Inside France’s €54B Climate Investment Drive w/ Raphaele Leyendecker, Techstars Sustainability Paris

SCS (Intro):

That's Raphaele Leyedecker, Managing Director at Techstars Sustainability Paris, who's backed over 70 startups proving that sustainability isn't just a trend; it is a strategic necessity. 

In this episode of Billion Dollar Moves, we sit down with Raphaele in beautiful Paris to uncover how France's unique investment landscape, the rise of climate, deep tech and government backed funding are fueling a wave of green innovation. From her early days. As a lawyer turned renewable energy founder to scaling impact driven companies, she shares her insider lessons on.

Why the old VC model needs to evolve for climate startups to actually thrive. The biggest mistake investors make when backing Clean Tech ventures and how AI is both a climate savior and a sustainability paradox. If you're in venture capital sustainability, or just looking for your next big move in climate investing, this episode is a must listen. Enjoy.

SCS: 

Raphaele, so excited to be here in beautiful Paris in your beautiful office of Techstars sustainability paris. Tell us a little bit about what we need to know about you, one memory from childhood, for example, that has shaped you today. 

Raphaele Leyendecker: 

I grew up in the French countryside in the east of France. In a horse lover family. I was used to waking up, going to feed the horses and I grew up as a horseback rider at a professional level. So definitely, yeah, I guess it helped me to, you know, juggle with a lot of different stuff. 

SCS: 

Yeah. And be competitive as you are, and the world of venture. You are so kind to join us as an ecosystem partner with Beyond The Billion. Where are we today in venture? Frame a little bit of the landscape here in Paris for us. 

Raphaele Leyendecker: 

Well, my view is really specific since I only invest in climate and I think it's the right momentum actually for Europe. France has been at the forefront of the regulation for a while, I think with the Paris Agreement, and I guess this opened the door to a lot of opportunities for the startups.

We've seen a lot of software companies created here to help companies go way beyond what they can do, especially with the voluntary carbon markets, but now with the CSRD regulation as well. And we have seen also that now we are not only talking about software anymore because this alone can't change the world, fight global warming, but also the rise of deep tech is really important. 

So I guess that, at least in Europe, the climate tech thrives, starting with software, but now we are seeing a lot of really interesting deep tech companies and carbon removal like engine truck weathering and technologies rising.

SCS: 

And tell us a little bit about you as an investor and how your previous experiences have framed your journey here today to work on sustainability. 

Raphaele Leyendecker: 

I started as a lawyer and I thought it was not operational enough. So I wanted to work really, on the carbon markets. So from the finance perspective, it was at the worst momentum ever because this is when they actually closed BlueNext, which was the Carbon Trade Exchange in Paris. But this was also a great moment where I met my co-founder, Stephane. Where we created our first company, Agronergy, doing biomass heating systems.

So being an entrepreneur, I guess is really key in what I do right now because investing in ideas and people is great, but being able to help them, to connect them with the right ecosystem, them being a corporate or mentors or C-level they can recruit or investor obviously is really cool.

SCS: 

Yeah, so tell me a little bit about what we need to know about how different Techstars here, in Paris, and I guess the approach that you've taken. 

Raphaele Leyendecker: 

David Cohen and Brad Feld are such landmarks in the entrepreneurship world. I guess we replicate what they have been doing since the start of Techstars in Boulder in Colorado.

So we have the exact same deal, just that our investment thesis is focused on something really specific. We invest only in B2B high environmental impact companies wherever they are. So it's not only the French or that are accelerated by Techstars, one third in France, one third Europe and one third rest of the world.

Because thanks to Techstars Global Network, we can really help impact driven founders to have the global footprint they need to scale. 

SCS: 

Yeah. So remind me, is this a franchise model or is it a branch model? 

Raphaele Leyendecker: 

Yes, we are funded directly by a Techstars fund. Techstars has about 32 location worldwide and Paris is one of them. 

SCS: 

Yeah. And how do you see, because you've got a unique point of view as the MD in Paris in such a huge network, I saw the, you know, multi-billion number in terms of the assets under management and the skill in which the companies has grown to tell us a little bit about where you see Paris in comparison to all the other Techstars, like are we early in the ecosystem? Is there more work needed in certain places or?

Raphaele Leyendecker: 

Definitely. Paris is a really mature tech ecosystem. We have a lot of support when it comes to early stage companies. You can visit Station F here in France, a thousand companies are having their offices there.

