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 Zoe Reich, Fund Manager at Octopus Ventures, who works closely with Dealflow.eu and participated as a jury member during our latest e-pitching event on Deeptech.
Can you describe your role in your organisation and tell us a bit about your background?
I am a fund manager; I look after our early stage deeptech investments. Deeptech is a novel technology that is protectable and offers a paradigm shift in approach to a global challenge. That’s what we classify as deeptech and we invest from the seed stage onwards, with our main funds focused on Series A.
My academic background is in volcanology and atmospheric modelling. I had an early career at KPMG before spending the last decade in the technology transfer environment, running the internal funds for Oxford University and Imperial College London, those are proof-of-concept through Series A funds. I have also invested on behalf of the Welsh Government through the Development Bank of Wales, sourcing high-growth, high-IP companies from within the Welsh environment.
What is unique about the company and what is the ambition behind it?
We are B Corp, so we care about tackling big challenges but in the most sustainable and ethical manner. The B Corp status flows through in terms of how we operate, the companies we back and the external stakeholders who engage with us. We also back founders all the way from the inception of the company to growth.
We have our pre-seed funds, which are the first equities going into companies, we have our seed and Series A funds, and we have a growth strategy as well; that is something that’s unique in the environment. Where we go to town in terms of support is on the talent side. So, both regarding the development of startup founders in deeptech, from often academic into entrepreneurs but we also set up the organisational structure for growth as well; everything from “How do you think about your levelling up within the company” to remuneration and setup of teams for optimal internal interactions.
What key areas/markets are you currently looking into, and which funding stages do you aim for?
In terms of teams and technologies that we think are going to change the world, it gets broken down to B2B software, fintech, consumer, health and deeptech. Those are the areas that we want to place our bets within.
My fascination, biased, of course (laughs), is with deeptech. For me, it’s deeptech that offers the step change in approach to not only improving the state of current challenges but eagerly trying to solve them. It’s the fundamental novel research applied to a commercial application that allows that to happen.
The joy of deeptech is that you never know what’s coming around the corner, whether that’s a breakthrough, the frontier research happening within European universities, or research departments. But we look at the fulcrum-enabling technology that could open up multiple markets within the platform approach that are going to have high impact and, ultimately, the possibility for outsized returns.
As an investor, what strengths and skills do you look for in companies when assessing a potential investment?
First and foremost, it must be the team. It must be the expert technical team with deep scientific and tech knowledge to overcome any hurdles in technology validation and productisation. You also must have a separate productisation team to make sure your ongoing research has the commercial application that allows scaling. And on top, you need a developed sales team. It’s across those three verticals that I dive into when assessing a team.
Then, it’s the novel nature of the technology. Within deeptech, the markets you’re targeting are evolving because it’s a new technology one brings to the market. You may have to create or substantially change the market to fund your application, so for me, it follows that order: the team, the technology, and the market.
Can you think of important investment achievements for you, so far? Is there a success story that you can share with us?
From the Octopus portfolio, WaveOptics is definitely up there. It was sold last year to SNAP. I would say that’s where the depth of our background is: the commercialisation, the early traction, and the scaling of the deeptech hardware. We’re one of the few funds that go deep in on that aspect; because we are a team of 50 investors, we have the internal breadth of experience to underwrite the technological pathway of everything from biotech to new novel materials companies, to robotics companies.
On the software side, it is also novel algorithms where there is a true innovation in terms of the AI component or an AI-based company.
Do you find it easy to bring EU-funded startups or scaleups into your ecosystem?
We have mostly been a UK-focused fund as our core fund is a VCT fund. However, we do make investments in Europe.
For deep tech the breadth of the specialist research centers across Europe is compelling. The 5* research institutions but then the scale of the technology transfer network supporting the translation of this frontier research into commercial entities and the funding and infrastructure network around them. In terms of the mindset of those companies, all shackles have now been lost. You are looking at European ventures with the drive and ambition to be global players and maximizing company value prior to exit.
What efforts do you make to fill the gap between European companies and private investment (Private Equity, VC funds, infrastructure sectors, etc.)?
We have specialist pre-seed, seed and series A funds as well as growth vehicles. So we are able to support companies throughout their life cycle.
In the early stages of a company’s development we are used to going in alongside grant funding, including the likes of
EIC, EIT grants, the various Horizon grants, Innovate UK, etc. The grants have been exceptionally additive to the companies we invest in as long as those grants are in line with the strategic trajectory, and aren’t divergent from that.
For me one of the strengths of the European infrastructure is the translational grant network interacting with risk capital. Its what creates a capital efficient stage of investment for early-stage deep tech and supports wider valuation arbitrage.
What are the main challenges you face when looking to invest in EU startups or scaleups?
We have built strong connections with universities, individual technology transfer offices, and relevant incubators and accelerators over many years. So have the visibility to go early. But for me the biggest challenge at this stage of investing is ensuring demand led innovation. By this I mean making sure teams are developing products in line with the needs of their customers. It is really hard for new entrepreneurs to build that customer outreach network, test their ideas, gain rapid feedback and implement through proof of concepts. I also think this is where VCs can step in. Making use of their and their current portfolio’s networks to support this process as efficiently as possible.
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 and What motivated you to join forces with Dealflow.eu in search of an investment match?
Platforms like this are brilliant for that matter. For me, investing is not about finding the dealflow and keeping it to yourself, but it’s about getting the appropriate syndicate around the company you are looking to support. So, the greater visibility access promotion of early-stage deals, the better. I find Dealflow.eu incredibly useful for that purpose.
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
