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Deep tech is on the rise in Europe, fueled in part by the match between AI and a local flavor of math excellence. But it\u2019s also benefiting from a growing community, public support and increasing amounts of funding.<\/p>\n
Elaia<\/a>\u2018s third deep tech seed fund, DTS3, is an example: \u201cIt is double the size of the two previous funds,\u201d Anne-Sophie Carrese, a managing partner at the French VC firm, told TechCrunch. With a first closing at \u20ac60 million, it is set to reach \u20ac120 million by the time its fundraising is complete, which she said should happen by early 2025. It\u2019s already identified the first three startups to join its portfolio.<\/p>\n While other deep tech funds have emerged across Europe since Elaia\u2019s creation in 2002, the firm puts relationships it built with research institutions over the years to good use.<\/p>\n Building these partnerships has proven to be a solid source of dealflow for Elaia \u2014 in some cases, it has even gotten priority or exclusive access to projects coming out of certain labs. For instance, partnerships have led to investments in companies such as Aqemia<\/a>, Alice&Bob<\/a> and Mablink Bioscience<\/a>. The latter, a biotech company working on novel cancer drugs, struck a deal<\/a> to be acquired by Eli Lilly, \u201ca very nice exit\u201d according to Carrese.<\/p>\n How well some of these companies have been doing is one reason why Elaia wanted a larger fund: It will have more dealflow, and it would make sense to be able to accompany the most successful bets it results in. Its goal with DTS3, Carrese said, is to invest very small tickets in some 40 incipient B2B deep tech startups, and follow on in 25 to 30 of them when they will be leaning closer to seed stage.<\/p>\n The deep tech fund will focus on computing, industry and life science. Pure AI will fall under the first pillar, as will quantum and cybersecurity, but DTS3\u2019s capital could also be invested in AI-driven chemistry and biology, for instance. \u201cFuture of industry\u201d is even broader, including energy, climate tech and new materials.<\/p>\n \u201cIt\u2019s really a multi-sector fund, and in the Elaia team, we have investors who cover each of these sectors,\u201d Carrese said. \u201cWe have to make 80% of our deals in the EU, strictly speaking, but the remaining 20% is open to the rest of the world.\u201d In practice though, 80% of that 20% will likely go to companies in Spain and Germany, two countries in which Elaia has been deploying efforts.<\/p>\n DTS3 signals the momentum that is forming around an emerging concept: European dynamism, a response to the \u201cAmerican dynamism\u201d nickname coined by a16z<\/a>.<\/p>\n One of its vocal advocates is Kyle O\u2019Brien, a Paris-based Irish and American national behind two initiatives: The European Dynamism 50 report<\/a> and tech tour<\/a>.<\/p>\n European Dynamism \u201cis more of a movement than a category or industry vertical.\u201d O\u2019Brien told TechCrunch. \u201cI think, now more than ever, we need something like that to capture the attention of founders, as well as capital domestically and from abroad. So the idea behind the tour is to attract American investors to come over here and explore what that means.\u201d<\/p>\n Elaia will be the French ambassador of the tour, which will take a group of general partners from U.S. VC firms\u00a0 to four countries in less than a week<\/a> next June, with visits to CERN, a rocket factory, ETH Zurich, ASML and more. To no one\u2019s surprise, the Paris stop involves a boat cruise on the Seine and lots of AI.<\/p>\n The report, which was published this Wednesday, highlights 50 European deep tech companies, but more as an editorialized showcase than as a ranking. \u201cThe only quantitative aspect is that we gave each country a number of companies proportional to the amount of VC dollars that go into their deep tech system,\u201d O\u2019Brien said.<\/p>\n Regardless of methodology, Elaia\u2019s portfolio companies make up a sizable share of the French contingent of the list. One name on the list is Zama, a French encryption company that announced a $73 million round of funding a few days ago.<\/p>\n Zama CEO Rand Hindi, a seasoned entrepreneur, co-founded VC firm Unit Ventures<\/a> alongside O\u2019Brien. The duo has already done dozen investments together, and is looking to do the first close of its fund \u201cin the first half of this year,\u201d O\u2019Brien said.<\/p>\n While the firms may overlap in investments, they don\u2019t fully see eye to eye\u00a0 on the \u201cdeep tech\u201d term. While O\u2019Brien has replaced it with \u201cdynamism\u201d in pitch decks about the tourto LPs, Carrese sees no reason to retire it. \u201cFor us, deep tech is a natural fit, as we\u2019ve always been very close to research at Elaia,\u201d she said.<\/p>\n Elaia\u2019s research partnerships also leverage France\u2019s expertise in mathematics \u2013 something that\u2019s been very helpful to the country\u2019s tech ecosystem with the rise of generative AI. Lazarus is a former researcher in pure mathematics, and he is not the only math brain on the team, nor in France\u2019s tech ecosystem.<\/p>\n \u201cWe have natural connections with all the math laboratories,\u201d Carrese said, \u201cand we see our former classmates and their students now becoming AI\u2019s little wizards and building the most emblematic companies of the moment.\u201d<\/p>\n Besides France\u2019s ability to nurture this type of talent, there are other tailwinds coming from public policy. Two names come to mind: Tibi and Bpifrance.<\/p>\n You may not know Philippe Tibi, but you may start hearing his last name more often. Like Carrese, he is a former student of Polytechnique, one of France\u2019s most prestigious higher education establishments. But he also inspired the namesake initiative<\/a> that incentivizes institutional investors, including major insurance companies, to back venture capital funds, which hasn\u2019t traditionally been the case in France.<\/p>\n Tibi\u2019s report was issued in 2019, but DTS3 may be one of the first tangible results of its second phase, Tibi 2<\/a>. Says Carrese:<\/p>\n We were lucky enough to be accredited at the very first committee meeting last July [\u2026] and this has clearly given us access, in much larger amounts, to leading institutional investors. And that\u2019s great news, because these are people to whom we know we\u2019ll deliver performance afterwards [so] we\u2019re looking forward to building long-term relationships thanks to this initiative.It\u2019s not just a windfall. We know we have partners we can trust for the long term.<\/p>\n<\/blockquote>\n This support is also timely, as 2023 wasn\u2019t exactly a great time to raise funds. But Elaia found another key supporter in French public sector investment bank Bpifrance. A major investor in DTS3, according to Carrese, the institution has also been deemed the machine powering French tech\u2019s rise<\/a>.<\/p>\n All of these factors make DTS3\u2019s home turf its ideal playing ground. \u201cWe\u2019re really going to keep two thirds of our deal flow in France, because this creates a dynamic for the creation of startups which is extraordinary.\u201d<\/p>\n<\/p><\/div>\nEuropean dynamism<\/h2>\n
French tailwinds<\/h2>\n
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