We have a lot of incubator accelerators. What really makes a difference through asset of Techstars is this network that is everywhere from Boulder and Colorado to the Bay Area, New York, but also Tokyo, Lagos, Tel Aviv, Amsterdam, London. So I think being able to connect the dots, even in the mature ecosystem, just like France, is something that is really critical.

But what is also really specific about Paris is that Europe is not like the US. Every country has a different language. So when you're a French company, you speak French, so you start with your French footprint. If you want to scale, then eventually you go to Germany and you learn how to speak German and then you go to the UK and eventually Italy before expanding to the US.

And this is very different because there's been a lot of political questions about how could we help our startup scale in Europe. If we don't have a framework that is borderless, basically helping them with the taxes, the regulation, but also all the administrative tasks that makes it hard for a startup to be big, fast in Europe.

SCS: 

Yeah, I was just looking through some of the data points as well. I've come to learn as we expand our work here in Europe, is that France actually has been really good from a funding standpoint, and part of that is the support of the government. 

Talk to us a little bit about the landscape from a funding standpoint, and then we can talk a little bit about trends that you're seeing as well.

Raphaele Leyendecker:

Definitely we are lucky to have the BPI in France, which is both funding funds and startups directly. And they have given a big push in different directions lately with the AI trend that is actually booming. 

SCS: 

So, BPI, sorry, for the global audience, this is the Sovereign Wealth Fund equivalent? 

Raphaele Leyendecker: 

Yes.

SCS: 

That's owned by the government of France?

Raphaele Leyendecker: 

Exactly. This helped a lot develop certain topics such as AI in this indeed where we managed to attract great talent that were both French or actually coming to France to keep further developing Gen-AI. But also on the climate scene, obviously, Deep Tech, as I mentioned, we have great nuclear power companies that are also focusing on a micro nuclear solution.

This is pretty interesting, but also creating a new mindset in the VC industry. In France, but also in Europe that, yes, software alone can't do the job. So we need to be able to review the model for vc so it's not only short term return, but can maybe extend the timeline a bit and take more risk at the beginning.

The software model should be tweaked. We can invest in re-industrialization of our old Europe.

SCS: 

Interesting. So you've mentioned this a few times, that software alone can’t solve some of the hardest problems. And of course with VC, and I know you have a fund that you're working on, but the pressure is at least a 3x within a certain period of time.

Usually that's 10 years, right? When you think about the resetting of the mindset and the VC model to suit climate. What are your thoughts here on what works? What do we need to be reinvesting in to really make this work? 

Raphaele Leyendecker: 

Well, if you take an example of a traditional hardware, CleanTech, not saying Deep Tech because Deep Tech is something really different, but compared to a software you need at least two years of development to get to something and eventually then you will receive some good contracts. 

So it means that when you're an entrepreneur, you struggle to demonstrate VC, the traction, because even if you say, okay, I have this LOI, or we are building this and we believe that this can go really big.

It's tricky. But then when you actually look at the real numbers. The thing is software is also easier to start. It grows faster. So VCs really understand the kind of KPIs they need to demonstrate that it's VC backable. For all the hardware cleantech companies out there, not talking about what happened during the FinTech burst basically 10 years ago.

Because I think now we have some new material that can really fight climate change in a different way. The numbers are different, so it means that within two to three years, we can really get the company to have €7 million revenue, which was a bit different before because the regulation also has changed.

So I would say that at least what I'm seeing in France is that indeed hardware is much more backable also because as other investors are interested in the topic, we manage to have the timeline shortened and have corporate also interested in boost topic earlier than before being candidate for smaller contract than just, you know, €50 million, that was kind of the end of the technical roadmap for the traditional CleanTechs. 

SCS: 

Yeah. So you talk a lot about deregulation and for some of the audience, you know, we've had different ecosystems featured here. What do we need to know about where we are from a climate positive standpoint?

And I know the mayor of Paris has been putting up a lot of initiatives that has helped this. Can you talk to us a little bit about what we need to know here and how important, I mean, climate sustainability, any entrepreneur I speak to that's top of mind here in France.

Raphaele Leyendecker: 

Yeah, I guess we have all in mind the 2030 targets to limit the global warming. We are now at like three degrees plus, so it means that we need a lot of adaptation to survive. It's kind of sad, but it's true. Maybe it doesn't feel like survival because it's so close from now, but temperature rising means flooding means hurricane. 

