Claudio Meireles: Welcome to the Constructor Capital podcast. This is episode one. I'm Claudio, the CMO at Constructor Capital, and I'm joined here by our managing partner, Matthias Winter, and our general partners, Marie Lepske and Alex Fine. Today are going to be talking about our fund one, about Constructor Capital and the Constructor Group. But let's start with a small warmup for all of you. ⁓ For our listeners who are hearing about Constructor Capital for the first time, how do you describe the font in one sentence?
Matthias Winter: Okay. Well, maybe I start. first of all, Claudio, organizing this podcast. ⁓ understand it's ⁓ start of a series of podcasts, so we will have more with us, but also our portfolio companies. So we're super excited to start and it's great to be here with Marie and Alex. Amazing. So what Constructor Capital? Basically we are an early stage VC fund. which invests in companies which are at the frontier of science and technology. So as an example, we invest in companies ⁓ in deep tech. For example, we have quite a few companies in our portfolio already by now, which are working in the future of compute, future of new materials, topics that, new energy, topics like that, which are really at the frontier ⁓ of technology. on the other hand, the second, basically that we invest in is B2B companies, B2B platform companies. So it's not B2C, it's not FinTech. It's companies that provide, you know, for the future of AI, future of compute, which provide platforms. you know, we as ⁓ team, a number of these companies ourselves, founded them, scaled them. ⁓ we think we can ⁓ a number one smart VC fund, also help them grow and succeed.
Claudio Meireles: That's fantastic. just have closed Fund One recently. was now the right moment to launch Fund One and what gap in the market are we trying to fill in?
Matthias Winter: Marie, you want to take that one?
Marie Lepske: Yes, actually, we are focusing a lot on universities spin outs from top universities globally. ⁓ we are quite strict about domain focus. We only invest in areas which we truly understand. Next computing, as Matthias mentioned, quantum ⁓ optics, and more broadly, ⁓ physical computing system, ⁓ but also B2B platform software solutions. including educational technologies. are main domains where our team, our founders, ⁓ also Serge Bell, ⁓ deep hands-on expertise. ⁓ how we try to fill a real gap in the market, ⁓ ⁓ diligence and support ⁓ a strong pipeline ⁓ highly promising spin-outs in these fields.
Claudio Meireles: That's fantastic. And let's dive right now into Fund One more specifically. And this one is for you, Matias. When you and our team designed Fund One, were the key decisions on the size, number of portfolio companies and check sizes? ⁓ And do those choices ⁓ actually reflect way we want to work with founders?
Matthias Winter: Okay, that's a complex question. basically, we started about three years ago with raising money for Fund One, coming up with our hypothesis. And the initial idea would be, well, you know, we should be an early stage fund, so we can make it too big. At the same time, it needs to be meaningful. So we have impact. We said, you know, we should end up somewhere between, let's say, and 150 million US dollars.
Alex: So, some of that particular thing is happening right now in the 50s.
Matthias Winter: The logic was a bit like this. If you want to do meaningful investments in let's say deep tech or B2B platform companies, you will need to invest the ⁓ series A, maybe early stage series B for that of them. It may be on average something like 5 million US And we with the that we have, we can have a meaningful portfolio, maybe 15 companies or so.
Alex: and companies this month. Thank you.
Matthias Winter: Well, 10, 15, let's say. So then you end up at 75 million and you need a bit of reserves, even though you can obviously cover some of the reserve needs with SPVs later on. So that was one reasoning. The other one, we wanted to do an early stage acceleration program. It's called constructor start, where we do smaller checks, typically 100 to 200k. we're aiming maybe for 10 to maximum 20 companies. Okay. And this is basically building a pipeline, promoting entrepreneurship and building something that we can tap on later on also increasing the network. So that gives you the need to have a hundred to 150 million funds. And eventually we closed with 111 million. So quite in the middle. I think we will have a good impact with this size. Obviously, know, fun too will be bigger, but that's how the math works. And, you know, I think we're quite in the target zone. mean, we invested about 40 % of that already. Also thanks to a warehouse that we got from Serge. And we still have some firepower that we can use for the pipeline right now. And where investments got bigger, we had already one or two cases, we created an SBB for our LP so that they could participate in further.
Claudio Meireles: That's fantastic. And I will follow up on that by ⁓ asking you, we call ourselves a science-based global venture fund. What does that actually mean on our day-to-day investment decisions? And how is our IC discussion different from a typical software-only VC? for you, Matias, as well.
Matthias Winter: Okay, okay. ⁓ know, ⁓ see it's like the last step in a long journey. It obviously starts with identifying potential investment opportunities. And I guess the difference is, if you're let's say consumer VC fund, you get an opportunity, and then you have to react very fast and you have to make up your mind and look at the CV of the entrepreneurs then do some due diligence, but they need to decide because the opportunities move super fast. The way act as a deep tech... front, at least on the deep tech side you know, typically companies come out of the university to us. So it's super early stage. They have of a scientific background and scientific on what they want to build their company on. And typically not yet the full business model, et cetera. So we do ⁓ quite an extensive due diligence on the science, engineering, technology side. And we will involve a lot of experts in a huge network in academia, in business. you know, typically we do, to be honest, I'm that also to our companies, quite a lengthy DD process, you know, based on their backgrounds, but mainly also on the technology and how competitive it is, because it's a competitive world. We tap on university professors. experts, etc, etc. ⁓ know, what we do to be fair to the companies is also we share the due diligence with them. So we're not doing this, you know, in a black box, and they just see the results. We're discussing it with them, because, you know, it's, cutting edge on all sides, so they should also learn from it. And then after after a long time, you know, of many interactions, and obviously, we discuss term sheets, etc. Typically, we're the lead investors, so we take a bit time for that. come to the IC. Um, you know, once you're on the IC, I assume, or you can assume that, you know, the investment gets approved, but the process there is quite long. can take longer than six months. So this is how we need to imagine, uh, on the software side, it goes a bit faster. Um, but, um, you know, in principle, we're doing quite a detailed due diligence process.
