Sohaila Ouffata, managing director of BMW iVentures Europe, has been on a steep studying journey over the previous few years.
BMW began systematic company investing in 2011 with sporadic offers completed from its stability sheet and was battling a popularity of being simply company “dumb cash” making an attempt to muscle in on VC offers.
In the meantime, Ouffata, who joined in 2014, has additionally been discovering her place within the male-dominated VC business as a lady of Moroccan background.
Fortunately issues panned out. Early investments in corporations like EV charging community operator ChargePoint and site app Life360 resulted in good returns as the businesses listed on the inventory market.
By 2017, iVentures was spun out as its personal impartial company venturing arm with a €500m fund to spend because it needed, with no vetos from the father or mother firm. The fund invested in quite a few deeptech corporations, together with elements manufacturing platform Xometry and AI-chipmaker Graphcore, a lot of which now have unicorn valuations.
“Two portfolio corporations have gone public and 7 are getting ready to. Usually you’ve only one or two stars in a portfolio, this efficiency places us within the prime 25% of our classic yr,” says Ouffata. It has helped silence among the VC critics that had initially baulked at coinvesting with a company.
“€300m is the fund dimension we really feel matches for our funding targets.”
iVentures has been by a latest interval of change, although. Ulrich Quay who led the agency since inception not too long ago left, along with Tobias Jahn, managing director in Europe for the final four years. iVentures has simply raised a brand new $300m fund, transferring to a extra specific focus of investing in sustainability, one thing that Ouffata started championing two years in the past. She sat down with Sifted to speak about iVentures’ new path and what she has discovered about CVC investing:
What’s behind the BMW iVentures transfer into sustainability investments?
Sustainability is essential in our third wave of investing. After we began in 2011, our focus was on new and digital mobility corporations. The second wave was deeptech with a powerful deal with themes comparable to autonomous driving and industrial tech. Two years in the past, we began to debate the longer term influence of sustainability on our funding follow business and financial system. Again then we already clearly perceived a change in client mindset, rising regulation round sustainability and the steering of all monetary asset courses by ESG standards. We, due to this fact, anticipated this substantial shift to sustainability and have been specializing in corporations with a clearly sustainable method and imaginative and prescient.
All the massive Fortune 500 corporations have made their carbon neutrality objectives public. As a consequence, they might adapt their enterprise mannequin and in addition endure a change course of, i.e. by implementing new carbon-reduced applied sciences and by altering their work-flows and processes within the worth chain.
Sustainability investing will not be about charity however focuses on duty. We wish to discover purpose-driven tech corporations with a sustainability focus and make investments efficiently. We’re nonetheless on the lookout for revolutionary, cutting-edge corporations creating distinctive applied sciences. We spend money on corporations which have reached a product-market-fit already, tackle a big potential market and have a top-notch workforce that’s sturdy in execution.
What are among the applied sciences that you’re investing in?
One firm we’ve invested in is Pure Fibre Welding — 100% pure, plant-based and recyclable different to leather-based, yarns and foams. They’ve managed to provide prime quality plant-based leather-based, which seems like a premium product. It might go into automobiles but additionally be utilized in different industries comparable to style.
One other very thrilling firm is Boston Steel. It’s creating sustainable metal at inexpensive value. They produce metal out of renewable electrical energy, at a top quality and value aggressive to common metal. That is related to the automobile business as a result of 53% of a automobile is metal. If you happen to can decrease your CO2 footprint there it may have a huge impact.
One other firm is Purecycle, they produce virgin-like-plastic from recycled waste. The issue with plastic recycling at present is that the standard could be very poor, it’s a very darkish plastic that you just can’t use for a lot of merchandise. However Purecycle has developed a chemical course of the place they will produce a top quality recycled plastic that’s clear or white. There is no such thing as a scent and it may be utilized in day by day gadgets like shampoo bottles. There’s about 140 kilogrammes of plastic in a automobile so that is related for OEMs.
One other instance is Prometheus Fuels. They produce carbon impartial fuels from atmospheric CO2. They seize carbon and use a chemical course of to show it into ethanol and eventually into gasoline. Artificial fuels are very fascinating as a result of regardless of how briskly we’ll swap to electrical automobiles, you’ll nonetheless have huge quantities of automobiles with inner combustion engines on the highway for a while. Artificial, carbon impartial gas applied sciences will not be new however prior to now, they weren’t value aggressive and power intensive to provide. Prometheus have managed to get the price to be comparable to plain gasoline, which makes it engaging for the mass market.
Would you spend money on applied sciences in a roundabout way linked to automobiles?
