The aim of the Morning Talks series of interviews is to present the impact of Dealflow.eu partnerships on the EU innovation and investment ecosystem. For this interview, we met with Saurabh Kumar, Senior Investment Analyst at Katapult.VC, who works closely with Dealflow.eu and participated as a jury member during our latest e-pitching event on Sustainability.
Can you describe your role in your organisation and tell us a bit about your background?
I work as a senior investment analyst in Katapult, which involves leading a scouting team to understand the needs and trends and to source climate impact tech startups from all over the world for Katapult’s dealflow. I am also responsible for managing the dealflow and selection process of Katapult accelerator investments. Just to give you an idea, in 2022, we had a pipeline of 1902 companies and out of those we invested in 23 companies. Thus, for investing in circa 1% of companies, we go through each company manually. The role involves manually screening, interviewing, due diligence, expert inputs, reference checks etc that you would normally do in a VC selection process — which is quite a lot of work, as we do all of that manually for a better analysis.
Regarding my background, I am from India, and have studied and worked in 5 different continents. I attended high school and got a bachelor’s degree in India. My bachelor’s is in Accounting and Finance. Then I moved to Norway to do my master’s degree where I did MSc in Economics and Business Administration with a specialisation in Strategy and Business Management. Then I moved to Australia for another master’s degree, where I did Masters of Global Management. Then I went to the US for some entrepreneurial training, post which I also had a chance to work in the African continent.
Coming from a developing country and being exposed to developed parts of the world gave me a global outlook towards the problem that the world is trying to solve through start-ups. I’ve changed continents four times to be close to start-ups in different ways: education, working in startups, and now working in VC. Even during my studies, I always took the opportunity to utilise my spare time and work either on my own startup idea or contribute to the startup community in whatever ways I could. I believe that my greatest asset has been the fact that I am able to connect the dots and have a global outlook towards the world’s biggest problems. Katapult is a global investor, we have invested in 45 countries around the world. Thus, having a global mindset really helps me to be good at my job.
What is unique about the company and what is the ambition behind it?
We, at Katapult, invest in and accelerate pre-seed and seed-stage climate tech companies. We take each company that we invest in through a tailored 3-month accelerator program focusing on making them climate impact-ready, investor-ready, and scale-up ready. What’s unique about this is that we know how much climate tech companies have struggled in the past at the early stage with limited availability of capital and knowledge. Many had to just rely on support from grants as there weren’t many investors focused on early-stage climate tech companies. The landscape has changed a bit now, but many climate tech investors come in at a later stage. To make an exponential impact, Katapult realised that the climate impact companies not only need financial support but also other important elements such as climate impact-specific training and access to climate-focused networks. We believe our uniqueness is investing in early stage and training them. We started in 2017 and it was not very common at that time. With time, our learning curve and the network have grown exponentially and thus we are proud to say that we are one of the best climate (both ocean and non-ocean) focused funds around the world. Even though some of the investors are coming to this stage now with a similar focus as they’re getting more comfortable, we were one of the pioneers and that is strongly reflected in our expertise and the depth of our network. We also have a strong vertical called Katapult Ocean and we like to say that we are also the pioneers in ocean impact investing at such a stage.
Regarding our ambition, we have a branch called Katapult Foundation, a non-profit organisation that believes in catalysing people, capital and technology for good. The ambition behind it is to make an impact in this world while mobilising people, capital and technology for good.
What key areas/markets are you currently looking into, and which funding stages do you aim for?
Regarding the geographical market, we have already invested in 46 countries, including all the continents, except Antarctica. We have six domains, both in the ocean and non-ocean climate tech space, in which we invest: (1) Food, (2) Transport, (3) Energy, (4) Natural Assets, (5) Cities and Infrastructure, and (6) New Frontiers.
(1) Food includes harvesting, agriculture, aquaculture, mariculture, food systems, and alternative protein.
(2) Transport includes Supply chain, alternative propulsion systems, digitalisation, new materials, new vehicle design, etc.
(3) Energy includes offshore energy, onshore energy, renewable energy, hydrogen, storage, distribution, etc.
(4) Natural assets are everything coming from nature that can be used as an asset, such as ocean habitats, soil health, biodiversity, and ecosystem protection.