Claudio Meireles: For the founders that are watching us today, they are quite new to this world of VC and investment funds, and they in touch with many other investment funds that ⁓ typically investing in two weeks, ⁓ month. ⁓ ⁓ picking up on the long due diligence that we do, on the value that we add during that due diligence, what do founders gain?
Matthias Winter: Okay.
Claudio Meireles: with such extensive due diligence from us.
Matthias Winter: Yeah, well, know, they need to have a bit patience, obviously. look, mean, typically, I mean, if you're a founder, scientific founder, typically they come out of universities, PhDs, postdocs, et cetera. They know obviously scientists who work in the same field from conferences or wherever they go. But the breadth of people that we involve ⁓ in the opportunity, assessing the opportunity. is typically much, much, much wider than what they see in their day-to-day life or even in conferences, et cetera. So I think they get real feedback. mean, look, for example, we, we have a company that develops kinds of chips, et cetera, we will talk to target customers, acquirers. We will talk to, you know, suppliers, ⁓ you the entire, the entire ⁓ supply chain relationship and how realistic it is. will talk to. other founders in that space to companies who have similar technologies, maybe even adjacent technologies, which might be relevant, et cetera. So you get a lot of new insights, how the opportunity evolves and how fast you can build a business. And maybe if you need to pivot and as I said, you know, we're willing to share that. That's that, you know, should be helpful for them in any case. So they would get a much more. I mean, the business plan, the deep tech is not about the Excel spreadsheet and the revenues. They get a much more realistic picture about, you know, how their technology fits and how, know, it can evolve and how it can make a difference and the company can grow. So I think it's a joint process of insights.
Claudio Meireles: So even before we write the first check or even if we don't write the first check, they're already getting quite a lot of value from us, from our due diligence network and that they can learn for the future. So I would say that that's advantage for them at ⁓ the of the day. So it's ⁓ good you actually went deep into this and that you went actually to the tech park, to the deep tech park.
Matthias Winter: We hope so.
Claudio Meireles: the scientists, which leads me to ⁓ Mari Lepske, your background actually includes quantum computing, advanced materials, investing. What drew you specifically to deep tech and science-based startups?
Marie Lepske: Klaudia, thank you again for recording this podcast and for these questions. my path into DepTech, it comes from a physics and applied mathematics ⁓ ⁓ my undergraduate and graduate training ⁓ also including doctoral work, I focused on mathematical control of complex systems. optimization, modeling, and managing uncertainty in complex physical systems. That rigor naturally translates to early-stage deep tech, where technical validation and risk decomposition are as important as market analysis. have been an inventor since 2013, working with family offices, funds, and also I built my own startup. felt like a natural fit because it's exactly where that kind of rigor matters. what enjoy is breaking a company down into real drivers, what's technically feasible, the risks and how to stage and mitigate them over time, ⁓ while still a clear line of sights to a scalable market outcome.
Claudio Meireles: we at ⁓ Constructor Capital, we work a lot in this intersection between the universities, research labs and startups. ⁓ your perspective, what does a good academic spin out look like? And well, let's spice this up. ⁓ What are red flags as well?
Marie Lepske: When we look at academic spin outs, we try to reduce it to a few drivers. What is the core technical advantage? What has to be proven next? And what can break or the path from lab to product and to commercialization? Obviously, the strong spin outs are disciplined about to that chain and they have founders with real scientific authority an ⁓ technical ideal. leaders who can turn research into engineering. They also have a clean, defensible IP position, ideally exclusive rights, and a roadmap that explicitly addresses translation bottlenecks like integration, reliability, and cost. flags are usually mismatched between ambition ⁓ ⁓ big claims without hard data. Timelines that ignore the slowest constraints and a team that stays academic only with no product ownership and business vision. or non-exclusive IP, no credible plan to secure non-dilutive funding and milestones that aren't ⁓ to customers ⁓ ⁓ also warning customers. The best spin-outs use the university network as leverage. but they're clearly building an independent company from day one. And we're helping them with this also.
Claudio Meireles: that's the other value that they get from us as well, from people that have been doing actually this work of building companies and ⁓ ⁓ in quite a scientific background. ⁓ talking of universities, Marie, you taken actually recently the stage at our constructor start demo day a few days ago, talking about quantum momentum. But I want to focus here on Constructor Start that Mathias mentioned before. What can Constructor first of all, what's the connection between Constructor Start and Constructor Capital? ⁓ what can companies like Kendra, that were one of the winners from Constructor Start, expect from ⁓ Constructor Capital over time?
Marie Lepske: So Constructor Start is a joint program between Constructor Capital and Constructor University in Bremen, we are holding together. We already had now third batch and now we are starting our fourth batch. ⁓ eight weeks program, online program, ⁓ during this week's startups ⁓ have different workshops and mentorship from our team, Constructor Capital, but also from industrial experts, our experts from technology, constructor university ecosystem, from scientific advisory board as well. And during these eight weeks, what ⁓ they could achieve. They could rebuild their pitch deck. They could have even first reaction with customers or partners. They could understand how to better do fundraising, ⁓ how to the team. So all key aspects ⁓ of first in creating company and business development and go to market. So these ⁓ aspects, we helping them. to achieve during our eight week of acceleration program, is ending up with a demo day, offline demo day in Bremen, where ⁓ 200 are coming, ⁓ including from but also our portfolio companies, our experts, ⁓ networks, scientists, our co-investors. And startups in the demo team presenting results of these two months of acceleration program. And ⁓ judges, independent team, ⁓ which like judges or 10 judges and only one of them from Constructure Capital. All others are our co-investors. are deciding in which startups we as Constructor Capital will invest. ⁓ are choosing up to three startups in each cohort and ⁓ providing investment ⁓ to of these startups. Regarding, example, this is one of our winners from the last cohort, one of three winners. This is ⁓ early stage, precede stage. quantum startup ⁓ Zurich, which won ⁓ $100,000. And ⁓ besides for sure it's investment from our side. But besides this, ⁓ also they get our support ⁓ with further of business development and next fundraising well ⁓ and go to ⁓ So we will ⁓ closing them as a front now.
