An interview with Yann de Vries on raising a €1bn Growth Fund for European Deep Tech!

0:00Yann de Vries:Hello and welcome back to the Scaling Europe show presented by Deal. I'm Seb Johnson. Today I'm joined by Yann de Vries. Yann is a very experienced, well-known name in the world of European VC and European tech. And today he's got a super, super exciting announcement. So he is the co-founder and general partner of Kimbara. Tell me, what is Kimbara? Sebastian, thanks for having me. Kimbara is a new deep tech fund that we're launching today. We're launching announcing 750 as a first close. We're here to really help bring the best founders and help them scale into global champions out of Europe. The objective is really to help address the funding gap at the Series BNC.

0:40This is where the founders actually need the most help after taking their companies from the lab to global scale. And we've assembled the A-team to do that with people that have been in deep tech for the last 15, 20 years across Europe. So we're super excited.

0:55Yann de Vries:And tell me a bit about your other team members, because this is an amazing team of amazing investors and operators across European landscape. So can you touch a bit on who you've built this with? Yeah, these are people that we've worked for for many, many years together. My other co-founder is Javier Santiso. He's based in Madrid. I've known him for 15 years. Javier is the founder of Mundi Ventures. He's been in growth, investing in tech for the last 30 years. And one of his superpowers is to really understand sovereign wealth funds, government, growth funding, scale-ups. And he was the head of the sovereign wealth fund of Malaysia for five years in Europe.

1:34So we complement each other very well. It came from the deep tech side with Lilium. He comes from the growth tech investing. And we rounded this team up with some amazing guys with deep sector expertise and operators like Siraj Khalik, who was the, he's a founder, he's a deep tech founder, he's also a very experienced deep tech investor. We worked together at Atomico for many years, and he's an expert in AI and semi and quantum. We have Rob Trezona, who is a climate expert. He's a scientist from Cambridge, PhD in material science, and he brings 25 years of climate deep tech experience. He was also a founder and CTO.

2:13And we have Pierre from PROMOS. He's been in deep tech for 25 years, and he's our kind of robotic space expert. So we kind of round and cover all the key deep tech angles across Europe. We're all spread around Europe to be close to the sectors of innovation. So we're going to be based in Spain, in Switzerland, in France, and in London. So it's a virtual team close to the clusters of innovation close to the founders we're going to spend a lot of time on the road to help them scale their business um and um and that's how how we're set up so far so we have secured the leadership team and then we're going to be building the team

2:53Yann de Vries:and from now amazing who are you going to be looking to hire is it more junior people venture partners but what's that going to look like so look we're going to take um we're going to take our time first of all we want to kind of really gel the team and uh and we want to try and do something different. First, we want to really, we are very focused deep tech team, right? In opposition to a generalist fund that do occasionally investments in deep tech. We're convinced that deep tech takes a focused approach. It takes a very different approach. You can look at companies and look at the ARR and have the standard software playbook.

3:31These are teams that are, you have to look at the business very differently. These are companies that spend sometimes 10, 15 years in the lab. You need to pick them at the right time to de-risk them when the science has been de-risked and come at an inflection point when you really have, and we think that's at the Series B and Series C, when the companies still have unlimited upside, but they've built significant IP and are ready for scale-up. So you have strong downside protection, which is a very interesting investment profile compared to a traditional software model where you come in at the Series A, where you have early market fit, but then you have very little differentiation now, increasingly, especially with AI, where these companies can overnight, as new LLMs come in, really be disrupted.

4:18So we want to build a different approach to deep tech and a team that has done this before. And we are an AI-first fund, right? So we want to rethink all the processes that remove friction, that help us be more efficient as investors from sourcing to diligence, avoid blind spots and biases and help our company scale and also transform the way we work with LPs in a strategic way. We have very few set of LPs that are going to be very strategic in helping us scale those companies. And so it's really a different model in many, many different ways. And the team will adapt to that.

4:55Yann de Vries:Interesting. And for those who don't know, I thought we might be addressing to kind of play back some of your team's investments, because this is this is this is a team with real great success and experience investing in deep tech. And I saw that, I think, you know, yourself, you've invested in companies like Grok and Dural, OpenAI, SpaceX, some of your other kind of colleagues and partners invested in companies like the Exploration Company. Robco recently raised a big, you know, Series C was at Series B, Fernride and Dural. So, I mean, these are amazing deep tech companies that you four or five have invested in.

5:29Yann de Vries:So you really do know what you're doing. This is like a really experienced group of operators and investors. Given the portfolio and the track record of the team that you've put together, how easy or difficult was it to raise a fund like this? I mean, this is a huge fund, you know, 700, relative, especially for European funds, 750 million first closed, targeting a billion. How was the experience raising the fund? Look, it's hard. fundraising right now is hard for everyone. We're a first time fund, so we're a first strategy. We had significant hurdles to jump with that. For a lot of people, it's a non-starter.

