Julien Fredonie, Honda Xcelerator Ventures: Europe isn’t fragmented. It’s a deep tech circuit board.

0:00Andreas Munk Holm:Welcome back everyone to the European VC podcast. As you know, most people look at the European tech scene and see fragmentation. They see a collection of disconnected hubs struggling to keep pace with the unified engine of Silicon Valley. But my guest today sees something entirely different. He sees a high performance circuit board, a deep tech mesh that is uniquely built to solve the hardest industrial problems of our time. Today, Jabba, my dear co-founder of UVC Corporate, and I are sitting down with Julian Fredene from Honda Accelerator Ventures. We're discussing why the old software playbook is failing in hardware, why CVCs are the missing link to the industrial scale, and the specific human blight spots that's causing even the most sophisticated investors to miss the next industrial powerhouse.

0:45This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured.

0:51Andreas Munk Holm:Julian, welcome to the podcast. Thank you so much. Thank you for having me. Excited to be here again. Yeah, but it's the second time we have Julian on. First time we spoke a bit about Honda, but this time we want to dive a bit more into the topics that you just mentioned, which is of course the European Deep Tech moment and the mesh that is European Deep Tech. Tell me a little bit about why you're in love with Julian. I think, you know, first time around, it was very, very clear how knowledgeable Julian are. It's nine months ago since we had you on the pod last time. And as I'm digging deeper into the venture landscape in Europe, Julian pops up here, there, and everywhere.

1:27A true community builder. So he's in there for the long run and the good connection to our agenda here at the EUVC to make tech and money available for the European tech founder. It's awesome to have you here again, Julian. I can't wait to do this with you.

1:45Andreas Munk Holm:You also are one of the managers of a WhatsApp group for deep tech investors in Europe. Is that true? Can you share that? Can we disclose it? Can people reach out to you if they want to join in? Yeah, of course. I mean, WhatsApp group is one way of, let's say, interacting among the community, but we also do a few things and are very happy to be in touch. And you have about 200 deep tech investors, am I right? Yeah, exactly. So basically we found out that many of us, CVCs involved in deep tech, share some seminar topics. There are some overlapping topics. Also sometimes face seminar challenges and at the same time bring a lot of value to deep tech founders, universities, TTOs, etc.

2:34So our simple idea when we created that community now two years ago was definitely to bridge the CVCs and the best universities in Europe. So we organized also a few visits to Oxford, EPFL, ETH, etc., where we go as a group. And now it's also a kind of coordination layer where people can share deals, share some insights, etc. Now it's a very lively community of 200 CVCs involved in deep tech.

3:09Andreas Munk Holm:Julian, you've laid out seven specific reasons why European deep tech is so attractive right now. Could you just walk us through those? Let's start with the big lines first, the seven points, and then we can dive into each one of them afterwards. To give a bit of context, I spent maybe 13, 14 years as a startup operator and founder. and I've been now in an additional 12 years in deep tech doing open innovation and CVT basically. I believe that entrepreneurs and especially deep tech entrepreneurs can change the world and I've always been a bit obsessed with what's next, what's the next big thing, the next big disruption etc.

3:48So I don't play Pokemon Go but instead I've been chasing startups for 25 years in one way or another. I have a kind of hands-on experience being involved in ecosystems in Paris, Berlin, Stockholm and today I'm French in Berlin working for a Japanese CVT because as you mentioned I run the Honda Accelerator Ventures activities for Europe and Africa where our mandate is to create strategic partnerships between deep tech startups and to invest. So we are involved in investments, in different types of collaborations, maybe 100 projects between R &D and startups every year. Each year, up to 60 million that we invest in startups.

4:40So with my colleagues, our job is basically to explore at the same time the large ecosystems that we know, but also the emerging innovation ecosystems doing deep tech in Europe. And with those different experiences, I definitely saw a huge shift in how Europe is somehow building industrial champions and how Europe is well positioned today for deep tech. There is, I mean, already there is a Europe deep tech moment that we see, right? We are all aware of the long story of the Silicon Valley, of the playbook of the Silicon Valley, which is move fast, break things. which works for software. And I think deep tech and hardware is a bit different, right?

5:28So maybe the motto for Europe would be more move fast and fixing. And at the end, the strength of Europe is really to, what we see today around the deep tech is really about solving industrial problems that require deep science with some kind of, some form of regulatory sophistication. So I think the first point, the first reason I believe Europe is highly attractive for deep tech is the understanding that deep tech is needed and that the deep tech startups from Europe can scale. So we see, I mean, there are many different reasons, right? Politics, geopolitical reasons, also some tough problems that we still need to solve around environment, sovereignty, health, etc.