Claudio Meireles: That's perfect. That's perfect to see this integration and to see Kendra in our portfolio, Kendra and the other winners from this constructor start. And we are looking forward to the next batch and this exciting ⁓ new startups that will be part of that next batch. Let me involve here Alex in our conversation. Alex, have scaled ⁓ businesses and led ⁓ &A's at companies like Virtuoso. and parallels, how does that operator background influence the way you evaluate early stage founders?
Alex: Hi, yes, Claudio, thank you. So I will primarily speak now about software. In deep tech, is slightly different. There is a lot of commonalities, but still. So when we invest in software, it's typically post-revenue. So there is already first revenue for one, two years. Companies are already hitting their seven digits. Maybe it's already a few million ARR. Typically, it's recurring revenue. that's a company with the ⁓ life and with the some proof point that there is right value proposition, customer profile, ⁓ and the works actually. So at this point we can speak ⁓ and ⁓ where would leverage my experience as a CEO to see how the founders are going to scale, what challenges they're facing. invest in early stage, that's ⁓ definitely good time for customers, for our for the startup leaders to have a decision about potential extension, pivot changes. So the company is still small, the customer base for them is still small and the the IP generated is already there, but not too ⁓ extensive yet. this is we're helping them to... ⁓ start thinking about the global scale, think about their path to 100 million revenue. And this is, we mentioned here, it's our diligence is deep and these conversations happen within that process. So we are not only asking them questions, we're also giving them quite bit of hints and bringing also along some additional which can complement their teams. And that is helping us. to have a firm belief in their success, helping them to have a better team and plan how to execute. eventually to start arriving to a position when they will be scaling, scaling reasonably fast and coming to potential exit for us, exit for them, which ⁓ typically expect in the range of five to 10 years. And of course, from day one, we would think about the potential exit. And we also have this conversation with the customer with our, sorry, always skipping sales angle, but with the startups, with founders to understand how they're going actually to, what is potential buyer and what is potential story that they will sell to the market.
Claudio Meireles: Okay, that's fantastic. Let me go back here to Fund One ⁓ was already mentioned by all of us that we invest across several ⁓ DeepTech, EdTech, Where you, Alex, see the biggest opportunity right now for Fund One in terms of business models markets?
Alex: Right. we, again, I will, guess I will speak here more on the software side, including EdTech. Maria and Matias are covering TipTech very well. So on software, well, let's start with EdTech, which is kind of a bit more compact niche. It's the smallest of various where we're investing, but potentially it will become reasonably big because the world is changing now as we speak with the AI prevalence and expansion and ⁓ of many jobs and potentially many more. The requirements for the workforce for employees is changing dramatically as we speak. Many people are finding themselves out of their jobs. looking for new jobs. Many people are just graduating and looking for the first entry level job and it is all becoming very different and the education is not designed for it and the EdTech is trying to address it. It's trying to facilitate a faster transition to the relevant skill set, but it is also kind of not there. So ad tech itself should be revolutionized and should be transformed into something that is relevant for today's including AI. And so here we are looking at, ⁓ having a good, deep view of the entire landscape and we are looking for the best opportunities here. who will present the relevant education and skills and knowledge platforms for the next generation of students, learners, teachers, the ⁓ schools, for scientists, for administrators, which be based, course, on ⁓ tailored AI tutoring, adaptive learning systems, which will a lot about corporate relearning and learning systems. If we then move to software. It's all disrupted. You see the variations now significantly dropped over the last weeks, actually, as we speak. The market is very nervous. Possibly it's a bit overreacting, but definitely the shift is happening and the traditional players should either reinvent themselves or slowly die. And many of them will reinvent. They have a lot of drive out and lot of investment capabilities. but many of them will be too inertial and they will not survive. So when we are looking at the software, of course, there are some no-go areas like horizontal size without proprietary data is becoming very difficult to contemplate or generic workflow automation or just GPT wrapper businesses. This all is easy to replicate and easy to replace. So that would be a no-go. areas for us. What will be more interesting is the vertical platforms with the multiple tiers and multiple integrations. So truly ecosystem players. This is difficult to replace. solutions which are setting their standards for integration will be also some of them will be winners and we want to find such. We're looking ⁓ the ⁓ platforms and AI foundational models. Again, not the repers. whatsoever, but the around effective infrastructure, will be developing, it's developing changing every week, every day. And then the security data governance solutions, which are also going to be super in high demand.
Claudio Meireles: Thank you Alex and let me get back here to Deep Tech angle ⁓ to you Marie. ⁓ Deep Tech often with long timelines, technical risk. ⁓ How you balance this scientific ambition with venture style returns in our fund one?
Marie Lepske: Yes. Good question. Thank you. Thank you, Claudio. First, the portfolio here matters. ⁓ And in One, we invest in next generation computing, but we also invest, as ⁓ Alex and Matias mentioned, ⁓ into the software solutions. ⁓ And at same stage, like Series A, next generation computing might still be pre-revenue, and usually ⁓ it's pre-revenue. or only have pilots, while B2B software can be related to unreal operational metrics like IRR, gross margin, year-to-year gross, CACL-TV and so on. That combination helps us balance the exit types and strategy and timelines for each in our portfolio and consequently risk across fund. And secondly, ⁓ with Tech, they are very disciplined about commercial proof, even if it's early stage. If there isn't a formal go-to-market yet, we still validate market pool, speak to potential customers, partners, map the alternatives and competitors' landscape, and build a view on whether the team can realistically achieve meaningful traction in till the next 24 months. Third, underwrite around milestones and execution. We spent a lot of time on the technical product, go-to-market roadmap tied to the round and what gets de-risked, what gets built, what gets validated. And we pressure-test it with the team. So it's ambitious, but should be realistic. And we also manage entry points. Sometimes we invest earlier at proceed or seed when pricing reflects as uncertainty. And sometimes later at series A or doing for loans in our current portfolio companies, even in series B, when more of the technical risk has already been taken out. how we keep our scientific ambitions ⁓ high while still aligning with venture. style outcomes.
Claudio Meireles: Thank you, Marie. And now I have questions for the group. You can take the lead on these questions. Please select between who wants to answer. But let me start ⁓ by team. ⁓ The behind Constructor Capital, who are we? Who ⁓ is team that is shaping this ⁓ fund go forward?
