Q&A with Kirill Mudryy, Enso Ventures
This blog accompanies the GCV Advanced Materials Society November 10th conference and report, ‘Venturing in the advanced materials and manufacturing nexus’, which is sponsored by Enso Ventures and Peloton Advisors. The conference will be hosted by Norton Rose Fullbright. Please contact me if you’d like to find out more about the Society and membership/sponsorship opportunities.
Enso Ventures is a private investment company based in London and New York that invests in Materials-Technology and Biotechnology in Europe and the US. Enso looks for early-stage companies with the following attributes:
– Disruptive technology platforms with products that address unmet needs in high growth markets
– Potential to become market leaders
– Strong IP
– Capable management with an aspiration to become global leaders
Enso Ventures has invested £50m in ten companies since 2012. The advanced materials investments in Enso’s portfolio include:
- Picodeon – www.picodeon.com
A Finnish nanotechnology company specializing in thin-film coatings and surface treatments, Picodeon’s Coldab® coating technology is an advanced Pulsed Laser Deposition (PLD) process offering the unique benefit of being able to deposit virtually any type of layer on any type of material. Picodeon’s applications include filters and electrical insulation layers, something necessary for instance in Li-Ion technology.
- Nanotherm – www.camnano.com
A British producer of innovative nano-ceramic thermal-management technology, which uses thin-film techniques to produce Nanotherm DM, a material with properties that rival exotic ceramics, but at a fraction of the price. Initially targeted at the Chip-on-Board and LED packaging markets, Nanotherm DM allows LED manufacturers to make significant cost savings without impacting the performance of their products.
- Carbodeon – www.carbodeon.net
A Finnish nano-diamond technology company that improves wear and abrasion resistance, and provides improved anti-corrosion, low friction and other surface finishes. Carbodeon’s applications include metal plating and thermal management in polymer parts.
Kirill Mudryy is an Investment Manager at Enso Ventures. He sits on the board of three of Enso’s portfolio businesses, Picodeon Ltd Oy, Cambridge Nathotherm and Enso Detego. Kirill qualified as a solicitor with McGrigors (now a part of Pinsent Masons).
LEIF: What’s different about Enso Ventures?
Kirill Mudryy: We’re a rare example, in Europe at least, of a venture fund focused on advanced materials. This means electronics-related materials, as well as new or improved engineering materials like coatings and surface enhancements, new catalysts and ceramics, to name a few. These are fundamental building blocks for any technology. We are backed by a single Limited Partner who is a great believer in the value of fundamental science and technology. This gives us a unique opportunity to be flexible and to deploy ’patient capital’, which is extremely important in materials-related ventures. Materials investments can take time, but at Enso we are specialists at accelerating time to market and building successful companies in this area.
LEIF: How do you differ from other VCs, both financial and corporate?
We are one of very few VCs that specialise in early stage material science companies and we are actually prepared to get involved much earlier in the investment cycle than most financial and corporate VCs. We can provide the early-stage funding required to get technology to the stage at which it is interesting and useful to corporates. For brand new start-ups in the advanced materials space it can be difficult to know which markets to target or who to recruit to build the team. We have the capabilities to help our portfolio businesses with business development, strategy, recruitment and other key issues. A lot of VCs say they are hands-on. We really are, especially in the early stages when there are more gaps to fill.
LEIF: Why Advanced Materials?
These days most VCs are still chasing internet deals. And some are very good at it, but for every Uber there are thousands of software tech companies that fail. But for advanced materials, we believe that careful selection focused on fundamental science and IP, mitigates the chances of failure. If a company we invest in has unique IP that can’t be easily copied, and there is an identified market that requires this technology, and the fundamentals of successful business case are there, then the company will not fail. It might take longer to succeed, but it will not fail.
LEIF: What is driving the uptake of Advanced Materials? Why does Enso see this as a growth sector?
At heart we still believe that Moore’s Law has not changed. It’s just being re-defined. We know that there is demand for smaller, faster and more energy-efficient electronics across an ever-growing range of industries as the ‘Internet of Things’ becomes a reality. Other industries are waking up to the fact that having more function in their products gives them a competitive edge. And these additional functions and features are often enabled by new underlying materials. We know that this demand can’t be met with current materials technologies, that VCs grossly neglected this area, and that this is therefore creating a choking point. Or to put it differently and more positively, it creates an opportunity for Enso because we are investing in advanced materials technologies that break the choking point and produce the innovation that is demanded in by electronics and other industries .
