foundation that is meant to actively close this gender funding gap while helping accelerate funding for necessary climate innovation. And we do that with an evergreen philanthropic vehicle that will provide recoverable grants alongside our community of investors.

1:43Andreas Munk Holm:Carmel, just because I think this is of importance, it's not an negligible number that you're raising for the foundation. So let's just get that on the track record. I do think it's very important that we put the numbers behind things here and then maybe people understand also why you're on the podcast. Yes, of course. So this is a huge financing problem. And for that, we're raising 300 million pounds in philanthropic capital to support the climate ecosystem. We're looking to doing that at 50 million a year. So we think of it differently than fundraising for a fund. But this kind of capital will support up to 500 women building in climate and more importantly, the innovation that they are driving.

2:27Andreas Munk Holm:Amazing. Thank you, Kamal. So now, finally, let's turn to our guest, Jarna, and here comes the beauty of Europe, Hyvonen, which I will try to just jump right into and try and pronounce without having checked with you, Jarna, if that was correct at all. So, Jarna, you are CEO and co-founder of Volare, a Finnish climate biotech company turning food industry side streams into sustainable protein, oils, and fertilizers using insect-based systems. You've raised no less than 26 million euros through a mixed capital stack and is now making the leap from pilot to industrial production. One of the hardest transitions in climate tech.

3:05This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured.

3:11Andreas Munk Holm:Yarnet, welcome to the podcast. Thank you. I'm so excited to be here. Did I get your surname somewhat correct? You did. You get nine and a half points out of 10. Very good. That's a very good job. Thank you. So to start us off, I just want to ask you if you can talk a bit about the experiences that have prepared you to raise such a significant amount, but even more so be so successful in the climate space. Like a little bit of the background of the company. We are a research spinoff for VTT Technical Research Center of Finland. So there's a lot of background and research to the production unit that we're currently building.

3:52We've done a demonstration factory and run it continuously for three years before this. And then we have a very diverse skill set in the team for building this sort of an operation. So it's not just one founder raising funding for an idea or something like this. So we have a long history of research and funding. And for me personally, you know, the experiences come from, I think, from doing a lot of different things and then believing that you can do a lot of different things. I do like to emphasize the role of the team here. Also, I actually changed to the CEO role after our race. So I've been part of the race in a different role.

4:33I've been COO and CCO before in the company. So chief of operations and commercial. but in a small team you switch the roles when different skill sets are needed in different phases and now we're moving towards the more commercial stage and I've taken on the role of CEO. But some of the experiences from my background that have helped in the raising is I was an economics major at the university, seeing the big picture, seeing the causalities between different things like which things leads to what other things and so forth has been sort of very helpful looking at the big picture and understanding the markets in a more general case.

5:15And then I've done a management consulting career earlier, which was great for understanding different industrial companies and large companies and how they operate and sort of seeing the industrial operations there. So those are some of the highlights maybe from the background.

5:30Andreas Munk Holm:Company-wise, let's just describe it a little better because I always do a grab job as soon we get to anything that's a little bit difficult technical. But I also think in terms of organization size, where are you stage-wise? You've raised 26 million. Was that across three rounds? Was that one big one? Just for everyone to understand where you are in the journey. Yeah, so in May last year, so May 2025, we raised 26 million euros. That came from sort of several different installments because it's different instruments. I sometimes joke around that if you can imagine a financial instrument, we probably have it.

6:06Because we're building a factory, it's very typical and it's kind of needed necessity to have these different sort of capital instruments in order to be able to build facilities as a startup. So we do have loan, we have mezzanine, we have equity, of course, a bit of grant and so forth. So it is from different sort of sources. We did close the entire thing then at May last year and announced it then.

6:32Andreas Munk Holm:Maybe, Carmel, you can talk a bit about the intricacies of the funding or the capital stack of a capital-intensive climate tech startup. Because we all know this good old chart showing how the progress through venture is you raise an angel round, then you raise a seed round. All of this is equity, blah, blah, blah. And then all the way in the end, you have mezzanine capital. But wait a second. You just said that you've raised one round and you had mezzanine capital. Carmel, maybe you can talk through the importance of understanding that this is exactly what's going on when we're building hardware tech.