6:09The key breakthrough for us was first to get the EIF as an anchor investor. They got in really because of the team, because of the mandate. Europe really needs a player at scale with focus to really bring these deep tech champions. And too often, we have amazing companies that are either sold too early. Think about DeepMinds sold for 400 million to Google. Now they are the forefront of Google's strategy. They're based in Europe. Think about what would have happened if that company had grown in Europe. Or others that get basically invested by American companies and then they have to go abroad, right?

6:47So we're here to try and change that. We're here to try and bring the best of Europe together. We have too much of a fragmented approach when it gets to deep tech. Lots of great innovation early stage. Lots of great funds, but they're subscale maximum 200, 300 million. And then they cannot raise these 50, 200 million rounds when the company needs that the most. And so that mandate was really what the EIF brought into. And then we round this up with Sub-In-Wealth Funds, who are strategic partners for us because they are here to help build sovereigns in Europe. And they bring not only strategic deal flow, but they also bring non-dilutive financing, which is critical, right?

7:30For deep tech companies, you cannot raise 100 % of your rounds in equity. It's just very dilutive. It puts a lot of risk on the fundraising. And you want to do that with, especially as you're building IP in your companies, you have different instruments instruments that become available for you to raise as you grow. You have grants for R &D initially, then you have IP debt, then you have capital financing for your factory. So we want to productize all this and we want to partner with the sovereign wealth funds across Europe to make this available for founders. This is going to be a big, a huge path to de-risk financing and help them scale with the optimal capital structure.

8:07And then thirdly, we want to bring in people who are financial investors with deep pockets who want to not only invest in the fund, but then want to double down on these winners. And so we have the ability to underwrite big rounds in Series C and Series D as these companies continue to grow from within already our fund and obviously partnerings then with the best co-investors as we scale. So we're trying to structure everything so that we can really help add a lot of value to those deep tech companies.

8:36Yann de Vries:and when you talk about deep tech can we talk about specifically what that isn't so this year already we've seen some quite big fundraisers that the likes of like uh syndesia parlo uh uh 11 labs today you know of those companies would you class any of those as deep tech i mean yeah what out of those of any of those deep tech would you call those sort of like applied or application layer ai yes these are these are amazing companies and that shows again that Europe has talent. But these are not necessarily the companies that we would go after. We want to go after companies that are based on fundamental science and engineering breakthroughs, that are tackling really hard global problems, and that have a trajectory to become a global category winner in their sector.

9:20So we're talking about companies that are at the intersection of hardware and software, combined obviously with AI today. These are companies doing chipsets, the future of compute, space, robotics, new materials, synthetic biology, things like that, that really move the needle globally, addressing fundamental problems. For example, you're not going to resolve climate change with software. So you need really new technologies to decarbonize our industries. And these are the type of companies that we are going to go after. The nice thing is if you crack a global problem like this, these companies don't need like you did in the US before.

9:58If you look at web or mobile or SaaS, the US companies had an enormous advantage because they basically had a huge untapped market with hundreds of millions of customers that you could tap into very easily. It was a huge hurdle for the for the equivalent founders in Europe. You go in a very fragmented market company, country by country. So the best ones move to the US. Here in deep tech is very different. You're not looking at millions of customers. You're looking at building a company based on innovation, cracking a big problem, and then you have a small subset of corporates, of governments. And this you can do very well from Europe.

10:39And the coexistence actually of industry and innovation and ambitious fund, these three things are the pillars for the deep tech company. And they're actually, you have amazing clusters of innovation around Europe doing that, which you actually don't have in the Silicon Valley. So there's a lot of things that are changed now and where Europe can actually play its strength and where you can build these global leaders. And you see this actually happening. The giants like NVIDIA did 18 investments in Europe last year. They see those talented companies, right? And they're coming in early to go after them.

11:10And this is exactly where we want to help them scale instead of selling either too early to them or going to the US. We want to help them become global champions in Europe.

11:19Yann de Vries:Amazing. That's what we love to hear. You know, it's such a problem that I hear founders talking about all the time is that funding gap, that black hole when you get to kind of break out stage and you always see the americans you know the very top companies are often able to raise from the american firms but there's a lot of amazing companies that are not able maybe their product isn't in the u.s or haven't got that brand reach um which i think i think i think it's an amazing mission that i think you're solving um have you got your eyes on any companies are you in conversations have you started deploying it just yet what does that kind of deployment process look like yes look we've been in the market for the last 10-15 years.