6:23So to solve all of those problems, all of those challenges, we need deep tech. This is where deep tech shines, right? We see that there is a lot of public funding, more than 1 billion will be invested. I think from the EIC in Deep Tech in 2026. And we see now some clear winners, right? I think in Europe, we have more, almost 50 startups, 50 startups which have reached the unicorn status during Deep Tech, right? So we can think about MISRA, IQM, Proxima, etc., etc. I think approximately 50 Deep Tech unicorn startups in Europe. and maybe almost 100 if you combine the unicorns and the 100 million revenue startups, right?

7:16So we see that Europe can scale the startups and we see that the attractivity is also changing, right? When I engage with investors, financial investors or strategic investors from US or from Asia, I think the conversations flipped completely from why Europe to where in Europe, you know, where to go in Europe. Should we go to London? Should we go to Amsterdam, et cetera? So I think now today the global VCs and the CVCs that are coming to Europe because they can find amazing startups with reasonable valuation and stability, some room for industrial innovation. So that's definitely point one. I think realizing that deep tech startups from Europe can scare, that they are attractive and that they are needed.

8:07That's already a kind of deep tech moment which happened in the past years.

8:12Andreas Munk Holm:I also know that you are looking at the education ecosystem as particularly important, which of course also ties into your community that we discussed before. We're looking a lot to bridge the universities with the investor community. Can you talk a bit about the strength of European innovation, what you're seeing on the ground now in terms of innovation and business acumen with deep tech and deep tech founders versus in the past? I mean, Europe has a very qualitative education in general, mostly free, very affordable, right? So that's already one good point for Europe. The top education around science and engineering is very, very high, right?

8:55Everyone knows about Oxford and all the, you know, science type of education. Also on the engineering side, there is a very, very strong backbone of, you know, tech universities everywhere in Europe. So all of this creates already a very good education from the, a very good start from the academic point of view, let's say. But that's only the start, right? So as a deep tech founder, you need to be mastering science and also business because this is what it is about, right? Bringing science to business. And we definitely saw in the past five to 10 years a huge increase in the number of other programs which are supporting scientists to become founders, right?

9:40And the impact is huge. You can go from low single-digit number of PhDs, going from research to entrepreneurship, to low double-digit, right? So from 2 % to 12 % PhDs will become founder when they are the appropriate support network and incubation, et cetera, et cetera. So all those programs from the universities, but also outside of the universities, company building, targeting PhDs, et cetera, they have a huge impact on the entry of the funnel, let's say. How many numbers, how many startups start their journey every year? And that has an amazing impact on the quantity of those companies, but also on the quality.

10:25Business viability is now also more supported by those programs, I would say. So second point is definitely the improvement of this educational, entrepreneurial education part in general, and especially in the universities that we saw. Julian, could you talk a little bit to, now we have all these new, you know, more founders that comes with this educational background. Could you talk a little bit to the team composition and how you see that evolving and how to be successful as it seems in deep tech? Yeah, definitely. I think this is something which is definitely required in terms of attention, right?

11:08So it's not only about the science and the product. I mean, that's a fundamental asset to develop. But at the end, the team which is doing this research and bringing this research into a product and this product into hopefully a business and hopefully a scalable business requires a very different type of organization. So I would say that the key word here is diversity, complementarity, where you need to have a scientist working with an engineer, but also someone maybe with a kind of real-life production or plant experience, and maybe even ideally with a kind of business person. So in general, I think what was often missing in the maybe previous decade of deep tech was really this diversity.

11:59And today from those educational programs, from those also the very early stage investors I think have a role here. I think one actually that could be number three of why Europe has an interesting opportunity right now. I think we see a new generation of GPs as well which are coming up. We have I mean there are already some very established funds which I've been doing deep tech for 10 years. They do a great job. There are a few generalist fans now getting interested in deep tech. What gets me very, very excited is the new deep tech GPs, which are often, you know, solo GPs, small fans. They have engineering or science background, entrepreneurial background.

12:52They move fast. They understand hardware. So they are a bit different from the European VCs that we see usually in Europe from the, you know, SaaS type of industry. And they bring a kind of different energy. At the end, that's very important because the deep tech and hardware is hard. It's different. And you need to have a very strong alignment with the founder. and you need to be able to bring a very different type of specific support also to the founder, right? So either on the product side or being very deep in understanding some very specific industries like, I don't know, semiconductors or computing, aerospace, etc.

