Europe is investing billions of dollars in early-stage climate startups, only to see too many companies fail at Series B, according to a recent report. But new funds are being raised to fill this gap, including Spain-based Mundi Ventures' latest fund, Kembara Fund I.
After securing a €350m commitment from the European Investment Fund under the European Tech Champions Initiative in 2024, Mundi Ventures has just completed a €750m first close on Kembara, its fifth fund and largest to date.
The fund will focus on deep technology and could reach a final close of 1.25 billion euros, according to a regulatory filing from Spain. But Kembara co-founder and general partner Yann de Vries said raising €750 million in two years for its first fund in this environment was “not easy”.
Kembara is managed by a team of experts within Mundi Ventures, with offices in Madrid, London, Barcelona and Paris. Mundi Ventures founder Javier Santizo is also currently co-founder and GP of the Kembara fund, which has published its full list of senior partners.
In addition to Mr. de Vries and Mr. Santizo, Robert Trezona of Climate Technology Venture Capital and Pierre Festal of Deep Tech Venture Capital have also joined as general partners, and former Atomico partner Siraj Khalik has joined as senior strategic advisor.
Their individual track records helped them raise capital from institutional investors who woke up to Europe's need for growth capital, and were able to turn many university spin-outs into large-scale businesses with industrial synergies. But it also gave them, especially de Vries, a front-row seat to the broader growing pains of Europe's climate change and deep tech startups.
De Vries, an experienced venture capitalist who founded Redpoint eVentures Brazil and later became a partner at Atomico, moved to the other side of the table and joined German electric aircraft startup Lilium, which is set to cease operations in 2024 after raising more than $1 billion and going public via a SPAC.
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In De Vries' view, Lilium went bankrupt because it couldn't find the growth capital it needed, but there was a silver lining to this “traumatic experience”. “I've seen a lot of great teams in Europe making the same journey,” he said. “[Europe] There is no problem with innovation. There are no problems with startup. The problem is scaling up. ”
Kembara is targeting Series B and C rounds, with plans to write initial checks of between 15 million euros and 40 million euros to around 20 companies. However, the size of the fund leaves follow-on scope to help startups in the portfolio scale up manufacturing and expand globally, with total investments potentially reaching up to €100 million per company.
This is more than the full size of many European funds, but that may be changing. Deep tech VC firm Elia and asset manager Lazard have partnered to form LEC (Lazard Elia Capital), with initial investments ranging from €20 million to €60 million per company, while operator-led fund Plural is reportedly raising up to €1 billion in new capital.
Still, most climate companies and deep tech growth-stage companies are capital-intensive, so even a big VC check has its limits. One of the lessons De Vries learned from Lilium is that raising money through equity alone is very difficult and can even leave a company in trouble later on. This inspired Kembara to take a different approach to fundraising.
“Some of us have lived through this situation, and what we want to do now is productize non-dilutive financing for these deep tech founders so they can de-risk future financings and optimize their capital structure to minimize dilution. [limited partners] who […] In addition to investing in funds, we want to co-invest in winners,” De Vries said.
For these LPs, geopolitics also plays a role in wanting to provide growth capital and venture debt to European growth-stage startups. “There will be significant support from European sovereign wealth funds, governments and companies, which will help us build a European champion in deep tech from Europe,” De Vries predicted.
This geopolitical context is also reflected in Kembara's focus areas, including dual-use and defense technologies to “defend Europe's sovereignty,” according to a press release. But De Vries pushed back against the idea that Kembarra was simply replacing capital that late-stage European companies might have raised overseas.
“There are a lot of gems that have gone unnoticed in Europe that have the potential to become world champions but have not reached their full potential.” He said DeepMind was another example of “missing out on growth capital and selling prematurely.” (Google acquired the company in 2014 for more than $500 million, and it is now estimated to be worth billions of dollars.)
There is growing urgency to keep European companies in Europe in many areas that overlap with Kembara's advocacy, including quantum computing, semiconductors and space technology. But the goal is to develop global champions that transcend borders. Coincidentally, Kembara means “wandering” in Malaysian (though the team has an older meaning of “humble path to excellence”).
Beyond the name, Kembara has ties to Malaysia. Mr. Santiso is also the former European CEO of Malaysian sovereign wealth fund Khazanah. That could open the door for many countries to consider exposure to the U.S. “For a second closing, we'll be looking for global investors, because we need not only global access to the market, but global access to the supply chain,” DeVries said.