LEIF: What is your view on the growing interest of corporate venture capital in advanced materials?
Of course, we’re excited. We see opportunities to work together and we’d like to see the type of ecosystem created around advanced materials that has grown up around biotechnology for instance. We also see it as an admission from corporations that they can’t produce all the innovation they need internally. They need to look externally and venture with new and innovative companies, like those in our portfolio. This increases our confidence that our investments in fundamental technologies will pay off in the near future. Over the years, we have built a strong network of companies and people who help us to accelerate the path to success for early stage advanced materials companies and it is great to see later stage investors entering the picture. However, we also see that in many cases early stage companies need some assistance when it comes to dealing with large corporates and this is where we often come to aid.
LEIF: How do you manage the typically slow adoption of Advanced Materials technologies?
First of all we choose our investments very carefully. And like any professional VC we strive to create a balanced portfolio of early-stage breakthrough technologies on one side and more mature, ready-for-commercialisation and growth companies on the other side. As I have already mentioned, we have a strong and growing network of people who help us to drive these companies to success. But some of the markets are not as slow as you might think. We’re seeing an encouraging impatience from the ICT industry to adopt advanced materials because that’s how they get a competitive advantage in very competitive markets. Also I think corporates in other industries are realising this as well, and we’re starting to see repeat acquisitions from certain players.
LEIF: Advanced materials typically have potential disruptive applications across several markets. This can mean that advanced materials companies end up as ‘jacks of all trades, but masters of none’. How do you manage what is now being referred to as ‘platform technology syndrome’?
We want our portfolio companies to be very focused on one or two markets, not more. Choosing those can be difficult, but we believe that is one of our competitive advantages as a VC, and critical for setting our companies up for success. For example, Picodeon is focused on lithium ion and sensor industries, while Nanotherm is focused on the high-power LED and power electronics markets; all of which are growing fast.
LEIF: Let’s talk more about your portfolio, starting with Picodeon. Why did you invest?
We identified Picodeon as the best in class company with super-fast thin film deposition technology, which we know is going to be extremely important to many industries, particularly batteries. Picodeon can dramatically improve the efficiency of Li-Ion batteries by improving the performance of thin film separators. Separators are used in batteries to prevent short circuiting, but they typically deteriorate over time. Picodeon’s technology creates stronger separators that are also lighter, allowing smaller batteries with longer lifetimes and greater efficiency – three properties that the high-growth EV and ‘Internet of Things’ market is crying out for. This is an example of an advanced material that enables function and can potentially change the economics of the industry. Picodeon also has extremely strong IP, and a visionary management team. So investing in this company was an easy decision.
LEIF: What areas of Advanced Materials innovation excite you most?
We’re looking at quantum computing, lithography, new chemicals for thermo- and conductive plastics, new oxides, transistors and high-temperature materials, to name a few. But we keep an open mind. Often, you don’t know what innovation you’re looking for until it finds you. If it’s a revolutionary technology that is related to advanced materials then we want to hear about it. But unmet market needs are what should drive innovation, and we often have to turn down interesting stuff that we can’t see a road to commercialise
LEIF: How does Enso source its investments?
We usually hear about them through our network, an introduction from someone we know is a great way to get a company noticed. But we also actively seek investments in certain areas where we think there is market demand based on conversations we have had in different industries. This means attending conferences and trade shows to look for new technologies. Furthermore, we’d like to form stronger links with universities here in the UK and across Europe as our focus on early-stage can complement academics who have a new technology that they would like to commercialise.
LEIF: How does Enso work with other investors, financial VCs and corporate VCs?
We have very positive experience in co-investing with other VCs and corporates in our pharmaceutical investments. This hasn’t happened as often as we’d like, probably as there are few investors in the advanced materials space so far. Also another differentiating factor, we have invested into our advanced material companies relatively early and for the last few years we have been focusing more on building a stronger company. However now when some of our portfolio companies are quite mature and ready to work with new investors, we will be actively looking for new partners. We do like to co-invest where possible, and as mentioned earlier it would be great to see a more mature investment ecosystem in this area. The applications for materials are vast, you can’t know everything in this area, and we’re actively seeking like-minded investors who can complement our knowledge and help these companies succeed.