11:52So we already know which founders we want to back. We have a really amazing pipeline. And I cannot tell you obviously which companies we're going to back now, but I'll be happy to come back once we announce some investments. So we're going to do investments soon. The fund is active. We can invest. We're super excited. And there's tons of gems in Europe that are under the radar that punch. They could win over American companies that are valued at multi-billion dollars today and and so we are really keen to to deploy this and help show what

12:23Yann de Vries:europe can do and does that mean you're going to be deploying this very quickly since you've got this amazing pipeline since you already know where you want to invest it do you think this is going to be careful right i think we're going to build a portfolio of 20 companies we want to make sure that we build the very best founders and back them and we are going to be very thesis driven i think this is where we're going to be quite different from the generalist funds we're not going to be doing a deal in three weeks like you typically do today in a hyper-competitive software environment. We're going to be thesis-driven.

12:53We're going to try and anticipate what the next 10 years look like in a sector, understand what are the next big pain points, what are the areas of strategic interest or profitability, and make some bets ahead of the wave, ahead of the herd, if you will. And if you know your space, if you're, for example, sitting like Siraj is on the board of high quantum, you have a very unique lens on the quantum space to make the next big bet. If you're a generalist investor and you're not familiar with quantum, you spend all your energy on SaaS, on consumer software, it's going to be very hard for you. You can maybe be lucky, but it's going to be very, very hard for you to pick the right bet.

13:31So we believe in focus and specialization and long-term strategic view. And also we are going to be building over time, which we have already in place based on our years of experience as a team, this very deep scientific industrial corporate network that helps these companies scale. And you don't need that network when you do software. These are completely different stakeholders, completely different people, completely different ways to go to market, completely different ways to fundraise. And that's what we're bringing together to help those teams.

13:58Yann de Vries:And what does success look like for this fund? The classic benchmark is a 3x fund in 10 years. You're investing kind of like a later stage, Series B, Series C, but you're in an industry or you're in industries where generally the timelines are much longer because they're deep tech. Do you have a view in your mind of what a great DPI result would be? First of all, I'll challenge you on the deep tech companies taking longer. I think the way things are happening today, where innovation is happening at an exponential scale, the cost of compute, of going to space, of sequencing DNA, all these things are dropping by orders of magnitude over the last decade.

14:38And so the founders today have tools of super intelligence at scale to be able to make some massive breakthroughs in science. Look at what DeepMind was able to do in one year with plotting folding. That was the equivalent of a billion years of PhD work. Right. So there are some amazing things that are happening. Right. And that's what we're going to be tapping into. I think very few people realize how quickly these things are moving. And if these companies hit the sweet spot, they can scale very quickly, especially if you come in at Series B and C. Between A and B, the risk has not fundamentally changed, so it's hard to put a big premium.

15:15But if you enter a Series B and C when the company is about to take off and it's taken the science risk away, it's trying to get early commercial traction, and they're positioned to be the global category winner, then you can have massive DPI or very quickly valuation traction. And so that's what we're betting it, right? So back to your question, what do we want to underwrite? Look, we want to be conservative with our LPs. We're promising three to five. But we think we can do much better if we play our cards right.

15:46Yann de Vries:Amazing. And assuming things go well, do you have a vision of turning this into a 2 billion, 5 billion, 10 billion fund in the future? Look, that's way too early to say. Let's stay grounded. We have an enormous opportunity. It's never been greater. The timing is great. Europe is about to embark on a trillion dollar expenditure to support those companies to build sovereign infrastructure in Europe. This is great wind in the back. So there's a lot of different things that are coming together for this with a great team, with a capital at scale, with amazing pipeline and Europe behind it. So we think we're going to be able to do a lot of really interesting things.

16:28But let's not go to the next funder at least too early. And we have to obviously deliver.

16:33Yann de Vries:Yeah, absolutely. And when you look at the deep tech landscape across Europe, where do you think Europe has a real advantage that they can lead the market? I think there's a couple areas where Europe is very strong. I think if you think at quantum, I think Europe has really leading companies and has very, very strong heritage in quantum physics. That's one area where we expect to see some amazing companies. Life science as well. the presence of all these pharmaceutical companies and this global research in Europe is a big thing then you look at climate climate is a big thing right it's completely the US are walking away from it the rest of the world in some extent as well and Europe remains the only continent that really thinks that it is important this problem is not going anywhere anytime soon it's getting worst every day.

17:27There are phenomenal companies in Europe who have developed amazing lab technology over the last 10-15 years that Rob, for example, has been following closely. And we want to get in now into a down market to help those founders really come out on the other side once in a couple years these companies will be able to offer solutions at scale to really have a big impact on climate. And that's an area we're very excited about. Across the board, we're going to try and really come up with climate-friendly companies that have a big impact. Another area is semiconductors, right? I think the next generation of chips, of routing, optical connects, this is going to be very important to remove the bottlenecks and reduce energy consumption in data centers.

