“Less ‘wishlists’, clear priorities and focus from policymakers” – eCAPITAL joins Cleantech for Europe

The cleantech transition rests on a foundation of dedicated investors from across Europe, who work tirelessly to fund and support breakthrough clean technology innovators. Founded in 1999, eCAPITAL is an impact venture capital firm that provides early to growth stage funding to technology companies. eCAPITAL is located in Germany and currently manages funds with over € 340 million under management.

We spoke to Lucas Merle, Principal at eCAPITAL, about his passion for investing into climate action, and his views on the state of play – as well as future – of European cleantech. Lucas describes his way to eCAPITAL as one of having an intrinsic motivation to work not just in venture capital, but with actual impact:

“Impact investing back then wasn’t a word used in the VC space, but even without shouting it out loud to the world, eCAPITAL was doing it. They did it because they believed in it, and because they’re good at it. Since the beginning, eCAPITAL is focused on deep-tech investments, a huge chunk of which is cleantech. We take on a broad sustainability focus; beyond clean hardware tech, we might also look to invest in software-based solutions related to sustainability in one way or another. Secondly, we are still very keen to invest in hardware, and we bring huge experience to cleantech hardware firms in our portfolio.”

Could you share some experiences from the cleantech companies in your portfolio?

Most recently, we focused a lot on supporting Numbat, a company developing and operating high-power charging solutions with integrated battery storage system. With its solution, Numbat enables fast-charging of electric vehicles without the need for high-power grid connection and thereby supports the expansion of the charging infrastructure, a critical success factor for the further adoption of electric vehicles.

The latest financing round comprised of PATRIZIA and a consortium of German banks, enabling the company to significantly expand its fast-charging infrastructure across Germany. Public guarantees, for example, could have provided additional financial stability, attracting further investments and facilitating broader partnerships, thus strengthening Numbat's position in sustainable mobility and energy management solutions.

Moreover, we worked closely with our portfolio company Dryad, which is developing solar-powered sensors, building an ‘internet of trees’ to provide ultra-early wildfire detection. Regrettably, that’s now a sustainability and resilience case. Global CO2 emissions from wildfires make up a larger share of emissions than any individual country on the planet, except China.

In the last few years, we’ve all seen or maybe even experienced the devastating effects of wildfires, so there’s a clear case of urgency for tech like this. At the same time, this is a hardware company, so they face all the challenges that comes with having to scale up production, build the sensors and physically go out to place them in the forests. That’s why we’re invested – we’re willing to support such cases, to further develop the product and refine their go-to-market strategy.

What other trends are you looking into at the moment?

We are currently looking a lot at carbon capture and storage technologies. There’s been quite a few investments into the early stages of this technology, pre-seed or even at the ideation stage. We’re a natural follow-on investor for such cases, for Series A, where we tend to invest. The world needs a whole range of different technologies to reach our decarbonization goals, and we’re looking at options across the board.

The US is offering a lot of support, and indeed in tech such as carbon capture. What’s your views on such cases, where there might be pressure on European innovators to expand elsewhere?

For certain companies, it is indeed easier to get funding abroad, say in the US. That’s why we’re sitting here today – there’s a clear need for more funding options in the EU. This is especially true once companies reach a certain stage. This has long been the case in Europe, where the scale-up stage, and especially in CAPEX-intensive- cleantech, might prompt you to look abroad.  It’s also a case of finding customers and partners abroad as well. Often, US or Canadian companies are more prone to be venture customers for early startups.

While we don’t push companies to head outside of the EU, we do recognise the need for innovators to look abroad for funding, especially with the US in mind.

'Wish lists’ perfectly symbolise what’s been done wrong by policymakers in the past.

What would be your wish list for policymakers?

To be honest, ‘wish lists’ perfectly symbolise what’s been done wrong by policymakers in the past. What I would wish for is that we establish a few specific priorities, and then act decisively on those. Increasing cleantech funding across the capital stack, but specifically for companies in the scale-up phase, would be such a priority. That’s usually the stage when companies get pushed abroad due to a better funding environment there.

Secondly, there’s a lot of heterogeneous legislation in place, which can be rather onerous for start-ups and scale-ups to navigate. Streamlining and simplifying, all without compromising on our standards for sustainability, would improve growth prospects in Europe.

Are there any experiences working with public funding measures you’d like to share?

We have a lot of companies that need a longer time to mature and commercialise, so they often apply for the European Innovation Council Accelerator program – and a number of our companies have received such funding. Such measures are a good starting point for earlier-stage companies, but they can certainly be faster and more streamlined.

So how do we get funding right for first-of-a-kind (FOAK) hardware companies?

Besides an extension of the existing public funding schemes and a more homogenous legislation across Europe, offering public guarantees for FOAKs and thereby de-risking at least part of the investment would definitely help companies in their fundraising efforts.

But going back to the issue with wishlists, we shouldn’t make lengthy lists of different ideas – but a short, focused list of objectives to achieve. When that’s in place, that’s what should be publicly funded, and let’s then do that right and let’s do that quickly.

Why is this the right moment to get engaged with policy as a VC?

The world economy is developing fast, and we’re in the middle of huge, global change. We – and certainly also other states – see the EU as a sustainability, cleantech and circular economy leader, globally. So much is changing, and the private sector can and needs to drive a lot of that change. Naturally, we should communicate with those who define the policy path and – by way of regulation – enable that change.

‍Thank you for sharing your insights, Lucas! We look forward to working with you.