13:38It's very niche, right? That's not something that you can make. Are there any specific of these solo GPs that you would like to mention, highlight and some of the investments that you found exciting that you received from them? So, okay, I will mention some new type of GPs that we find very interesting, their approach and their G-Flow, etc., in their selection process. And, of course, there are other ones that we like and that I will not mention because the list is very long. But I think, in general, we have a few funds like RUYA doing semiconductor, so very, very niche. Prototype is doing a very good job as well.

14:16in terms of moving fast and having some very interesting bets in France, very strong in AI, Visionaries Tomorrow, U2V, Unruly as well. So, yeah, it's actually a lot of very cool, let's say, new generation of GPs coming up, I would say. What would you mention? But, you know, there are so many great ones out there. I think what is super interesting for me is always to hear, you know, what is it that you see and where do you pick it up, right? because it also comes with the background and so forth. I think it's super interesting also to hear kind of the Honda approach, right? Because now we have corporates and CVCs in the game and the importance they play.

14:59And could you share a little bit about your view on that? You know, what do you bring into this equation? It also relates to the 0.3 on the quality of the new generation of the GPs. one thing that we like with them is definitely that they are comfortable with hardware. You know, at the end, 60 % of the value from venture will be created from hardware, and it's only a fraction of deployed capital today which is deployed in hardware, right? So at the end, this is also an area where the CVCs are very valuable, very comfortable, and very relevant when it comes to deep tech. They have, you know, that's what we see in our small community of 200 CVCs doing deep tech.

15:47They have a lot of industry knowledge first, by definition. They have a very different understanding or a little complementary understanding of the success factors in their own industries. And they have a very strong technical understanding, right? So they can be, they bring a tremendous value in terms of being able to support those deep tech companies. They can bring engineering capabilities. We see that hardware is often a challenge of also supply chain and production. Most of those large corporates backing the CVCs, they have some experience, some skills, etc. They have some global sales channels that they can leverage as well.

16:32So for all these reasons, there is a huge fit, I would say, between deep tech and CVCs. The strategics, most of the time, are also very comfortable with long timeline. So patient capital, in addition to the strategic value that they bring. And I would say that from a foreign market, it's also a very strong signaling, right, to have relevant CVCs on your cap table, which can be partners or customers, maybe sometimes even suppliers of the ventures that they are investing in and financing. Could you share, you know, have you been able, because one of the bigger things in corporate venturing, right, is, you know, what can the startups, you know, leverage from Honda?

17:21Have you managed this far to make some good partnerships and sales channels for the startups in your portfolio? Yeah, so I will not disclose any confidential detail, but at the end, when we invest, we have a clear plan of, or clear idea at least, of what we would like to create as strategic synergies. Most of the time we have several opportunities of collaboration and they can be in different directions, right? So we usually have some form of, of course, operational support also with our portfolio or platform teams. So being able to support on supply chain or production, sometimes even a bit of engineering as well.

18:06We have very strong activities around maybe joint development as well sometimes, which is also very important for both parties, which can create a lot of value. This is usually a very strong motivation for us to have a conviction in what we could do together as an investor and maybe not as just a customer, for example. And is that a plan from when you start looking at these companies as a part of your investment proposal and so forth, how we can collaborate? And how early do you do this with the startups, right? Because also you are a deep tech investor, so it might take a little bit of time before, you know, the tech is ready to work with Honda.

18:50Yeah, exactly. I mean, this is what we do most of the time from day one. When we engage or when I engage with startups, it's really also about understanding what could be the strategic overlap and the strategic relationship we could develop. And we usually have a very detailed plan or ID plan, which goes for multiple years. And then, you know, it's really about making sure that there is mutual value at each given time to create those partnerships and a mutual value creation. So it's a plan that we are also assessing or reassessing, which is also dynamic. Sometimes, sometimes we have new ideas.

19:27Sometimes some priorities are found in one party or another. So it's really about creating this mutual trust, actually, to be able to have very openly those very strategic conversations. I mean, every CBC is very different, right? So this is what we see in our CBC community, that every CBC is different in how they work, how they operate, how the decision making here is etc but what is very common to them is the strong value that they bring and the strong interest that they have in around ZipTech so for me it's definitely the also one of point four of why I'm very bullish about the European ZipTech ecosystem.

20:09I agree on that and I think as the companies in your portfolio mature right there's also one of the points that you mentioned around growth capital. Could you share a little bit about your opinion on how the CVC and how they should play in the later stage rounds? I think we come from... That's a shift happened as well, I think, here. I think we come from industry saying this lack sometimes of growth capital starting at Series B as a funding gap. And I think today the industry understand that's actually a funding opportunity. So this gap is being filled. I mean the funds have been created, some other ones are being created at the moment, and there is a lot of appetite for those rounds, you know, B, C, growth stage rounds for European Deep Tech.