Matthias Winter: Yeah. So basically, you know, the team, so we have the three of us who are, you know, GPs. You have, you know, probably the person who started this all, Serge Bell, who is obviously also GP. He's an LP. He's kind of the chairman of the company who's been an entrepreneur for more than 30 years, super successful, you know, three or four unicorns that he created. So that's the senior leadership. Then we have a couple of ⁓ partners like most funds have in ad tech, ⁓ in software And then we have an incredible team of three associates ⁓ and obviously number of support functions, including ⁓ you, Claudio. that's the core team. ⁓ It's quite for ⁓ a small So if you count it together, it's maybe 12 people. And then we have an extended team, is the experts and ⁓ that work in our network, in ⁓ in ⁓ tech, in constructor knowledge, cetera. So that is, if you want, the extended team. They're all very scientific. ⁓ have science-based education, et cetera. They're all deeply knowledgeable in the area. And we ⁓ leave. That's a good team to start with.
Claudio Meireles: And it's a good mention because my next question goes exactly this constructor because we are the venture engine inside of the constructor group. How can benefit from the constructor group
Marie Lepske: Yes, let me maybe jump in here. ⁓ part of the big ecosystem called Constructor Group and that gives founders real access, not just introductions ⁓ resources like Constructor University in Bremen and Constructor Technology. Practically that can mean partnering with professors and labs for joint for example, ⁓ getting support ⁓ validation role.
Matthias Winter: Bye.
Marie Lepske: even using tooling and software that's already for labs in constructor technology. And corporate ⁓ R &D environments benefits from constructor group as well. Also, IP support from our experts ⁓ in both constructor technology ⁓ constructor group. We have deep scientific advisory network in constructor group. an expanded advisory board with multiple ⁓ Prize ⁓ laureates, senior across areas like advanced materials and quantum-related fields. Founders can tap for technical diligence, product scientific translation and strategy, so the company can make ⁓ sharp decisions ⁓ on to prove and to patent and what to build next. So this is how we usually help this constructor group ecosystem. Also we have not only scientific advisory board, but industrial advisory board which our portfolio companies could use for their industrial and gold market validation.
Claudio Meireles: Thank you, Marie. And now I will go for the LP perspective. What should they expect from FundOne in terms of portfolio construction, geography, stage? What will we deliberately not do? What is the no-go here?
Matthias Winter: Look, so, you know, as we said, fund one is 110 million. We will, I guess we will invest 60 % deep tech. Just the area where, you know, we'll probably have more distinctive expertise compared to many other VC funds, obviously many do software. And then it's maybe 30 % software, 10 % education tech. That's probably the mix in terms of investments. anything, we'll probably ⁓ even more to deep tech because this is where the big opportunity lies at the moment with all the technologies evolving next generation compute, photonic, et cetera. Geographically, ⁓ have open mandate. We really wanted to have ⁓ a mandate is quite flexible. We have the natural mix between US, Europe, ⁓ Southeast Asia. moment we have portfolio companies in all geographies, we don't really have a target there. It really depends on the opportunity. know, sometimes, I it's typical prejudices, right? Typically US companies valued higher, even ⁓ in early but maybe also get to the market faster versus Europe maybe has more profound technology, but need a bit longer. ⁓ We'll ⁓ a of an opportunistic range there. in terms of geography. obviously, yeah, countries where we won't go such as China. But other than that, we left there with an open mandate. We have a 10-year fund with a two-year extension. So we're obviously trying to invest in companies that we can, you know, not all of them wait for 10 years, you know, get some DPI relatively early on. have a few in the pipeline. So we might even after less than two years. uh, have, uh, you know, some real distributions, which would be, which would be good. So that's the mix. And as I mentioned at the very beginning, it's probably 90 % of our investments are in our core portfolio to 15 companies to make a difference. And then we have this construct a start program, which is maybe 10. So that's how I would look at it. Um, we, know, in front one, you need to deliver, you know, exceptionally. So we want to deliver a 30 % IR to our, um, GPs.
Marie Lepske: you
Matthias Winter: moment looks quite good. I mean, we're very young, but we have, you know, an AB to asset allocated of 1.5, which is quite good. Obviously, we didn't return the money yet, but we hope we will do very soon.
Claudio Meireles: We're looking forward to that. And one last question. For LPs and ecosystem partners that listening to us right now or that are connected with the LPs and ecosystem partners, what's the best way to work with us around the fund one? Co-investments, university relationships, corporate partnerships, what's the best way to work with us?
Marie Lepske: Yes.
Matthias Winter: Alex, you wanna take that one?
Alex: Yeah, of course, coin investments, yes. As Matthias mentioned, have often, well, not often, but already happened a few times, we drive the SPVs. When it comes to the following investment, of course, we'll deploy our capital as well. There can be some ad hoc opportunities, which we will also bring to our LPs.
Marie Lepske: you
Alex: ⁓ If we were seeing that it doesn't meet our risk profile criteria from the fund itself, we can still bring some interesting opportunities directly to our piece, which is definitely an advantage of working with us because we have significant coverage in the industry and we process about startups' ⁓ requests. a year. So there is a huge pool. And yeah, in terms of universities, ⁓ that's we are building. This is a huge priority. Liaison with top universities, sourcing startups, finding the top in the industry to collaborate with them, to have the expert and then potentially even to collaborate with the companies which we invest in. So university DNA is ⁓ within fund. within the group, construct a group, also of the group and few dozen of very deep connections that we have with the ⁓ So, is very important. And besides that, of course, we have relationships and building every day with the more ⁓ ⁓ capital both from the preceding, precede stage, same stage, know, seed series to coinvest, and then the later stage. to follow on our investment later. that is also important part of the game, which is ⁓ traditional and we are very here and very collaborative in that regard.
Claudio Meireles: Thank you, Alex. Thank you, Matias. Thank you, Marie. It was great conversation to have with the three of you to dive into ⁓ Capital, our fund one ⁓ ⁓ Group. It was a pleasure to have you here. ⁓ for our audience, you can expect now more interviews and more conversations with ⁓ portfolio companies, ecosystem builders ⁓ ⁓ players in the... in the startup world and in the venture world. They will be hosted not only by me, but also by our partners and those conversations. So stay tuned for the next episode. Thank you.