18:11I think Europe has world-class technology in this area. And robotics, of course, is an area where Europe has a very strong heritage. if you look at Switzerland that Germany combined with a very strong industry and precision engineering you have a lot of things to tap into here

18:30Yann de Vries:yeah robotics is the classic one I think where yeah I think you mentioned our companies have been sold out too early you know we've built billion dollar companies and even the last couple of years we've seen a bunch being acquired by even Chinese companies and Japanese so I think robotics is definitely a super interesting one you have space as well space and space at the moment i think is really interesting with companies like the exploration company um i think it's super interesting especially with this push to sovereignty we sort of feeling the need to own our own space tech um but why do you think there is this gap you know given the fact that our tech maturity the tech ecosystem across europe has matured by in such a in such a huge way across so many of the categories software fintech um even ai we've got some really category leading companies but deep tech we still have this huge funding gap why do you think european investors have kind of shied away from it and not been willing to to invest in it i think there's a couple reasons i think first it takes time right deep tech is fairly new until recently most of the vcs were focused 100 on software deep tech was very risky to fund the companies would take a long time like you were saying and the outcomes were not there and so there were very few very specialized funds like amadeus and others who did a great job at the seed level or at the series a but then most of the great outcomes went to the u.s but as i was explaining earlier this dynamic has changed now so now you start to see very experienced investors operators who are actually starting as solo gps then early stage funds very specialized you have specialized funds in quantum in in in space in robotics in in climate etc which are now world-class in Europe.

20:14But these funds take time to scale, right? So some of them are reaching second generation, third generation, they're at 300 million. Innovation industries is now 400, 500 million. In a way, we were able to pull an amazing team who's been in the market for a long time and benefit from all these trends that were coming together to kind of leapfrog these three generations of deep tech funds and go directly into a billion-dollar, a billion-euro fund. This is quite unique. It was very hard to pull together, but this is how we were able to kind of shortcut this path. And then second big challenge is that in Europe, we're not investing enough in growth.

20:55A lot of the pension funds, ironically, are investing in US funds who then take our best companies back to the US. So our population savings is now funneled through our pension funds to fund the US. And that is crazy. We need to change that. There are initiatives on the way to do that. I think it's encouraging. You're starting to see this in the Netherlands, in the UK, in France, where if we were starting to create these much more exposure into VC, you're going to start to see these scale-up funds. There's a big initiative on the way as well in Europe for deep tech called the scale-up fund, which is planning to raise more than 5 billion fund to actually back these most promising European champions and write tickets of 100 million.

21:41So this is happening as we speak. We are staying very focused on what we do. We're going to be partnering with them to co-invest. That's great. That's a great other option, actually, for us to really scale the winners. So a lot of things are coming together. And I think you'll see a very different landscape in the next five years.

21:58Yann de Vries:I mean, it's amazing. You know, it's been such a hot topic that we don't have this capital. And I've always felt like we need our own soft bank, the Podala. You know, we need like a hundred billion dollar fund across Europe that is willing to invest and write huge checks, especially as our companies get bigger and bigger. And the problem we'll get later and later to an extent. Like right now, we don't have the investors at BNC. In 10 years time, you know, maybe we do have the investors at BNC, but do we have the investors at D and E and post IPO? Well, we do have global investors then, right? after when you get to cnd these companies are revenue generating they're profitable then you have tons of capital globally right and you don't need to relocate the company because you're already well established you're entrenched that's true you can then go ipo it's a completely different set of scale of challenges the most critical part is this missing middle that we're targeting now afterwards you have players like temasek and from singapore or omuba that as you mentioned from the middle east or large pension funds in canada these are all very hungry to deploy capital and actually with the geopolitics today, you start to see a lot of interest from all around the world to de-hedge from the US, right?

23:02And so that is also attracting very interesting and strategic capital to Europe. So again, great wins in our sales for scaling European champions. The ambition is there. The innovation is there. That's not the problem. It's really this missing gap that I think will play a critical role. And also, obviously, now we have the EU Inc. that is going to help start a lot of these companies we even have initiatives around deep tech to bring the different clusters together around europe and the big universities so a lot of things are moving positively sebastian very different from the depressing news that you read in the news today

23:38Yann de Vries:so yeah yeah and i don't think it's true i think i think there is a real cultural shift that's happening across europe right now and the politicians are waking up to the fact that we need to embrace and accept tech and accelerate it as fast as we can. All right. Final question. I know you said you, you, you, you haven't deployed anything yet. Do you know like a rough timeline when we can expect to hear about a first investment? Could it be like two weeks or two months? What are we looking at? Probably in the next three months. Yes. Nice. Exciting. I look forward to seeing it. It's going to be, yeah, it's amazing to see a fund like this kind of be born because I think it's exactly what we need.

24:16Yann de Vries:And, you know,$40 million checks, 20 of them it's big big investments at the right stage and so um look i look forward to seeing the investments that you make but thank you so much for joining me oh thanks for having me thanks you