“Solving the largest problem of our time”

A conversation between Daria Saharova and Stefan Mauer for our Whitepaper "Investing in climate tech: An opportunity for Europe". Daria is a founding partner of World Fund , Technical Advisor of the European Commission , and co-founder of the thinktank 1E9 .

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Ms Saharova, what is the situation with the financing of climate tech in Europe?

There is a funding gap in Europe– not just when talking about the climate, but for deep-tech as a whole. In other words, for fundamentally new innovations. The climate sector is particularly affected by this because the genuinely great solutions are very much technology driven. Such companies have a completely different growth dynamic than, for instance, pure software startups. They need venture capitalists who understand this dynamic and also bring with them the corresponding funds. This is still lacking in Europe.

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Why is this?

We have a structural problem in the venture capital industry in Europe, which is partly historical. On the one hand, most new VCs have a fund volume of between €30 million and €50 million. This leads to smaller allocations per startup in the portfolio beyond their development phases and, as a result, adds to the above-mentioned gap in financing. On the other hand, assessing such opportunities requires internal technology expertise – investment teams need engineers, chemists and physicists. Unfortunately, this is not yet standard practice. Last but not least, as VCs, we have become far too enamoured with predictable recurring revenues. This obsession is not always satisfied with deep-tech.?

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In 2022 there was also an adjustment in the VC market. Doesn't deep-tech involvement in such an environment mean even more risk?

Conversely, it is good that some pressure is being removed from the market, and investors are becoming slightly more cautious again. The valuation level has, for a long time, not been sustainable. However, some topics, such as fintech, are more affected by the correction. We hope not to see any major drop in value in the deep-tech sector.

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All things considered, what does this mean for investors?

Investors must not lose the courage to continue investing in disruptive, market-changing solutions. That is to say, the highest returns are found where the biggest problems are solved– and the biggest problem of our time is the climate disaster. Those who contribute most to the decarbonisation of individual industries or find fundamentally new ways to solve this problem will also be able to deliver the greatest returns.