Future Energy Ventures' Investment Strategy

Veronique Hördemann 0:01

Our focus areas are called future energy , future cities and future technology . And in future cities . We are focusing on everything that basically enables the energy transitions in cities , Like EV , everything that is around storage , everything that is around residential decarbonization that makes buildings more or less more effective and more efficient that is in future cities . Then we have our future energy bucket , where everything that supports basically the broader energy system , like solar solutions , also storage for bigger , larger storage facilities , flexibility , everything that is around that and everything that we do is based on a software-only approach , basically .

Ryan Grant Little 0:50

Welcome to another Climate Tech Podcast Interviews with the people trying to save us from ourselves . Veronique Hördemann is Managing Partner and CFO at Future Energy Ventures . We talked about that firm's investment strategy , the differences between corporate and traditional venture capital and the importance of that so controversial word these days diversity in the VC space . I reached Veronique in Essen , germany . I'm Ryan Grant-Little . Thanks for being here . Veronique , welcome to the podcast .

Veronique Hördemann 1:23

Thank you , nice to be with you .

Ryan Grant Little 1:25

You are the managing partner and CFO at Future Energy Ventures . What does Future Energy Ventures do ?

Veronique Hördemann 1:33

Yeah , the company is doing venture capital investments in climate tech since day one and we are an early stage investor and supporting startups to grow and scale .

Ryan Grant Little 1:45

And what is day one ? How long have you been operational ?

Veronique Hördemann 1:48

Since 2016 .

Ryan Grant Little 1:50

Okay , so the firm's been around for nine years in climate tech . That makes it rather a pioneer . Are there any specific areas that you're focused on in climate tech ? I think you have a renewable energy background . Is that also the focus of the firm ?

Veronique Hördemann 2:06

So the focus of the firm is basically everything around energy transition , so we are supporting startups that are supporting that topic , everything that is around in three focus areas clustered for us , and our focus areas are called future energy , future cities and future technology . And in future cities , we are focusing on everything that basically enables the energy transitions in cities . Yeah , like ev , everything that is around storage , everything that is around the residential decarbonization that makes buildings more or less more effective and more efficient . That is in future cities . Then we have our future energy bucket , where everything that supports basically the broader energy system , like solar solutions , also storage for bigger , larger storage facilities , flexibility , everything that is around that , and everything that we do is based on software only approach , basically , yeah , so we are supporting companies that basically fit everything together . Then we have all the different solutions , yeah , and the overall broad , broader system that we see for the future is a comprehensive and well-working system with different parts , right , and we are investing in these technologies that are enabling that working system . Basically .

Ryan Grant Little 3:30

Oh , that's very interesting . So it sounds like built environment , transportation , these types of things within cities , electrification of this , but from a software approach specifically . How do you make the decision to focus on software specifically and not get into the hardware space ?

Veronique Hördemann 3:45

So it was a decision also from day one onwards , because I am in our opinion , basically the hardware approach , which is totally fine Most of the time , requires more capital , right , and if we are , we have now two funds going . The first fund is basically a closed fund by now we are not investing there anymore and the second fund has now been established and overall the volume of these both funds , in our view , would

Software-Only Approach to Climate Tech

Veronique Hördemann 4:12

not be sufficient to support basically the development of hardware . And we also believe that sufficient hardware currently is existing and that this hardware , this technology that is already there , basically just needs to be managed and optimized in a very well way in order to come closer to , basically , co2 reduction and our targets basically . So , therefore , that's the reason .

Ryan Grant Little 4:36

So it's interesting . I mean , I know a lot of VCs are interested in the hardware space but struggling a little bit with looking at what that means from a financing perspective , and I think you know it's much easier for us to understand things like financing of SaaS or like of the on the software side , whereas hardware is , you know it's huge money and there's , you know , differences like project financing , there's , you know , all kinds of different types of financing layers that are involved in that . And I think it feels like a lot of VCs are interested to get into that space to deploy that kind of capital , but recognize that it's very challenging and there's a huge risk of capital loss in that space as well . And I just wonder if you could , you know , talk about maybe some of the thinking that went behind staying away from that space as well .

Veronique Hördemann 5:24

Yeah , again , as you mentioned , I think a lot of capital is required and I think also different financing forms are required to actually enable hardware to develop . Basically , and we have had our experiences right . So in the previous fund we had experience also with hardware and what we have realized is that it basically is taking more time , more capital and needs different structures in the end also to be scalable . And that's basically the reasons . And then , based on our fund sizes , also in the first fund , but also in the second fund , this is in the end not manageable . We decided that we don't want to manage that .

