“Decentralise, decarbonise, electrify” – Vireo Ventures joining Cleantech for Europe

Cleantech for Europe’s investor coalition continues to grow! Our latest joiners: Vireo Ventures, a pre-seed and seed venture capital fund active in Europe. They state their mission as being to support decarbonisation worldwide, and to do so through electrification. While they primarily focus on software-driven companies, they are open to investing in hardware-focused companies as well, so long as the focus is on the digital aspect of that business. We spoke to Thomas Labryga, one of their General Partners. He explained their main investment thesis, that the future economy will be decentralised, decarbonised and electrified. Thus, they support founders and startups supporting that transition, building up an ecosystem from their headquarters in Germany, with a growing team of 6 and several international Venture Partners and advisors.

“Our thesis is electrification.”

Vireo is focused on everything related to energy – be it the energy system per se or the electrification of mobility, smart cities (i.e. buildings) or industries. The team started in 2020, first with an angel vehicle and now with an institutionalised fund – which has been live in the market since November 2022. With the angel vehicle, which has also traded under the name Vireo since 2020, they made 17 angel investments into their sector of choice. Now, in its current iteration as an institutionalised fund, the team has already conducted six more deals.

Thomas highlights the impact that investors can have when they opt to invest in sectors in which they have experience. Having worked along the whole energy value chain with big utilities, then in corporate venture capital investing in the power sector, he says, prepared him to then work with Vireo.

“Our advantage is: we’ve been around the block.”

Vireo’s approach to Venture Capital is a blend of Venture Capital industry expertise, sometimes decades long. Thomas reflects on the fact that when he went into VC, cleantech was something of an ugly duckling in the investor pond – now, he says, it feels like everyone at least slaps “climate tech” on their website. It’s clear that he, and the entire Vireo team, is proud of their credentials, and their time served in this sector that is now at the epicentre of a global race for competitiveness between the world’s key economies.

In the ebbs and flow of cleantech market waves, some ideas keep resurfacing. Concepts and technological ideas are sometimes tried by different innovators, all with similar challenges. The recent revived interest in some legacy Smart Grid and Metering solutions is one materialisation of this pattern. In-house industrial experience ensures that such ideas – ostensible or even purported innovations which actually are known in the field to be non-starters – can be filtered out before imprudent investments are made. This, Thomas emphasises, is a key element of their strategy: Timing is a key success factor for innovation, but knowing what has and hasn't worked in the past and why is also important input for investment considerations.

“You learn about the energy business when you work in it.”

The energy sector is complex, a fact compounded by the fact that energy markets are differently regulated. Regulatory issues muddy the waters of what tech might be scalable in one country, but not in another. Thomas raises the issue of flexibility management – a topic handled in vastly different ways by different countries inside the EU’s Single Market. A

company with an unprecedently disruptive technological idea might well struggle to scale beyond a single EU member state.

Thomas brings up the counterexample: the United States. He makes the point that energy is a sector in which the US cannot claim an overwhelmingly superior scale-up environment. This, he says, was the case with for example digital – there’s no coincidence that companies such as Google sprang up in America, given digital companies’ immediate access to a continent-size, regulatorily uniform market even before such a company would want to try to go global.

In energy, though, the situation is different. This applies not just to the EU, but also to the US, where a slew of state-level regulatory discrepancies hinder the scaling of start-ups. Here, Thomas says, the EU still has an opportunity to streamline regulation and secure a competitive advantage. This need to find our European angle is underpinned by Washington D.C. rolling out landmark measures such as the Inflation Reduction Act, which serves to compete globally for cleantech dominance.

“We need regulatory harmonisation and an electricity market built for decentralisation”

Policymakers should enable the meaningful participation of smaller players, and one key blocker is indeed the issue of fundamental market design. Cleantech companies often struggle to make their voices heard in a political arena which is dominated by established players.

Looking at what a better market design for energy would look like, Thomas underlines that current systems tend to favour incumbents. Instead, he would far prefer an electricity market which, while being harmonised, enables decentralisation and smaller, innovative players to compete and flourish. One example would be a framework, compensation and incentive scheme for decentralised players such as renewable generators, flexibility providers or even prosumers, complementing the existing central TSO and exchange market model. Managing electricity flows on the DSO level would significantly enhance the effectiveness and efficiency of the overall electricity system. This would open up numerous new business model and revenue streams from generation, to flexibility, energy and grid management players to the demand side around mobility, real estate and industrial consumers

It’s vital that those with experience in the cleantech field join forces to advocate for the most ambitious policies. Only when the voices of such innovators and investors are heard, is it possible to unlock Europe’s potential as a global cleantech leader. Thus, we are very happy to welcome Vireo Ventures to this work! The movement is growing, and we look forward to continuing our collaboration!

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