The mayor here did a great job for all the decarbonization of the city when it comes to automobiles. We have much more streets that are bike-friendly. We have a lot more support when it comes to recycling, but it takes years. And obviously to get there, we also needed to change our habits, which was very uncomfortable. The transition is actually painful,but now when you move around Paris biking, you feel it's great.

I think this comes from the user perspective. I don't know if it's especially in France, but maybe Europe also. Mostly if you go to the Nordic, and this is also really true, we think the environment is important and we try to mitigate our impact when it comes to consumerism. 

SCS: 

You're deep in the world that we're not in.

Tell us about what's exciting, you know, what trends, what are the entrepreneurs building that's solving some of the toughest issues we're dealing with in climate? 

Raphaele Leyendecker: 

Definitely. Me, I'm focusing on like five main topics, namely energy. And we have amazing companies that are trying to build high altitude wind turbines.

So well basically, even if the current wind turbines are becoming more and more competitive here, you limit the impact on the environment talking about, you know, the noise, the visual pollution. The harm on the animals, but we also have floating solar panels that can be installed near shore.

So also this creates a lot of diversity for the grid with new renewable energies. We have software that helps to actually manage EV fleets.We have also an algorithm that manages to cold degrees and trade energy in a lot of different ways using large scale batteries. Talking about Paris and the micromobility sector, we have a great company called Bib Battery.

They actually analyze the lifecycle of batteries. They started with the lime scooters and now dealing with the biggest car manufacturer to be able to recycle their batteries and reemploy them if possible. We made 72 investments in total in the last three years. 

SCS: 

Wow. In the last three years. 72 investments and.

What has, I guess, impressed you in terms of the kind of entrepreneurs that you're meeting these days? 

Raphaele Leyendecker: 

What is really nice is as I get to manage an accelerator, they are here to work with us. So once you invested, you really discover what are the challenges you're facing. So it's about honesty and about involvement.

I love to ask them, you know, when we start the programs, what are your three key words for success. And really few are actually mentioning money, not because they don't want to make money, but because for them the financial success is rather the freedom, but most, well not say all of them, want to actually create a positive lasting impact and this creates emulation that is really powerful within the companies. 

SCS: 

Yeah. You are deep in the world of climate and sustainability and of course there's so many angles that we could go into. 

What are your focus areas and what do you see as, you know, key trends, investors, and climate need to be thinking about?

Raphaele Leyendecker: 

Yeah, definitely. Energy, as we mentioned, is something big, but also circular economy, whether it's about the tokenization of the kinda material you can recycle or waste management. We have a company called Waste Tide in France doing great with AI to know what kinda value is in your waste from a B2B perspective.

Natural based solutions are a growing trend. We started with carbon, but we are actually seeing that biodiversity is becoming quite something. Water Tech is an amazing topic where we don't see enough projects, but where we have some great companies, namely Kumulus Water is an amazing company building hardware to create potable water out of the air.

And well, not to neglect all the ESG enablers, we need to measure the impact the companies are having. Then Soft France also doing a great job with such a topic.

SCS: 

I mean, we talked a lot about the excitement and the opportunities given, you know, the deregulation. There's a lot of calls where we need innovation to solve this problem to reach the 2030 goals, right? 

But what are the challenges here specific to maybe France, Climate, Europe as a whole? Like what do we need to know, I guess coming from America that's slightly different. 

Raphaele Leyendecker: 

We need money, obviously, to help our companies to grow at scale. And right now I don't think we have the correct setup for IPO.

Well, let's see what arrives with the IRR. Will it stay? I don't know, but this was definitely something drowning our talents here in Europe because we have the perfect place to create the companies and launch them. But once they're thriving. They actually immigrate to the US.

And so I guess that it's really that signal for Europe that we haven't managed to create that landscape for our companies. 

SCS: 

And why is that? Why is there not enough? Not a robust IPO market for European companies, frankly, that are growing here? 

Raphaele Leyendecker: 

Well, I guess twofold. There is less money on the European markets than in the US. It's also much slower to make decisions in the US. Even from the start we can see it, with Techstars in the US market, the valuation of the companies, even pre-seed, are just almost twice bigger. And the tickets are not twice bigger.

So it just means that, yes, investors understand that, well, to fuel a company, we need money and we don't need to bargain on the price to neglect the founder's perspective. 

SCS: 

So tell me a little bit about the stages that you're doing the check sizes. Talking about valuations here. Where are we Pre-seed, Seed, like what are you seeing these days?