Ryan Grant Little 6:03

Can you talk a little bit about some of the companies that you've invested in ? Maybe just highlight a few from your portfolio and talk about what was compelling about the business case enough that it made it through and passed the investment committee finish line .

Veronique Hördemann 6:17

Yeah , so I think , as mentioned , we have two funds ongoing right . The first fund has been invested , so we are only managing it at the moment , and I think there are different portfolio companies that we think are worth to mention . Yeah , so I think at the moment , the best performing companies that we are seeing in the ev space are in the heat pump business , so , um , they are developing quite well , also based on market and developments . So , and I think and we have , we have had our ups and downs , right with all these companies yeah , so , um , they are developing quite well , also based on market and developments , and we have had our ups and downs with all these companies . So , in Fund One , the companies are already some time in the portfolio . It's not that we just invested and it's a matter of developing then , from day one onwards , now to a point where we try to make them basically available or sellable in the market . So that's the Fund One opportunities where we try to make them basically available or sellable in the market , right , so that's the fund one opportunities , and there are different companies currently that we are nourishing and trying to develop

Portfolio Companies and Investment Success Stories

Veronique Hördemann 7:13

right , we had some exits . That also happened in the fund one and I think from my perspective I think because it was one of my deals this was a very early exit , basically , of a company that's called GridX and that was basically one of the very first investments we did in the fund quite early on and it was developed then very well from our side and the company had a good product as well and we managed it until exit right . So that was one of the companies from fund one that I would mention right now because , as I said , it's it was my investments . But I think any other company that we are currently nourishing has a very different story behind it . Yeah , not in every company that we invest in that that went through the investment committee in the first place is doing what they have done at the beginning right , and I think that's also like the normal path we see right Some development , some changes in business models that we went through in order to make them actually attractive targets for the market . So that's fund one .

Veronique Hördemann 8:17

And then for fund two and perhaps that needs to be clear the fund one was basically a corporate fund with only one LP . The second fund is now an open structure with several LPs on board and it's basically managed now , slightly different than the fund before and the investment we have done in the second fund . It's not much yet . So I think we have like three announced investments and we are currently working on two or three more . They had all very different backgrounds , right . So I think we know a lot of companies for quite a long time . So I think some of these companies we have now invested in the new funds we knew already for like two or three years , followed them for quite a while and therefore the investment decisions are always then a little bit more easy because you know a company quite for a long time and the decisions in the current fund structure were all supported by our understanding . What we think is basically the next hot topic for our thesis of climate change , of energy transition .

Ryan Grant Little 9:16

So in fact the first half of your career in BC was with the corporate venture capital and that was one of the Europe's largest energy companies , if I remember correctly . And then that was the first fund and then you decided at the firm to spin out and bring in new LPs . How did that decision kind of emanate rather than staying in as a CVC ?

Veronique Hördemann 9:39

So it was a long process and there were also different things happening in the background , but the overall conclusion that we took , basically together with our LP at that time , was that if we really want to grow our topic that needs more capital . And how do you get more capital into our idea is to make it larger by also attracting additional LPs , and that basically started the whole process .

Ryan Grant Little 10:06

What's it like , you know in your role as an executive at the firm , dealing in kind of a more traditional VC setup versus a CVC Is it ? Do you have ? You have more people to report to , but maybe you're a little bit more nimble . I'm curious because I've worked a lot as a co-investor with both , of course , traditional VCs but also CVCs , and I can see some advantages and disadvantages to both models , but you've lived it really for five years of each so far . I wonder if you could just talk a bit about how it's different from a day-to-day perspective on your side as the investor .

Veronique Hördemann 10:40

Yeah . So the conclusion is it's very different , and I think the main difference is that , basically , we are now on our own right , so decisions are done by us and we are proposing investments and there's no additional board or committee behind it that validates

Transitioning from Corporate to Traditional VC

Veronique Hördemann 11:00

or vetoes our decisions . Basically , we learned a lot right . So I think , um , within the , within the corporate environment yeah , it was a set up . Basically , of course , you need to report to certain functions , you need to build your relationships within the corporate , because it's also quite fluctuating depending on which people are currently taking responsibility there . So I think the majority of our time there was really to make sure that we have our good relationship , that we actually show the value . New founded external company where we have now built up all the structures . We are regulated by the barfin . So everything that we did over the last now two years basically , or even longer , is to accomplish everything that is related to that , and I think that's a big difference . So we are really a startup basically .

Ryan Grant Little 12:12

So before you're running it basically off the balance sheet of your one LP , which is the company that you like work within , and now you've got to spin it out and as a fund you've got a specific kind of requirements about how you handle external money . All these kinds of things that I mean probably some more paperwork , but less kind of internal reporting .