Sure, for instance we invested in Turntide Applied sciences — a producer of cost-and power environment friendly electrical motors. These motors are used for instance in HVAC methods for the heating and cooling of buildings. There are thousands and thousands of those motors all over the world however there hasn’t been quite a lot of innovation round them. Turntide added a software program element that enables the motors to run very effectively and due to this fact contributes to large power financial savings.
Round ten years in the past, autonomous driving was the subsequent massive factor — and predicted to return to market round 2020. Within the meantime, its complexity has grow to be apparent and expectations available in the market have deeply modified.
Does anything change with this new fund?
No. We’re nonetheless specializing in Sequence A and B and we nonetheless have BMW as the only LP.
The fund is smaller than the earlier one you raised. Given the success of the final fund have been you not tempted to go greater?
The dimensions of your fund at all times correlates with the stage you spend money on. No person would make investments out of a $500 million fund into numerous seed-stage corporations. So €300m is the fund dimension we really feel matches for our funding targets.
Did the automobile business make a mistake in pursuing autonomous driving so aggressively — one thing they’re now having to drag again from?
There have been quite a lot of autonomous driving offers that we by no means touched as a result of the valuations have been loopy and since our BMW engineers have been capable of consider the know-how and inform us that the applied sciences weren’t fairly what the businesses have been pitching. Round ten years in the past, autonomous driving was the subsequent massive factor — and predicted to return to market round 2020. Within the meantime, its complexity has grow to be apparent and expectations available in the market have deeply modified. In sure areas — i.e. on restricted freeway distances, autonomous driving shall be potential within the close to future however widespread autonomous driving will take much more time to occur. It’s a really, very capital intensive house, so when you don’t have nearly limitless entry to capital, it’s sort of inconceivable to finance this by your individual money stream.
However I might at all times say autonomous driving had a particularly essential affect on the entire business. We have now seen a considerable shift to digitalisation additionally fostered by autonomous driving. It pressured a extra open mindset and extra partnership-oriented actions within the automotive world. The issue was so large you needed to depend on partnerships and it has remodeled the carmakers’ technique to cooperate with suppliers and rivals. This mindset is altering. We have to grow to be much more open and prepared to work with startups, and deal with them in a method as equal companions.
You create strategic worth by investing within the best-performing corporations, within the outliers which are actually shaping the way forward for the business.
How does iVentures work along with the BMW father or mother firm?
We attempt to share what we study new market areas extra extensively. We create deep dives and quick market stories, we create watch lists of corporations that we wish to observe and we distribute our deep-dive stories very extensively within the BMW Group organisation. We host data calls the place we share these, and are current at administration’s conferences the place I encourage folks to share that data.
What benefit do you get again from the BMW relationship — other than the funding?
Our CVC workforce, each right here and within the US, are based mostly at BMW tech workplaces the place there are quite a lot of engineers that do commerce scouting as their fundamental job. We collaborate with them as a lot as potential, significantly consulting with them on tech diligence.
As an automotive firm we even have the capability to confirm applied sciences and check applied sciences in actual phrase setups, and might detect when a startup is admittedly able to spend money on. It’s a part of the due diligence.
Ought to a CVC fund have a monetary or strategic focus?
My philosophy is that you just create strategic worth by investing within the best-performing corporations, within the outliers which are actually shaping the way forward for the business. Not by investing in a bunch of corporations, which can be tremendous related for one specific enterprise unit however will not be driving the change in your complete business. That is why I at all times argue that company enterprise funds must have a monetary focus too.
Additionally, you may’t be on the cap desk with fully totally different objectives to the opposite buyers. The founders wish to maximise the returns of the corporate, the buyers wish to maximise the return of the corporate. You possibly can’t be there simply desirous to maximise your particular person company agenda, which, by the best way, typically adjustments when the administration on the company LP adjustments.
What have been among the hardest challenges at BMW iVentures?
There’s a massive distinction in attitudes between US and European VC. Silicon Valley-based buyers cherished working with us from the get go. They have been tremendous pragmatic and mentioned “Okay, we’re about to spend money on deep tech, comparable to autonomous driving, with completely no understanding of the house. If BMW iVentures does due diligence and so they do the deal, we’ll coinvest with them.”
“I completely don’t appear to be an automotive particular person.”
They noticed the core competencies that we’ve very clearly. However quite a lot of European buyers noticed us a brand new child on the block once we began. They didn’t purchase the concept of us being an impartial fund with monetary targets. Following the efficiency of our portfolio, these discussions modified fully, we don’t have these conversations anymore.
On a private be aware, I’m a feminine VC — I completely don’t appear to be an automotive particular person. I might like to see extra range within the business. Tons of research present that ladies make investments otherwise, they’ve an extended trajectory and focus extra on the influence on society.
Maija Palmer is Sifted’s innovation editor. She covers deeptech and company innovation, and tweets from @maijapalmer