7:08Yeah, I think I addressed that. That's exactly the point. And part of the reason that we decided to kind of jump into this is that the way that we are looking at a mixed capital stack and for founders to know what are the different tools that they have, and for that also for other investors, is a really, really critical element. And I think one of the things that distinguished climate tech, especially hardware climate tech, from the VC ecosystem as we know it, and as you mentioned, we started with the equity investment, but the transition from using just equity and maybe some governmental grants in the beginning to shifting for different type of debt models, as well as more sophisticated financial and capital stack models, is something that I think we all feel that we're not familiar with enough.

8:00And Jarno, it would be wonderful to understand how did you guys look at it and decide to build it the way you did? Yeah, we did look at a lot of different instruments that are available. There's a lot of public instruments. We're not like a lot, not like an abundance, but there are different kinds of public instruments. They are different in every country. And these instruments also have a time window. So this is what makes it difficult that you have a bunch of different instruments and they all depend on each other. And then it's like a house of cards. So if one of the cards is missing, then the whole thing falls apart.

8:35So you have to have everything ready in the exact same time frame in order for it to work out. And that's what makes it difficult. The reasoning behind having this is like goes down pretty deeply into the sort of startup financing. But in order to have the relationship between the valuation and then the equity at this specific time point when you don't really have revenues yet or you have very small revenues because you're just building your first commercial factory. it's just a very difficult math to make it work make the valuation versus that the sort of share that the founders or that the team has versus so that the next rounds would also be fundable and that the financing for those following rounds would actually make sense for all parties it's a difficult sort of sort of puzzle in that sense the way we looked at it we knew from the beginning that we want to have different kinds of and we need to have different kinds of instruments and we started basically all the discussions pretty much at the same time.

9:39I think first, because these instruments depend on each other. So just to be clear, getting equity depends on getting the loans and the grants and so forth, because of course, investors are much more likely to invest if you already have. If you have a 10 million grant and you're looking for 10 million equity, it's much more likely that you get it if you have a firm commitment on the grant. And then the grant depends on the equity. So the government has made a rule, for instance, that, hey, we're going to only give you the grant if there's equity as well, because the government doesn't want to give grants that are not used for several reasons.

10:19So all of these instruments depend on each other. So you kind of have to start these negotiations at the same time and make different parties understand and see where they can flex and whether they can make a sort of conditional commitment and so forth. So it is a puzzle and I think there's no one secret sauce to it. So it really depends on the instruments and the financiers behind those instruments. Yes. And a big part of what you were raising for was CapEx. As you were building, you are building this factory. You had a specific approach there as well, right? In the selection of what you're building and how you're building.

10:58I think is a really important thing for people, for founders to keep in mind, looking at existing infrastructure that's not utilized instead of building from the ground up. Could you just maybe talk about that for a minute or two? Because it's definitely a way to keep some of the capex lower. Yeah, definitely. Because of course, especially if you have investor like VC type investors, they want high returns for the money that they put in. So typically they are not infrastructure investors. or they don't want to build facilities. The walls is what I mean to say. So basically what we did is we went brownfield.

11:36So we have an existing building that we're renting out with a long-term rent commitment, which brings down the capex quite a bit, but it's also actually much more sustainable. So you avoid all the emissions of constructing a new facility. And it is much cheaper from the perspective, but it's also faster. So building a facility like this, we would have probably added a year to the project just to build the walls. So now the walls existed, we could speed up the process so much, which also costs money. If you have to sort of have runway for 12 months more for building the facility.

12:14Andreas Munk Holm:I spoke to Dr. Simon Thomas, the founder of Paragraph, the other day. And what he said was, so they're doing graphine stuff that I hardly understand. incredible company, incredible progress. What he said was one of his major takeaways for many founders in this space is that, and I love this part because the playbook for hard tech is different from just pure software. One of the points that he made was you really have to, in this space, oftentimes bring in CFOs earlier because the complexity of the capital stack and being able to service the many different types of debt you take on and so on, and managing all of that is very, very difficult compared to a normal tech startup.