Marie Lepske: Thank you. Thank you all.
Matthias Winter: Okay. Well, maybe I start. first of all, Claudio, organizing this podcast. ⁓ understand it's ⁓ start of a series of podcasts, so we will have more with us, but also our portfolio companies. So we're super excited to start and it's great to be here with Marie and Alex. Amazing. So what Constructor Capital? Basically we are an early stage VC fund. which invests in companies which are at the frontier of science and technology. So as an example, we invest in companies ⁓ in deep tech. For example, we have quite a few companies in our portfolio already by now, which are working in the future of compute, future of new materials, topics that, new energy, topics like that, which are really at the frontier ⁓ of technology. on the other hand, the second, basically that we invest in is B2B companies, B2B platform companies. So it's not B2C, it's not FinTech. It's companies that provide, you know, for the future of AI, future of compute, which provide platforms. you know, we as ⁓ team, a number of these companies ourselves, founded them, scaled them. ⁓ we think we can ⁓ a number one smart VC fund, also help them grow and succeed.
Claudio Meireles: That's fantastic. just have closed Fund One recently. was now the right moment to launch Fund One and what gap in the market are we trying to fill in?
Matthias Winter: Marie, you want to take that one?
Marie Lepske: Yes, actually, we are focusing a lot on universities spin outs from top universities globally. ⁓ we are quite strict about domain focus. We only invest in areas which we truly understand. Next computing, as Matthias mentioned, quantum ⁓ optics, and more broadly, ⁓ physical computing system, ⁓ but also B2B platform software solutions. including educational technologies. are main domains where our team, our founders, ⁓ also Serge Bell, ⁓ deep hands-on expertise. ⁓ how we try to fill a real gap in the market, ⁓ ⁓ diligence and support ⁓ a strong pipeline ⁓ highly promising spin-outs in these fields.
Claudio Meireles: That's fantastic. And let's dive right now into Fund One more specifically. And this one is for you, Matias. When you and our team designed Fund One, were the key decisions on the size, number of portfolio companies and check sizes? ⁓ And do those choices ⁓ actually reflect way we want to work with founders?
Matthias Winter: Okay, that's a complex question. basically, we started about three years ago with raising money for Fund One, coming up with our hypothesis. And the initial idea would be, well, you know, we should be an early stage fund, so we can make it too big. At the same time, it needs to be meaningful. So we have impact. We said, you know, we should end up somewhere between, let's say, and 150 million US dollars.
Alex: So, some of that particular thing is happening right now in the 50s.
Matthias Winter: The logic was a bit like this. If you want to do meaningful investments in let's say deep tech or B2B platform companies, you will need to invest the ⁓ series A, maybe early stage series B for that of them. It may be on average something like 5 million US And we with the that we have, we can have a meaningful portfolio, maybe 15 companies or so.
Alex: and companies this month. Thank you.
Matthias Winter: Well, 10, 15, let's say. So then you end up at 75 million and you need a bit of reserves, even though you can obviously cover some of the reserve needs with SPVs later on. So that was one reasoning. The other one, we wanted to do an early stage acceleration program. It's called constructor start, where we do smaller checks, typically 100 to 200k. we're aiming maybe for 10 to maximum 20 companies. Okay. And this is basically building a pipeline, promoting entrepreneurship and building something that we can tap on later on also increasing the network. So that gives you the need to have a hundred to 150 million funds. And eventually we closed with 111 million. So quite in the middle. I think we will have a good impact with this size. Obviously, know, fun too will be bigger, but that's how the math works. And, you know, I think we're quite in the target zone. mean, we invested about 40 % of that already. Also thanks to a warehouse that we got from Serge. And we still have some firepower that we can use for the pipeline right now. And where investments got bigger, we had already one or two cases, we created an SBB for our LP so that they could participate in further.
Claudio Meireles: That's fantastic. And I will follow up on that by ⁓ asking you, we call ourselves a science-based global venture fund. What does that actually mean on our day-to-day investment decisions? And how is our IC discussion different from a typical software-only VC? for you, Matias, as well.
Matthias Winter: Okay, okay. ⁓ know, ⁓ see it's like the last step in a long journey. It obviously starts with identifying potential investment opportunities. And I guess the difference is, if you're let's say consumer VC fund, you get an opportunity, and then you have to react very fast and you have to make up your mind and look at the CV of the entrepreneurs then do some due diligence, but they need to decide because the opportunities move super fast. The way act as a deep tech... front, at least on the deep tech side you know, typically companies come out of the university to us. So it's super early stage. They have of a scientific background and scientific on what they want to build their company on. And typically not yet the full business model, et cetera. So we do ⁓ quite an extensive due diligence on the science, engineering, technology side. And we will involve a lot of experts in a huge network in academia, in business. you know, typically we do, to be honest, I'm that also to our companies, quite a lengthy DD process, you know, based on their backgrounds, but mainly also on the technology and how competitive it is, because it's a competitive world. We tap on university professors. experts, etc, etc. ⁓ know, what we do to be fair to the companies is also we share the due diligence with them. So we're not doing this, you know, in a black box, and they just see the results. We're discussing it with them, because, you know, it's, cutting edge on all sides, so they should also learn from it. And then after after a long time, you know, of many interactions, and obviously, we discuss term sheets, etc. Typically, we're the lead investors, so we take a bit time for that. come to the IC. Um, you know, once you're on the IC, I assume, or you can assume that, you know, the investment gets approved, but the process there is quite long. can take longer than six months. So this is how we need to imagine, uh, on the software side, it goes a bit faster. Um, but, um, you know, in principle, we're doing quite a detailed due diligence process.
Claudio Meireles: For the founders that are watching us today, they are quite new to this world of VC and investment funds, and they in touch with many other investment funds that ⁓ typically investing in two weeks, ⁓ month. ⁓ ⁓ picking up on the long due diligence that we do, on the value that we add during that due diligence, what do founders gain?
Matthias Winter: Okay.