21:00So that's something which changed already. It's not only the very early stage which is moving, the growth stage is moving. This is an area where the CVCs also have a lot of involvement within the past one, two years, that the CVCs are coming, on average, a bit later in the round, so maybe around Series B, more than Series A, as they were doing maybe a couple of years ago. So there are some opportunities now, let's say, in these fields. I think what we have seen in the past years, maybe also in some companies that we have been working with closely, that it was very difficult to get, you know, 20 million, 30 million tickets in Europe two or three years ago.

21:48I mean, environment is, of course, still challenging, but those pockets now exist, they are identified, and they are looking also to deploy, right? So that's a huge shift. Could you share also, just so we bring Hyundai into the equation, you know, where do you play in the ecosystem? What stages do you invest into? Yeah, definitely. So we invest from 2 to 10 million. So for us, that means starting at late seed to series C or even D could be considered in different cases, right? Let's say lower limit for us is to have some kind of proof point, some kind of prototype, MVP, so ID stage is not the stage where we are active, but as soon as there is a kind of prototype, MVP, I think this is an area where we can start collaborating.

22:48And as I was saying, we are doing two things. One is the direct investments from 2 to 10 million. So that's one area of activity. And we are also running hundreds of projects between deep tech startups and R &D on our four topics of interest, which are sustainability, mobility, air, sea, land and space, manufacturing and advanced computing, robotics and AI. Now we see, and I think you mentioned that the EIC is intending to invest 1.4 billion into deep tech related investments in 2026. How do you see the exit market coming from that and what is needed in a European perspective to make this successful?

23:31We were talking previously about unicorns and of course this is not about unicorns, it's about exits, right? Innovation ecosystems, they are like physics or chemistry experiments. You have many, many parameters and when you change just one parameter, you change the total output of the ecosystem, right? So one example is the French tech, actually. They have been able to change the narrative of, you know, being an entrepreneur is risky to being an entrepreneur and running a startup is very cool. And doing so, that's not the only thing that they did, but that's a key impact that they created on the French ecosystem, right?

24:12And by just changing one parameter, they changed the overall output, right, of the ecosystem. And of course the parameter which is the game changer is the exit, right? It creates an impact on basically all the other parameters. So it's the meta parameter by definition. You create, of course, multiple millionaires or billionaires overnight. You create new networks, you create know-how. So that's very important, right? You create the understanding that it's possible as well, you know, to exit a startup from Berlin or from Stockholm etc. So you lead the way, right? And you create some vocation, etc.

24:54So exits even on the cultural impact on the ecosystem are very, very, very important. They are, I mean, we see that from, you know, IPO market is a bit different. We see that maybe SPAC is a bit coming back around deep tech. But also we saw in the past years a very growing, I would say, mutual maturity from both sides. So the exit is like two parts. So you need to have mature startups and you need to have appetite from the corporate, some kind of reinvention, urgency, etc. Both are high. and we see that the maturity of the company working, collaborating, creating strategic collaborations with the large corporates is also growing.

25:45Their understanding of how to manage the relationship with the corporate is also growing. And we see from the other side that the need for innovation and to build new industrial champions and to reinvent industrial champions, etc. etc. has never been as high. So there is a real need for a lot of large corporates to acquire new innovation that is coming very well with the accelerated maturity of the companies. So I would say that it's an exit market hopefully will be positive in the next years, probably driven by some SPAC, etc. on one side, but also with the growing activity from corporates.

26:35Andreas Munk Holm:Yeah, I was about to ask you a bit if you could tie all of this together, because you're basically saying here a list of the factors that are forming the strength of Europe, and you're calling that the European Deep Tech Mesh. Am I correct that that's how you understand and how you think about it that by tying together one the moment in the market to the education ecosystem that we have around startups and birthing new startups and technology and then you couple that with the early stage investors the corporate the corporates and the cvcs the growth capital and finally the exit in the end all of this is coming together to form what you're considering the European Deep Tech Mesh.

27:14Yeah, exactly. I see it as a kind of funnel from the education to the exit. The idea of the mesh comes from the, you know, we hear often that Europe is too decentralized, that there are, you know, too many hubs, it's complex to navigate, et cetera. And in the few years ago, all those hubs were somehow competing and how I think today they are more forming a kind of competition, right? So those networks, they are not completely disconnected. They are connected. The talents flow, the capital flow, the ideas flow. And there is something very unique also with Europe, right? It's mainly we are from a mid-similar generation.

28:00We are an era-smooth generation. So we know a lot of people who have been, you know, multilingual, who are culturally adaptive and think European, right?