Raphaele Leyendecker: 

Yeah, definitely. So precede, let's say that the first fundraising that should be between €500 to a million. Typical valuation here would be €3 to €4 million raising a seed where the company already making revenue, which should be around €7 to €8 million, maybe up to €14 million with companies doing really, really good with the senior profiles team.

And then while C-rates really case by case, depending on the topic. 

SCS: 

And are you feeling like there's more attention now from other European states coming into France? What are the trends that you're seeing in terms of that's helping, I guess, boost the ecosystem a little bit more? 

Raphaele Leyendecker: 

Again, talking about what I know well, climate and sustainability. We've seen that a lot of foreign investors have also been looking at what, uh. Our companies are doing. We've seen several US investors just as Sequoia investing in here. Atomico also is pretty active in our market, but on climate specifically, the Nordic investor, like Pale Blue Dot or Norsken are investing in the good companies while Speedinvest from the dark region also opened an office. 

I think this creates a positive signal and again, I think they are just faster in their decision and eager to invest at higher valuation. Trying not to negotiate that much valuation, but maybe even enlarged the fundraise.

So it's pretty competitive for the institutional investor out here but pushing them to go forward. 

SCS: 

What about the, I guess, the next generation of family offices here? I mean, part of what we're seeing, but with new funds that are coming out, right? Emerging managers, a lot of them are actually supported by family offices. 

We were just also in Asia where a lot more families are investing in tech and venture because they see this to be the future. I wonder what the scene is in France as a whole. 

Are you seeing more support from high net worth individuals? Is there enough wealth to support that?

Raphaele Leyendecker: 

Yes, well, we have some of the biggest corporations in the world. We have the family offices behind those big corporations. Think about LDMH, Peugeot L'Oreal. So yes, we have a high net worth that are really active on the tech scene  and family offices that are also really well structured to do so.

I think indeed they have a right play when it comes to industry. The Peugeot family has created a familiar office that is doing a really good on the mobility sphere. Obviously, I think we have seen a growing appetite because it's not only about money, it's also about what you're building and this sounds great.

But it is also a big trick for entrepreneurs and fund managers because it's like a double exemptions. You don't only need to bring the same returns, but you also need to demonstrate that you're having a positive impact. 

SCS: 

So profit and purpose alignment. 

Raphaele Leyendecker: 

Yes, exactly. But the profit is not lesser than a traditional fund. So this is where even a pre-seed you need to be able to show the track record when it comes both on the financial return and the impacts. 

SCS: 

Yeah. So it's double the pressure is what, what you're faced with. 

Raphaele Leyendecker: 

Exactly. But maybe something that is interesting on that topic because well we are in Europe. The EU has been also funding a lot of funds with a really specific regulation, namely the Article 8 and Article 9 funds. And those are pushing the funds to demonstrate the kind of impact they have. So whether it's just the impact of their portfolio company or also the impact of the portfolio company from within, you can well both invest in any kind of startup and help them implement ESG.

So this is typically what an Article 8 would do, and Article 9 is really investing in impact driven companies. And so, yeah, starting with pre-seed, it can be really tough because founders have to demonstrate attraction they're actually having with their companies, but also the impact. 

But when you start, you might pivot some time. So should you rather spend some time to forecast the kind of impact you will have or on the market. And this is definitely what we are tackling during this three month program with the entrepreneurs. 

SCS: 

Yeah. And so of course, speaking about impact that you were just telling me how proud you were about the diversity of your entrepreneurs that you're seeing here, a large proportion actually is growing here in Techstars Sustainability Paris.

What do we need to know about the gender scene? Are female founders creating in deep tech? What are the challenges here? What do we need to know? 

Raphaele Leyendecker: 

Yeah, well definitely we have a 35% of the portfolio that is led by women. We are very proud of that number because we don't have 35% of the application coming with that same ratio. 

We have amazing women leading really scientific startups. Whether it's about renewable energy, whether it's a biotech, but they're also doing software. So I should actually do the numbers to see, we have the proportion… 

SCS: 

No, but this is great. I mean, you know, part of the work that we do is showcasing the fact that women are innovating everywhere. For the benefit of all, right? 

In Asia, we were with one of the, if not number one today, a drone company in agriculture. So they started as a husband and wife team that was cinematographers. They were taking drone videos and realized, hey, we're capturing a lot of data today.

They're being deployed to increase precision agriculture. Increase the yields and all of that, right? So think about that. And then of course we have Canva in our partner funds portfolio in graphic design and so many others. What are you excited by as you look ahead, as you come towards the end of our conversation here, thinking about Paris moving forward and your role moving forward?