13:03Maybe you can talk a bit about that, how you thought about expanding that as part of building

13:08Andreas Munk Holm:their company. Yeah. So basically, we have had a CFO for, I think, three years now, and he's brilliant. He's an ex-colleague of mine as well. So we didn't know each other beforehand. But this is definitely true. So you need a person, you need a CFO who's super smart and has experience or understands a lot of different kind of finances. It's not just project finance. You have to understand startup funding and all of these different instruments and the covenants that they have and how are they built, How do they match together? And how does the company look like in the next fundraise if we do this decision now and so forth?

13:50So it's the administration and understanding of the different instruments that you have, but also the fundraise and looking at the long-term view for the company in a very complex way, I'd say, compared to many other startups or like pure software startups. They have their own things, of course, but it's a very different case, I'd say.

14:13Andreas Munk Holm:I'd love to ask you a bit about how did you de-risk and communicate the technical and execution risk to investors in this fundraise? I think that was sort of, I wouldn't say easy, but it was very natural for us because we've built the company from the very beginning with cost efficiency in mind. for instance because cost efficiency is also aligned with our values in the sense that we're very energy efficient so that's more sustainable as well but it makes us more cost efficient as well and it simplifies the process quite a bit the way we've also done sort of de-risking the the technology side is that we are not reinventing the wheel so having the attitude from the very beginning that you don't make shiny new equipment about something that actually exists in a different industry so you're just like being creative about where in which industry is this part of the process done super well so in car manufacturing they do this and this super well they are specialized in in that so let's take the process from there buy them the machinery off the shelf and just implement it so it's it's sort of uh being smart about where you have your own unique edge, which we do have, and your own IP, and where you can actually just implement things that are already in use, and you don't need to sort of do all the hard work and have a big risk about the commissioning and that for the machinery.

15:44So that's something that we've done from the very beginning, and it's proved quite useful for us as well. Communicating that clearly, and then also together with what is your sort of a special thing about you and then how do you de-risk? And these things sometimes are contradictory. So that's sort of something you need to communicate well. And in that narrative for investors, did you ever find it more problematic because it sounds as if you're minimizing the level of innovation? I mean, a lot of times when you think of how to implement innovation, pre-existing innovation differently sometimes the response comes back to being a bit like so it's just a processing innovation and it's not an innovation innovation maybe it's not VC backable when you're telling the story of your company it's always you know there's always good and bad sides to everything you say so you can never you can you can never win kind of but I I think in the communication, it's just about really pointing out where it makes sense to have your own innovation and where it makes sense to patent it, like strategically, because when you're patenting, you're also disclosing all the information to everyone in the world to make it public.

17:07So really being smart about where are the parts of the process, where are the things that you can actually bring value with, bringing your own thing that's done differently. For instance, for us, it's where basically we have a dry processing method for our proteins, which is very gentle also on the protein. So that the digestibility, which is very important for our customers, stays high. But instead of having a wet method where you have basically you have to boil out the water at the end of the process and use a lot of energy for that. And you have a sludge and you have a waste water basically from that process.

17:48There's a clear differentiation in this sort of processing method. So we have a dry method, less energy usage, no waste water compared to this old method, which has been easy to implement for the other companies. but it's not optimized for insects. To go to the details.

18:07Andreas Munk Holm:I was about to say, we ended up jumping directly into fundraising and the capital stack. And obviously this is where Carmel and myself, of course, as well, are very passionate. But let's just make sure that like to those that haven't yet opened up their browser and said, okay, what the fuck is, well, Laura, let's just get it described to everyone. What exactly are you doing? What's the IP behind this that's making everyone's thinking, oh, there's something here? So basically what we do is we upcycle food industry side streams with an inset called the black soldier fly combined with our own technology into three products, a protein meal, an oil product and a fertilizer product.

18:49And just to be clear, our customers are in the feed and pet food segment and in the chemical industry. And then of course, agriculture for the fertilizer. So we don't commercialize or sell insect proteins or oils for human food. Food is a very cultural thing. We don't believe that in the Western countries, people are going to start eating a lot of insects very soon. So basically, we're replacing unsustainable proteins or heavily used proteins from aqua feeds and from pet foods and offering an alternative solution that's fully circular. What's really cool about our process is also that nothing else comes out of the process.