Claudio Meireles: with such extensive due diligence from us.
Matthias Winter: Yeah, well, know, they need to have a bit patience, obviously. look, mean, typically, I mean, if you're a founder, scientific founder, typically they come out of universities, PhDs, postdocs, et cetera. They know obviously scientists who work in the same field from conferences or wherever they go. But the breadth of people that we involve ⁓ in the opportunity, assessing the opportunity. is typically much, much, much wider than what they see in their day-to-day life or even in conferences, et cetera. So I think they get real feedback. mean, look, for example, we, we have a company that develops kinds of chips, et cetera, we will talk to target customers, acquirers. We will talk to, you know, suppliers, ⁓ you the entire, the entire ⁓ supply chain relationship and how realistic it is. will talk to. other founders in that space to companies who have similar technologies, maybe even adjacent technologies, which might be relevant, et cetera. So you get a lot of new insights, how the opportunity evolves and how fast you can build a business. And maybe if you need to pivot and as I said, you know, we're willing to share that. That's that, you know, should be helpful for them in any case. So they would get a much more. I mean, the business plan, the deep tech is not about the Excel spreadsheet and the revenues. They get a much more realistic picture about, you know, how their technology fits and how, know, it can evolve and how it can make a difference and the company can grow. So I think it's a joint process of insights.
Claudio Meireles: So even before we write the first check or even if we don't write the first check, they're already getting quite a lot of value from us, from our due diligence network and that they can learn for the future. So I would say that that's advantage for them at ⁓ the of the day. So it's ⁓ good you actually went deep into this and that you went actually to the tech park, to the deep tech park.
Matthias Winter: We hope so.
Claudio Meireles: the scientists, which leads me to ⁓ Mari Lepske, your background actually includes quantum computing, advanced materials, investing. What drew you specifically to deep tech and science-based startups?
Marie Lepske: Klaudia, thank you again for recording this podcast and for these questions. my path into DepTech, it comes from a physics and applied mathematics ⁓ ⁓ my undergraduate and graduate training ⁓ also including doctoral work, I focused on mathematical control of complex systems. optimization, modeling, and managing uncertainty in complex physical systems. That rigor naturally translates to early-stage deep tech, where technical validation and risk decomposition are as important as market analysis. have been an inventor since 2013, working with family offices, funds, and also I built my own startup. felt like a natural fit because it's exactly where that kind of rigor matters. what enjoy is breaking a company down into real drivers, what's technically feasible, the risks and how to stage and mitigate them over time, ⁓ while still a clear line of sights to a scalable market outcome.
Claudio Meireles: we at ⁓ Constructor Capital, we work a lot in this intersection between the universities, research labs and startups. ⁓ your perspective, what does a good academic spin out look like? And well, let's spice this up. ⁓ What are red flags as well?
Marie Lepske: When we look at academic spin outs, we try to reduce it to a few drivers. What is the core technical advantage? What has to be proven next? And what can break or the path from lab to product and to commercialization? Obviously, the strong spin outs are disciplined about to that chain and they have founders with real scientific authority an ⁓ technical ideal. leaders who can turn research into engineering. They also have a clean, defensible IP position, ideally exclusive rights, and a roadmap that explicitly addresses translation bottlenecks like integration, reliability, and cost. flags are usually mismatched between ambition ⁓ ⁓ big claims without hard data. Timelines that ignore the slowest constraints and a team that stays academic only with no product ownership and business vision. or non-exclusive IP, no credible plan to secure non-dilutive funding and milestones that aren't ⁓ to customers ⁓ ⁓ also warning customers. The best spin-outs use the university network as leverage. but they're clearly building an independent company from day one. And we're helping them with this also.
Claudio Meireles: that's the other value that they get from us as well, from people that have been doing actually this work of building companies and ⁓ ⁓ in quite a scientific background. ⁓ talking of universities, Marie, you taken actually recently the stage at our constructor start demo day a few days ago, talking about quantum momentum. But I want to focus here on Constructor Start that Mathias mentioned before. What can Constructor first of all, what's the connection between Constructor Start and Constructor Capital? ⁓ what can companies like Kendra, that were one of the winners from Constructor Start, expect from ⁓ Constructor Capital over time?
Marie Lepske: So Constructor Start is a joint program between Constructor Capital and Constructor University in Bremen, we are holding together. We already had now third batch and now we are starting our fourth batch. ⁓ eight weeks program, online program, ⁓ during this week's startups ⁓ have different workshops and mentorship from our team, Constructor Capital, but also from industrial experts, our experts from technology, constructor university ecosystem, from scientific advisory board as well. And during these eight weeks, what ⁓ they could achieve. They could rebuild their pitch deck. They could have even first reaction with customers or partners. They could understand how to better do fundraising, ⁓ how to the team. So all key aspects ⁓ of first in creating company and business development and go to market. So these ⁓ aspects, we helping them. to achieve during our eight week of acceleration program, is ending up with a demo day, offline demo day in Bremen, where ⁓ 200 are coming, ⁓ including from but also our portfolio companies, our experts, ⁓ networks, scientists, our co-investors. And startups in the demo team presenting results of these two months of acceleration program. And ⁓ judges, independent team, ⁓ which like judges or 10 judges and only one of them from Constructure Capital. All others are our co-investors. are deciding in which startups we as Constructor Capital will invest. ⁓ are choosing up to three startups in each cohort and ⁓ providing investment ⁓ to of these startups. Regarding, example, this is one of our winners from the last cohort, one of three winners. This is ⁓ early stage, precede stage. quantum startup ⁓ Zurich, which won ⁓ $100,000. And ⁓ besides for sure it's investment from our side. But besides this, ⁓ also they get our support ⁓ with further of business development and next fundraising well ⁓ and go to ⁓ So we will ⁓ closing them as a front now.
Claudio Meireles: That's perfect. That's perfect to see this integration and to see Kendra in our portfolio, Kendra and the other winners from this constructor start. And we are looking forward to the next batch and this exciting ⁓ new startups that will be part of that next batch. Let me involve here Alex in our conversation. Alex, have scaled ⁓ businesses and led ⁓ &A's at companies like Virtuoso. and parallels, how does that operator background influence the way you evaluate early stage founders?