Veronique Hördemann 12:33

Yeah , and it's a different mindset . I think also A different mindset and a different attitude towards decisions and perhaps also to risk taking .

Ryan Grant Little 12:44

You mentioned some areas like investing in heat pumps , which I think Germany has done a really really good job of building out this market , and I've seen a few startups from the UK and in their pitch decks they're always referencing Germany and kind of trying to replicate that , and so I can imagine that's been a very profitable kind of line of investment in the first fund . What kinds of things are you excited about for the second fund ? What are you looking at what gets you really excited for the second fund ? What are you looking at what gets you really excited ? You mentioned also electrification of cities , so is that still ? Are you still seeing new opportunities in that segment ?

Veronique Hördemann 13:18

Yeah , so the overall investment strategy has not changed between the first and the second fund , because we still believe that , at least for this next fund generation , our investment thesis holds strong and we are totally convinced that we will still find within this investment thesis very good startups that support whatever we think should need to happen to enable the energy transition .

Veronique Hördemann 13:42

So therefore , there was no change , right .

Veronique Hördemann 13:45

The only addition that we have put to our strategy is now that we are actually an impact fund , so impact and CO2 reduction is now playing , from day one in investments , a bigger role , although our previous investment fund has already completed that mission as well , right , without us knowing .

Veronique Hördemann 14:05

But this is the only change in strategy and we are still excited about mainly the same topics . So everything that belongs to the mentioned buckets that we are still excited about , mainly the same topics . So everything that belongs to the mentioned buckets that we are looking at and all these topics belonging to these buckets , we are still interested and , as mentioned , it's like everything that has to do with solar managing solar real estate , decarbonization , storage and second life , use of it , optimization , and everything that belongs to that , everything that has to do with energy flexibility , marketplaces , energy tariffs , trading algorithms behind it . So everything regarding to that and also like certain perhaps not so obvious topics , like we have looked into earth observation , we have looked in emission management , so everything that is related to that is also of interest . And , of course , ev . So I think that's less exotic

Current Climate Tech Investment Priorities

Veronique Hördemann 15:00

, but EV is also obviously one of the big drivers for future cities .

Ryan Grant Little 15:05

And what about the geography ? So are you a pan-European fund or global fund ? Where are you looking ?

Veronique Hördemann 15:10

We are based in Germany , obviously , so we are looking in Europe , we have also colleagues sitting in the US and we have also colleagues sitting in Tel Aviv to do the APEC region and that's our focus and that has also not changed compared to the first fund .

Ryan Grant Little 15:27

You recently wrote that there's been some kind of comeback of European startup exits , which should prime the pump for some more investment . But of course , at the time of recording now , it's safe to say that the global economy is experiencing a bit of an upset and a lot of unpredictability . If you were going to place a bet right now on the European VC ecosystem , right now on the European VC ecosystem , it's a tough question , but what are your thoughts ?

Veronique Hördemann 16:43

So I think it has to do a lot with risk and uncertainty , right ? So I think , generally , if you would have asked me , like a few weeks ago , I would have said the European VC ecosystem is there and is working and we see some good trends , that there's an uptick , and that was true , yeah . So I honestly . We saw valuations going up . We saw also exit opportunities emerging , yeah , and we also saw a lot of competition on deals from all kinds of investors and jumping into the markets and onto onto this topic climate tech basically . Yeah , so a lot of money flooded the market .

Veronique Hördemann 17:20

Basically now over the weekend , I would say let's monitor , basically , yeah , because the outcome is still unclear . But uncertainty and increased risk obviously is a big problem for financial investors , basically , and it's still a little bit unclear because it's so fresh , right , it's still a little bit unclear how investors will react , what the outcome would be and will be and what measures are going to be taken in order to accommodate for this increased uncertainty that has come over the weekend . Basically , and I think that's the current situation in my view , and we are not at the end of the funnel . So I mean , I would think there's still certain room for negotiations . There are some randomness in everything , so I think the situation is still a little bit unclear in my opinion , and we will see in the next few weeks whether this is developing , and only then , I think , there can also be a clear view how Europe , or especially also climate tech investors , will go with that right .

Ryan Grant Little 18:28

Yeah , and we're recording on April 8th , so about a week after the tariffs have come out , and I think it's safe to say that we have no idea where we are in the funnel or how big the funnel is or anything like that right now . So we will see . You were recently spotlighted by Startup Basecamp as one of the leading women in VC and I wonder if you could talk a bit about the state of play for women in VC and also as climate tech founders .