Raphaele Leyendecker: 

I think we are at the right place at the right moment. We are currently raising a climate fund to double down on our effort. 72 companies. One third France, third Europe, third rest of the world, demonstrating that we can actually help climate companies to go to the next level and make a positive change.

SCS: 

Where does Techstars see itself as an investor on the cap table? 

Raphaele Leyendecker: 

Well, we are here to last. I think we are always on the entrepreneur's side, so we are not here to exit the next day, we are here to help them when they face challenges. So building that community of people believing in the same goal that we can have a positive impact, really change something at the end of the day.

Because every week typically we have a high and low with our entrepreneurs, and it doesn't stop with the program. It doesn't stop at the three months. It's like a forum where you can feel supported and it's great to, you know, shout out on LinkedIn that you just fundraise at €10 million.But something different to be able to go back to your peers and actually say like, okay, I had a really rough week.

Something is not going well with my family, and I feel I'm struggling with a lot of different stuff happening also with my team. And how do I get there? It doesn't happen in one week or two to build a company. So yeah, we are definitely here to last. 

SCS: 

I like that. Essentially you're saying that, uh, in part of the program you have end of the week forum where the leaders come together to share the highs and lows. Love that. 

What's the biggest thing that you've learned from your journey so far as an entrepreneur yourself, feeling the challenges yourself and now supporting a wider ecosystem, and then beyond playing the ecosystem role, also funding and investing in ideas you believe in. What are your, I would say biggest, like three key takeaways from your journey.

Raphaele Leyendecker: 

Yeah, be patient. It takes time and humility to help entrepreneurs to build something that, you know, you can turn around and it's working even without you. So yeah, be patient. 

Then it's about the effort you put in sometime, and often at the beginning it feels like it's so difficult to create something from scratch. You will see the sum of your effort that will pay us at the end of the day. 

This is definitely true with all the companies I've seen then, it's about the impact. When you have a vision, when you know what you want to accomplish, you don't give up. 

SCS: 

Yeah. So a lot of ground that we've covered in a shorter amount of time.

Let's move quickly to the billion dollar questions to get to know you as a leader. So first question I'll always ask, especially for a VC, money or power? 

Raphaele Leyendecker: 

Money.

SCS: 

Money. Fame or fortune?

Raphaele Leyendecker: 

Fortune. 

SCS: 

So you talked about your horse riding, but beyond that, when you reflect on your childhood, what is something someone in your childhood has said to you that still remains in your head today as a leader?

Raphaele Leyendecker: 

Be kind. 

SCS: 

Be kind. I like it. How has this informed your leadership? 

Raphaele Leyendecker: 

When I was competing as a child, I was, obviously you're competing against the others, but you're also competing against yourself to be better. And I feel like, um, working with a lot of different people coming from different geographies, working on different topics.

Sometimes it's difficult to forget your background, to really understand others, and I think it's what it takes to investors to, you know, kind of unprogram yourself to be able really to push a vision where we can create together something that is different. So when I say be kind, it's like be open-minded and always try to help people get their best.

SCS: 

Yeah. When you think of the leaders you hire, what three qualities do you look for?

Raphaele Leyendecker: 

Kindness, effectivity, because well we only have 24 hours in a day, so we should be really focused. And curiosity.

SCS: 

A founder that you have worked with or you look up to? And why 

Raphaele Leyendecker: 

Iheb Triki, founder of Kumulus. Super Smart. Coming from the best school, worked for the best companies, BCG namely, but also taking the feedback open to the others. He was actually willing to bring water to schools in Africa, and they have been such a great solution that it's attractive for luxury hotels in Europe. 

SCS: 

What do you wish founders applied more of?

Raphaele Leyendecker: 

Balanced lifestyle. You feel like you and your company are the same, but it's not true. You know, when you welcome investors, suddenly the company is independent and has its own life. So should you. 

SCS: 

And last one. What is one billion dollar move that anyone can take today? 

Raphaele Leyendecker: 

Invest in women.

SCS: 

Yeah. Love it. 

Raphaele Leyendecker: 

Yeah. They have the creativity to actually help us move forward. 

SCS: 

Absolutely. And with that, it is a wrap. Thank you for making your version of billion dollar moves, and as we always end the show, we'll give a high five for the work you've done. Thank you. Keep making billion dollar moves.

Raphaele Leyendecker: 

Thank you.