(5) Cities and infrastructure include carbon capture, optimisation, circular economy, waste management, and smart cities, among other related topics.
(6) New frontiers are about what is evolving right now in terms of exploration, data analytics and robotics, for example.
Regarding the funding amount, we typically invest between €150,000 and €500,000 in the range of 1 to 10% equity, depending on the stage, valuation, and need of the companies. The idea of calling it pre-seed or seed depends on a lot of factors such as geographical area. You might have noticed that when we say pre-seed in the US it might come at a higher valuation than pre-seed in Europe.
What are the main challenges you face when looking to invest in EU startups or scaleups?
As we are based in Europe, I would say that it is easier for us to invest in EU startups as compared to investing in the rest of the world. This is because of multiple reasons such as the network effect, understanding of rules and regulations, etc. However, to reflect on the main challenges, sometimes I would say that it is about the visibility of the company. We know that the EU has numerous good companies at different stages and while some are in the research phase other might have gotten some soft funding. However, having more visibility is always good. We recently have been partnering with a lot of different organisations such as Dealflow.eu so that we have more visibility of these companies, but we, again and again, find that some of the great startups still lack visibility.
Other problems could also be related to technology, as we invest in climate tech start-ups. In the New Frontiers domain, for example, about using data, we need to understand the market readiness – some of the technology is promising, but we need to understand if the market is ready. But these types of issues aren’t related to geography but it’s more tech related which is common around the world.
As an investor, what strengths and skills do you look for in companies when assessing a potential investment?
We are an early-stage climate investor and to understand the early-stage climate investor you need to believe in the team and traction of the company, not only customer or sales traction but also other types of traction such as investors traction, partnerships traction, or awards or recognition from EU, etc. As climate tech is still evolving and as we invest in early-stage companies, it can happen that these founders might not have a lot to showcase to us, they might not have a lot of cash flow. But if they have a good team, and traction with the right choice of tech and market the likelihood of pulling it off is way higher. We remind ourselves then and again that we can’t expect the early-stage founders to have a great cash flow or other things already. Moreover, we also need to be mindful of the fact that the founders understand the technology better than us, we are not the experts, they are. We need to understand that we are risk investors and that’s how we operate. We need to use a combination of the available data and proxies to make the right investment decisions.
One thing that is very important to us is analysing the impact potential of a startup. We are climate impact investors, so the impact intentionality is binary for us, and we put a lot of emphasis on whether the company is making an impact – if it’s the right one, or if it will have any adverse effect. Starting from the scouting process until we invest, a lot of analysis is done on the impact of the company. We use different tools such as the Theory of Change, IMP framework and others to analyse both the current and future impact potential of a company. We have a lot of internal discussions about greenwashing vs the real impact potential of a company.
Can you think of important investment achievements for you, so far? Is there a success story that you can share with us?
There are many good achievements and investments. Since I’m talking about impact, I can mention a company called Pinovo which is in our portfolio. They have an innovative solution to curb the microplastic pollution problems in the ocean, and these types of problems, which are critical, are ignored in the market. Not a lot of companies have come to bring solutions to this and Pinovo was one of the pioneers. We are very impressed by how their impact story has been built with time and how they have been making an impact in the ocean world.
Another ocean impact company that comes to the top of my mind right now, among others, is called Ocean Bottle. They produce bottles and for every bottle you buy, they fund the recycling of 1000 single-use plastic bottles in some parts of Asia. We have been very impressed by their success story as well.
Another successful company in our portfolio that is worth mentioning is called Chooose. It’s a Norwegian company that builds digital tools so that we all can make climate action part of our everyday life and business. They were one of the pioneers in the space and have been performing great from both impact and financial points of view.
We have four unicorns in our portfolio. They are both impactful and financially successful. Two of them are from direct investments and the other two are accelerator investments. The two direct investment unicorns are called Prometheus and Solugen which are based in the United States. They both are an important contribution of Katapult towards reducing dependence on traditional oil and gas. In terms of accelerator investments, one of them is called Esusu which is based in the US and the other one is called Betterfly based in South America. They have had an amazing journey. These are social impact companies in which we invested from our prior funds. Just to give you a background, we started in 2017, in 2018 we started another vertical called Katapult Ocean, and then in 2020, we realised that more than half of our portfolio was climate-based, and we concluded that climate tech was where we had to focus on, also because climate tech was the most important issue to be solved, because of the current scenario in the world. Therefore, we moved towards climate, but Esusu and Betterfly are about social impact and came from our previous funding investments.