Alex: Hi, yes, Claudio, thank you. So I will primarily speak now about software. In deep tech, is slightly different. There is a lot of commonalities, but still. So when we invest in software, it's typically post-revenue. So there is already first revenue for one, two years. Companies are already hitting their seven digits. Maybe it's already a few million ARR. Typically, it's recurring revenue. that's a company with the ⁓ life and with the some proof point that there is right value proposition, customer profile, ⁓ and the works actually. So at this point we can speak ⁓ and ⁓ where would leverage my experience as a CEO to see how the founders are going to scale, what challenges they're facing. invest in early stage, that's ⁓ definitely good time for customers, for our for the startup leaders to have a decision about potential extension, pivot changes. So the company is still small, the customer base for them is still small and the the IP generated is already there, but not too ⁓ extensive yet. this is we're helping them to... ⁓ start thinking about the global scale, think about their path to 100 million revenue. And this is, we mentioned here, it's our diligence is deep and these conversations happen within that process. So we are not only asking them questions, we're also giving them quite bit of hints and bringing also along some additional which can complement their teams. And that is helping us. to have a firm belief in their success, helping them to have a better team and plan how to execute. eventually to start arriving to a position when they will be scaling, scaling reasonably fast and coming to potential exit for us, exit for them, which ⁓ typically expect in the range of five to 10 years. And of course, from day one, we would think about the potential exit. And we also have this conversation with the customer with our, sorry, always skipping sales angle, but with the startups, with founders to understand how they're going actually to, what is potential buyer and what is potential story that they will sell to the market.
Claudio Meireles: Okay, that's fantastic. Let me go back here to Fund One ⁓ was already mentioned by all of us that we invest across several ⁓ DeepTech, EdTech, Where you, Alex, see the biggest opportunity right now for Fund One in terms of business models markets?
Alex: Right. we, again, I will, guess I will speak here more on the software side, including EdTech. Maria and Matias are covering TipTech very well. So on software, well, let's start with EdTech, which is kind of a bit more compact niche. It's the smallest of various where we're investing, but potentially it will become reasonably big because the world is changing now as we speak with the AI prevalence and expansion and ⁓ of many jobs and potentially many more. The requirements for the workforce for employees is changing dramatically as we speak. Many people are finding themselves out of their jobs. looking for new jobs. Many people are just graduating and looking for the first entry level job and it is all becoming very different and the education is not designed for it and the EdTech is trying to address it. It's trying to facilitate a faster transition to the relevant skill set, but it is also kind of not there. So ad tech itself should be revolutionized and should be transformed into something that is relevant for today's including AI. And so here we are looking at, ⁓ having a good, deep view of the entire landscape and we are looking for the best opportunities here. who will present the relevant education and skills and knowledge platforms for the next generation of students, learners, teachers, the ⁓ schools, for scientists, for administrators, which be based, course, on ⁓ tailored AI tutoring, adaptive learning systems, which will a lot about corporate relearning and learning systems. If we then move to software. It's all disrupted. You see the variations now significantly dropped over the last weeks, actually, as we speak. The market is very nervous. Possibly it's a bit overreacting, but definitely the shift is happening and the traditional players should either reinvent themselves or slowly die. And many of them will reinvent. They have a lot of drive out and lot of investment capabilities. but many of them will be too inertial and they will not survive. So when we are looking at the software, of course, there are some no-go areas like horizontal size without proprietary data is becoming very difficult to contemplate or generic workflow automation or just GPT wrapper businesses. This all is easy to replicate and easy to replace. So that would be a no-go. areas for us. What will be more interesting is the vertical platforms with the multiple tiers and multiple integrations. So truly ecosystem players. This is difficult to replace. solutions which are setting their standards for integration will be also some of them will be winners and we want to find such. We're looking ⁓ the ⁓ platforms and AI foundational models. Again, not the repers. whatsoever, but the around effective infrastructure, will be developing, it's developing changing every week, every day. And then the security data governance solutions, which are also going to be super in high demand.
Claudio Meireles: Thank you Alex and let me get back here to Deep Tech angle ⁓ to you Marie. ⁓ Deep Tech often with long timelines, technical risk. ⁓ How you balance this scientific ambition with venture style returns in our fund one?
Marie Lepske: Yes. Good question. Thank you. Thank you, Claudio. First, the portfolio here matters. ⁓ And in One, we invest in next generation computing, but we also invest, as ⁓ Alex and Matias mentioned, ⁓ into the software solutions. ⁓ And at same stage, like Series A, next generation computing might still be pre-revenue, and usually ⁓ it's pre-revenue. or only have pilots, while B2B software can be related to unreal operational metrics like IRR, gross margin, year-to-year gross, CACL-TV and so on. That combination helps us balance the exit types and strategy and timelines for each in our portfolio and consequently risk across fund. And secondly, ⁓ with Tech, they are very disciplined about commercial proof, even if it's early stage. If there isn't a formal go-to-market yet, we still validate market pool, speak to potential customers, partners, map the alternatives and competitors' landscape, and build a view on whether the team can realistically achieve meaningful traction in till the next 24 months. Third, underwrite around milestones and execution. We spent a lot of time on the technical product, go-to-market roadmap tied to the round and what gets de-risked, what gets built, what gets validated. And we pressure-test it with the team. So it's ambitious, but should be realistic. And we also manage entry points. Sometimes we invest earlier at proceed or seed when pricing reflects as uncertainty. And sometimes later at series A or doing for loans in our current portfolio companies, even in series B, when more of the technical risk has already been taken out. how we keep our scientific ambitions ⁓ high while still aligning with venture. style outcomes.
Claudio Meireles: Thank you, Marie. And now I have questions for the group. You can take the lead on these questions. Please select between who wants to answer. But let me start ⁓ by team. ⁓ The behind Constructor Capital, who are we? Who ⁓ is team that is shaping this ⁓ fund go forward?
