For a company that bills itself as “deep tech's first check,” the final check for SOSV's latest $306 million fund took a little longer than founder Sean O'Sullivan had hoped. This is probably more an indictment of the macroeconomic environment than a reflection on the company. Ask any venture capitalist and they'll tell you that the past few years haven't been the best time to raise money.
“If you consider our track record, our profitability, our proven success, and all the unicorns that have come out of SOSV in the past, you can imagine that we could shut down SOSV within three months,” O'Sullivan told TechCrunch. . Recent interviews. Instead, it took about a year and a half, with the most intensive effort being in the last six months, O'Sullivan said.
“The level of caution in the market is the highest I've ever seen,” he said.
Despite the difficult and long process, SOSV was able to achieve a new milestone.
The new fund totals $306 million, making it one of the largest pools of early-stage deep tech venture capital raised in recent years.
“We're doubling down and focusing on deep technology,” O'Sullivan said. “Because there are so many industries in the climate, that concentration allows us to address the ever-expanding opportunities within the climate.”
Market wariness is a reality of high interest rates, but for O'Sullivan, it's also a sign that deep tech investments aren't moving fast enough. Many investors recognize that the economy-wide effects of climate change present a range of opportunities. For O’Sullivan, investing in this area is also essential.
“This is truly an act of war. We must stop acting as if this is just an investment theme today. This is an existential crisis for the planet,” he said. “So we're tackling this problem with the intensity and speed that we think the rest of the industry needs.”
Speed and intensity may mean making more bets than before, as some companies and accelerators are doing. O'Sullivan takes a “less is more” approach.
“I see other people going in a different direction. They're trying to put 200 or so companies together as one group and cover all the situations,” he said. “These days we are more like a studio than an accelerator origin. We work on fewer companies, about 80 deep tech companies a year. We are focusing more capital, more attention and more services on them.”
Continued focus on biology
More than a decade ago, when SOSV was more of an accelerator, only 20 to 30 percent of startups participating in the program were able to find follow-on funding, O'Sullivan said. That's what it means. That bothered him and caused him to change the company's approach over the years. Including the launch of the Hax and IndieBio programs. His two SOSV programs incubate deep tech startups by providing space to build and experiment in addition to operational support.
As a result, 60% to 70% of companies now find funding past SOSV's initial pre-seed checks (ranging from $250,000 to $500,000), O'Sullivan said. Typically, for every $100 million the company invests in startups, it attracts about $2 billion in additional capital, he added.
SOSV's new fund continues the firm's focus on human and planetary health, an emerging trend among deep tech investors who recognize that the two areas are inextricably intertwined. Mr O'Sullivan said SOSV intended to invest around 70% of the funds in climate change technology companies and 25% in health technologies, with the remaining 5% set aside for opportunistic investments.
Limited partners involved in the new fund include family offices, institutional investors and corporate venture capital, with the latter contributing 25% of the total capital.
“The reason it's so high is because so many companies need these decarbonization technologies,” O'Sullivan says.
The company will continue to seek out startups with a wide range of technologies, from robotics to minerals, biomaterials to biomanufacturing. SOSV will continue to focus on companies that use biology to tackle climate change. O'Sullivan believes biological processes often win out. “Biology is 30 to 300 times more efficient, and even 3,000 times more efficient, than chemistry in terms of reducing greenhouse gas production by these systems.”
Climate “is really a physical world problem. To tackle it, we need to make our means of production much more efficient,” O'Sullivan said. “We have a special role because we do deep technology, we also work on biology, chemistry, physics and electronics. And it's all about what it takes to change the means of production. is.”