19:27So basically, there's no new side streams. So we take in materials that otherwise, for instance, be burnt for energy, and we bring them fully back to the food chain.

19:36Andreas Munk Holm:This is a conversation that I've had with many on the podcast in the climate space now or sustainability space. And it's, of course, going to the moment that we're in, which is that some have even gone so far as to say that before we had greenwashing. Now you have the opposite. I can't remember the term now, but you basically have that you're covering up that you're green almost because it's not where we are anymore. It's not fashionable anymore. Yeah. Yes. Can you talk a bit about this moment managing through it, how you've maybe changed some of your positioning or how you talk about yourself in the market?

20:14I think it hasn't been such a change for us. I mean, we still stand by the same values and the same purpose behind the company of making the food chain more circular. Like after 2022, maybe, financial markets, you might have noticed they changed quite a bit as professionals in this industry. And then, of course, the narrative has changed quite a bit, as mentioned. It's becoming more and more pressing that the business itself has to be sustainable economically and financially. And really, the products need to be something that the customer actually wants for also other reasons than just for sustainability.

20:55There are still many of our customers still stand by the goals that they have for sustainability and for climate impact. So this is still relevant for them. Even before this, it doesn't make sense to build a business which would not have a business model that's viable even without a sustainability premium, for instance. So business-wise, no change in there. And narrative-wise, not so much either. So you are already starting to scale up and looking into partnerships with the industry. Have you seen it change who you're talking to or how you're selling within the corporates that you work with? So instead of talking to sustainability managers, for instance, just going straight to procurement, or has that stayed the same?

21:47For us, it stayed pretty much the same. It's not just the sustainability department that we're typically talking with. Many of the companies that we work with have, it's either purchasing for novel ingredients or special novel ingredients. managers or then just, you know, ingredient buying. And of course, then depending on the company size, the management is involved in these discussions as well. But not so much. I see what you're getting from maybe that's more visible in the funding side and the sort of shifts in the focus areas of VC funding in Europe, especially. That's evidently quite visible.

22:29You immediately talk about efficiencies, right? Were you talking about efficiencies in such a dramatic way, let's say at 2021 earlier days? Is it part of the maturity process or going towards the green hushing? It's actually, I think it's both. When you start a company, it's more about commercializing the innovation. So there, the efficiency is not so pressing as when you're building your first-of-a-kind factory, where you're actually looking at the unit economics. So when you're at a pilot scale, of course, you look at the unit economics, but there's a lot of things that are not the same as they would be in commercial scale.

23:08So it's quite different. So it's natural to go more towards how to make this an actual business. at this point. But the efficiency is actually because it's been in the DNA of the company since we founded it. And before that, even before founding the company, we tested every unit process. And then at the pilot scale, we tested every unit process and understood that we really need to make this like the price point cannot be too high, because if we want to make a big impact, we're not going to make a niche product and in order not to stay a niche product you need to make the cost on a similar level as uh the materials that you compared compared to so now um you closed around may and and you're starting to build what are the next path and you're reaching exactly the the next valley of death for the b round that we we continuously talk about and and funding especially in Europe?

24:08How are you thinking of positioning yourself and your scale-up? I think it's an understatement to say that we're starting to build because we're like halfway through the project already. I'm very, very proud of our team. We're doing a world record, I think, in the speed of building the facility. For the next round, it's going to be very different because we already have a facility that functions and you can really look at the unit economics and that. So I'm very optimistic. I'm a very optimistic person anyways, but I'm very optimistic about us being able to demonstrate that what we're doing and in this like sort of, let's say insect industry, things can be done in a very efficient way in Europe and then sort of focused on making it an actual scalable business.

25:02And when I say scalable, I really mean the efficiency, not just the size of the facility, for instance.

25:09Andreas Munk Holm:Let me ask you, because we are needing to wrap up on that, but I want to ask you one question, despite me always being very aware that I don't want to make a conversation with women building in climate or in any space for that matter, too much about women. I would love to ask you both, though, to comment a bit on what you think works in our ecosystem and where you think that there are still counterproductive myths or counterproductive viewpoints or structures in place? Yeah, I think this is a hard one. I have a friend who studied shoe design at London School of Fashion, I think it's called. And I was like, wow, that sounds cool.