Veronique Hördemann 18:55

So I think overall , as a fact base is still that in startups , as also as in VCs , I think overall fact-based is still that in startups , as also as in VCs , I think it's still an underrepresented portion . So women are not so much climate tech founders and also not so much active in the investing world and , for example , I mean that is something that is just fact-based . Yeah , I think in 2024 , only 10.6 percent of female led startups received funding . Right , so , and that's a very , very small share compared to perhaps the potential that is out there and , I think , overall , the chances to increase diversity here and to also increase potentially I don't know better results , because that's also like fundamentally proven that more diverse teams bring more results . Basically , yeah , this is something where we definitely see some potential to change or to grow there .

Veronique Hördemann 20:00

Right , and for us as Future Energy Ventures , we are trying to lead by example . I'm not sure whether you have seen our team , but I think we have tried to be really diverse , not only with respect to gender , but also with respect to backgrounds and everything , to really make sure that we perhaps can prove what has been the theory behind it , so that actually , diverse teams can lead to better results , and we would also love

Women in VC and Startup Diversity

Veronique Hördemann 20:26

to see more of that in startups . That's not true for all the startups we invested in . So , still , the majority of our startups is basically not female driven , but we are looking to also get better there and we are encouraging female-led startups to apply or to come to us and ask for investments .

Ryan Grant Little 20:47

Okay , so to our female listeners who are starting up a company right now , take note and I was also interested to see that you're based in Essen , out towards the west of Germany , and you know Germany has a very well built out climate tech VC sector . A lot of it's in Berlin with some outliers in Munich , and I wonder if you could just talk a bit about the experience of being in Essen and how important location is to the work that you do .

Veronique Hördemann 21:16

Yeah , so first of all , I mean , we have an office in Berlin because we see most of the buses in Berlin , so that's why we are also there , why I'm sitting in Essen For private reasons , basically , to be quite honest , although the whole rural area is developing , also with regards to at least the startup scene not necessarily climate tech , but there's a lot of ambition and activities happening here to build up that environment for startups to be here , to developing here , right , but generally at the moment , we have our base in Berlin . Yeah , we are trying to get our network there , and that I am in Essen is basically based also on the fact that I have , like the more operational I'm doing , also investments , but all the backup operations , like finance and all the regulatory stuff , can be done from anywhere .

Ryan Grant Little 22:08

Right , we are trying to also connect here in the rural area , but it's , yeah , we are doing it , but it's definitely more in berlin understood , understood , and I was also interested to see you were posting about the school system and made a really interesting point about how the school system as it exists today limits innovation , and I wonder if you could talk about what you meant by that and a little bit about why that topic is important to you it's also a private , personal topic because we have our struggles with a normal school system that children must run through and I think overall it's a very well , it's our opinion , my opinion , right .

Veronique Hördemann 22:49

So it's a very standardized , very strict system where little flexibility is allowed to happen and the potential of children is sometimes not taken into full perspective there , because you need to fit into that one direction the school system goes and I think in the end that limits basically the potential you get out of all these children we have . Right ? So the creative mindsets , the out-of-the-box thinking , the innovative ideas that children might have and can develop is basically limited and is not taking the full potential . That's basically the background and especially for us . For me it's personal , because we have a kid that is so creative and has so much potential but can't live it to the fullest because it's limited .

Ryan Grant Little 23:44

Understood . Maybe another topic for the future . I'm very interested in education and alternative forms of education as well , so one to talk about offline as well .

Veronique Hördemann 23:55

We can do that .

Ryan Grant Little 23:56

You've talked about . I mean , you've already made a call out to any female founders listening . You've already made a call out to any female founders listening , but for other people who are listening to this episode , how can they reach you and get involved with the mission of future energy ventures ?

Veronique Hördemann 24:10

on every channel email , linkedin phone , so there's no limit .

Ryan Grant Little 24:15

You can get me anywhere telegram , telegraph , fax , fax , fax it's . I mean , it's germany .

Veronique Hördemann 24:23

I know , there's still fax machines no , but there is anyone like , so I'm I think , um , if there's real interest to meet and to exchange , I think there will be always ways to do it . I'm very open and very happy to do it okay .

Ryan Grant Little 24:37

Well , I'll put some of those ways to reach you in the show notes . Veronique , thank you so much for joining today .

Veronique Hördemann 24:43

Thank you so much .

Education, Innovation and Final Thoughts

Ryan Grant Little 24:45

Thanks for listening to another Climate Tech Podcast . It would mean a lot if you would subscribe , rate and share this podcast . Get in touch anytime with tips and guest recommendations at hello at climatetechpodcom . Find me , ryan Grant Little , on LinkedIn . I'll be back with another episode next week . Bye for now .