Matthias Winter: Yeah. So basically, you know, the team, so we have the three of us who are, you know, GPs. You have, you know, probably the person who started this all, Serge Bell, who is obviously also GP. He's an LP. He's kind of the chairman of the company who's been an entrepreneur for more than 30 years, super successful, you know, three or four unicorns that he created. So that's the senior leadership. Then we have a couple of ⁓ partners like most funds have in ad tech, ⁓ in software And then we have an incredible team of three associates ⁓ and obviously number of support functions, including ⁓ you, Claudio. that's the core team. ⁓ It's quite for ⁓ a small So if you count it together, it's maybe 12 people. And then we have an extended team, is the experts and ⁓ that work in our network, in ⁓ in ⁓ tech, in constructor knowledge, cetera. So that is, if you want, the extended team. They're all very scientific. ⁓ have science-based education, et cetera. They're all deeply knowledgeable in the area. And we ⁓ leave. That's a good team to start with.
Claudio Meireles: And it's a good mention because my next question goes exactly this constructor because we are the venture engine inside of the constructor group. How can benefit from the constructor group
Marie Lepske: Yes, let me maybe jump in here. ⁓ part of the big ecosystem called Constructor Group and that gives founders real access, not just introductions ⁓ resources like Constructor University in Bremen and Constructor Technology. Practically that can mean partnering with professors and labs for joint for example, ⁓ getting support ⁓ validation role.
Matthias Winter: Bye.
Marie Lepske: even using tooling and software that's already for labs in constructor technology. And corporate ⁓ R &D environments benefits from constructor group as well. Also, IP support from our experts ⁓ in both constructor technology ⁓ constructor group. We have deep scientific advisory network in constructor group. an expanded advisory board with multiple ⁓ Prize ⁓ laureates, senior across areas like advanced materials and quantum-related fields. Founders can tap for technical diligence, product scientific translation and strategy, so the company can make ⁓ sharp decisions ⁓ on to prove and to patent and what to build next. So this is how we usually help this constructor group ecosystem. Also we have not only scientific advisory board, but industrial advisory board which our portfolio companies could use for their industrial and gold market validation.
Claudio Meireles: Thank you, Marie. And now I will go for the LP perspective. What should they expect from FundOne in terms of portfolio construction, geography, stage? What will we deliberately not do? What is the no-go here?
Matthias Winter: Look, so, you know, as we said, fund one is 110 million. We will, I guess we will invest 60 % deep tech. Just the area where, you know, we'll probably have more distinctive expertise compared to many other VC funds, obviously many do software. And then it's maybe 30 % software, 10 % education tech. That's probably the mix in terms of investments. anything, we'll probably ⁓ even more to deep tech because this is where the big opportunity lies at the moment with all the technologies evolving next generation compute, photonic, et cetera. Geographically, ⁓ have open mandate. We really wanted to have ⁓ a mandate is quite flexible. We have the natural mix between US, Europe, ⁓ Southeast Asia. moment we have portfolio companies in all geographies, we don't really have a target there. It really depends on the opportunity. know, sometimes, I it's typical prejudices, right? Typically US companies valued higher, even ⁓ in early but maybe also get to the market faster versus Europe maybe has more profound technology, but need a bit longer. ⁓ We'll ⁓ a of an opportunistic range there. in terms of geography. obviously, yeah, countries where we won't go such as China. But other than that, we left there with an open mandate. We have a 10-year fund with a two-year extension. So we're obviously trying to invest in companies that we can, you know, not all of them wait for 10 years, you know, get some DPI relatively early on. have a few in the pipeline. So we might even after less than two years. uh, have, uh, you know, some real distributions, which would be, which would be good. So that's the mix. And as I mentioned at the very beginning, it's probably 90 % of our investments are in our core portfolio to 15 companies to make a difference. And then we have this construct a start program, which is maybe 10. So that's how I would look at it. Um, we, know, in front one, you need to deliver, you know, exceptionally. So we want to deliver a 30 % IR to our, um, GPs.
Marie Lepske: you
Matthias Winter: moment looks quite good. I mean, we're very young, but we have, you know, an AB to asset allocated of 1.5, which is quite good. Obviously, we didn't return the money yet, but we hope we will do very soon.
Claudio Meireles: We're looking forward to that. And one last question. For LPs and ecosystem partners that listening to us right now or that are connected with the LPs and ecosystem partners, what's the best way to work with us around the fund one? Co-investments, university relationships, corporate partnerships, what's the best way to work with us?
Marie Lepske: Yes.
Matthias Winter: Alex, you wanna take that one?
Alex: Yeah, of course, coin investments, yes. As Matthias mentioned, have often, well, not often, but already happened a few times, we drive the SPVs. When it comes to the following investment, of course, we'll deploy our capital as well. There can be some ad hoc opportunities, which we will also bring to our LPs.
Marie Lepske: you
Alex: ⁓ If we were seeing that it doesn't meet our risk profile criteria from the fund itself, we can still bring some interesting opportunities directly to our piece, which is definitely an advantage of working with us because we have significant coverage in the industry and we process about startups' ⁓ requests. a year. So there is a huge pool. And yeah, in terms of universities, ⁓ that's we are building. This is a huge priority. Liaison with top universities, sourcing startups, finding the top in the industry to collaborate with them, to have the expert and then potentially even to collaborate with the companies which we invest in. So university DNA is ⁓ within fund. within the group, construct a group, also of the group and few dozen of very deep connections that we have with the ⁓ So, is very important. And besides that, of course, we have relationships and building every day with the more ⁓ ⁓ capital both from the preceding, precede stage, same stage, know, seed series to coinvest, and then the later stage. to follow on our investment later. that is also important part of the game, which is ⁓ traditional and we are very here and very collaborative in that regard.
Claudio Meireles: Thank you, Alex. Thank you, Matias. Thank you, Marie. It was great conversation to have with the three of you to dive into ⁓ Capital, our fund one ⁓ ⁓ Group. It was a pleasure to have you here. ⁓ for our audience, you can expect now more interviews and more conversations with ⁓ portfolio companies, ecosystem builders ⁓ ⁓ players in the... in the startup world and in the venture world. They will be hosted not only by me, but also by our partners and those conversations. So stay tuned for the next episode. Thank you.
Marie Lepske: Thank you. Thank you all.