Do you find it easy to bring EU-funded startups or scaleups into your ecosystem?
There are many initiatives from companies, such as Dealroom, that have been a great resource for us to bring in these startups and increase their visibility. We have a dedicated scouting team that looks for these startups. Moreover, we attend events, and we collaborate with companies such as Dealflow.eu where we discover other companies as well.
It is not difficult to find EU-funded companies, but I believe we can improve the process because the nature of the climate tech industry mostly involves hardware, which requires intensive capital. Therefore, founders need grant support from governments to do research work to prove their value, and only then external investors can come in. These companies have great potential, but they lack visibility because their focus is more on achieving grants. If we can have access to those companies or have them in our pipeline or a way through which we can track the progress of these companies from early on then I think that would be good for both companies and investors. This will be a great step forward to catalyzing people, capital and technology for good.
What efforts do you make to fill the gap between European companies and private investment (Private Equity, VC funds, infrastructure sectors, etc.)?
We realised that the stage at which we invest was the stage at which climate tech companies needed a lot of help not only from the financial point of view but also from the skills point of view. Climate tech space is a very special place to be in. You need to make sure that you are making an impact while scaling the profitability of the business. Thus, the founders lacked skills, such as understanding how to talk about their impact story or how to plan their series A, B and C while doing their pre-seed round.
Our accelerator programme is focused on three main goals: making the company impact ready, making the company investor ready, and making the company scale-up ready. These are the three challenges companies will face going forward from pre-seed to seed to Series A to further series of investments, so this is where we make a big contribution. We work hands-on with these companies for three months and then we support them by introducing them to many investors and partners, both during and after the accelerator programme. Last year we had our demo day on the 14th of December 2021, and we had 470 investors in the room seeing 18 companies that we invested in. Besides introducing them to investors and increasing their visibility, we provide other portfolio support as well during the lifetime of the company. During the target time, usually 8 to 10 years, we also introduce them to new portfolio companies and investors. We are very flexible with our seed investments. While sometimes we lead a round, we co-invest with others as well. We also have a follow-on fund through which we follow-on our investments in great companies that we have invested in.
What motivated you to join forces with Dealflow.eu in search of an investment match?
Given the lack of visibility companies face, we believe that the more visibility these companies will have, the better our understanding will be and the better we will move towards our goal of catalyzing people, capital and technology for good. With collaboration with Dealflow.eu we gain visibility and insights to great companies. That’s why we joined forces with Dealflow.eu in search of an investment match.
There are multiple other services provided by Deaflow.eu, such as having access to companies that didn’t get funding from EIC yet or having the opportunity of co-investing in them with the EIC. Dealflow.eu is supporting these opportunities and it motivated us to join forces with them.
Dealflow.eu is all about supporting innovation and providing a unique matchmaking platform.
Can you tell us how you have leveraged from it and its high-potential portfolio to increase visibility and scaling-up opportunities?
There are two aspects I can mention. One is participating with Dealflow.eu as a jury in different competitions and roundtables, which increases our visibility – because it’s not only the startups that lack visibility, the investors as well. If the start-ups knew the right investors, then they could also approach them. On our end, we need to know the right start-ups. Participating as a jury in competitions also helps us to increase our visibility and simultaneously have access to the companies participating in those events.
Second is having access to the companies in the EIC’s dealflow. We recently joined forces with this initiative, so we need to see how it develops and how we can leverage this more. With time, I would like to see how these companies, which didn’t get investment from EIC or other similar funds, can also have the visibility of investors like us, where we can help them in different ways.
Article published by EurA AG.
More about Dealflow.eu
Supported by the European Commission, Dealflow.eu discovers and supports the most promising EU-funded innovators and connects them with relevant investors and corporates. The initiative was launched to help groundbreaking innovations secure the funding needed for their future commercialisation by offering them tailored support and matchmaking services.
To learn more about Dealflow.eu, visit https://dealflow.eu/
Disclaimer: Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the Directorate-General for Communications Networks, Content and Technology. Neither the European Union nor the granting authority can be held responsible for them
