Greetings, I'm Gerod Carfantan, Managing Partner at Sente Ventures. I am pleased to share the journey and mission that drive our firm. The inception of Sente Ventures can be traced back to the vision of my partner, Serhat Cicekoglu, a long-time friend and colleague with whom I share a rich academic background. During his tenure in corporate venture capital, Serhat astutely identified climate change and urbanization as critical future risks and opportunities. He noted the vast potential within emerging European ecosystems, brimming with skilled scientists and engineers, yet lacking a mature venture infrastructure.
Recognizing the opportunity to bridge this gap, Serhat established Sente Ventures. Initially launched as an international startup accelerator, we soon transitioned to a focus on strategic investments, partnering with innovative corporations as well as accelerators such as Forest Valley to support the next generation of entrepreneurs. Our hybrid operating model integrates corporate venture capital services with active investment through syndicates, particularly in pre-seed ventures, and encompasses both equity and debt financing for capital-intensive deep tech startups. Our investment focus is twofold: Human Essentials, which encompasses innovations in food, agriculture, and water within the context of urbanization, and the Industrial Circular Economy, which promotes sustainable industrial practices and supports the energy transition. By aligning our activities with these domains, we are dedicated to driving technological innovation and sustainability, ensuring our investments yield substantial returns while fostering a positive and enduring impact on global challenges.
Sente Ventures' Approach to Deep Tech and Business Model Innovation
Our investment thesis is crafted to address the unique challenges and opportunities presented by different markets and technological landscapes worldwide. Cross-border investments are a core aspect of our strategy, but not every opportunity is suitable for this approach. We employ a case-by-case methodology, guided by fundamental principles that distinguish between two main types of investments: deep tech and business model innovation.
For deep tech, which is characterized by significant intellectual property (IP) and patents, our investment decisions are relatively agnostic to geographic boundaries. Strong IP can transcend borders as long as it is well-protected internationally. In contrast, business model innovation often faces greater challenges when crossing borders, as models successful in one market may not easily translate to another due to differing customer needs and market dynamics. Consequently, we are more selective with these investments, avoiding copycat models and focusing on genuine innovation that can scale.
In deep tech investments, the strength of the technology often takes precedence over the founding team. We believe that gaps in commercialization skills can be addressed if the underlying technology is robust. Additionally, we care about the total addressable market (TAM) for deep tech, as pivoting a patent is significantly more complex than adapting a business model. We need assurance of a substantial market for the technology, even if it is not yet fully commercialized. For business model innovation, the criteria shift to the capabilities of the team and their ability to adapt and find market fit. A capable team can navigate initial market challenges and scale successfully. We look for typical venture capital metrics such as customer acquisition costs, lifetime value, and growth traction. Our evaluation criteria also vary by investment stage. In early-stage deep tech investments, we assess the technology readiness level (TRL), qualifications of the developers, and the potential market size. As these startups progress to seed and Series A stages, we seek evidence of economic viability and scalability of the technology. For business model innovation, early traction and growth metrics are critical and good indicators of the team’s ability to execute as well as the business model’s hyper-growth potential.
Post-Investment Collaboration and Success Stories
At Sente Ventures, we place a significant emphasis on collaboration with entrepreneurs in the post-investment phase to ensure their growth and success. Our approach varies depending on the needs and preferences of the startup. Some entrepreneurs engage with us closely, seeking monthly coaching calls rather than formal board positions, while others may interact less frequently. This flexibility allows us to tailor our support to each startup's unique requirements. We maintain a robust community through WhatsApp, segmented into specific technology areas like battery tech, materials, and logistics. This community not only facilitates knowledge sharing and trend updates but also provides a platform for introducing new opportunities such as accelerators and corporate challenges.
I often have calls with 10 to 15 startups in a week, offering guidance and leveraging our network to connect them with potential corporate and financial investors. From seed to Series B, we are well-positioned to help startups secure the next round of funding, often leading syndicates or facilitating introductions to suitable investors. Beyond Series B, startups usually benefit more from the support that the next layer of investors can provide.
Two success stories exemplify the impact we aim to achieve. The first is “Make My Day”, a startup initially addressing EV range anxiety with an app for individual drivers. Realizing a larger opportunity, they pivoted to assist fleets in managing electrification strategies amid sparse charging infrastructure. This pivot proved successful, leading to a Series A funding round and additional government grants.
Another success story is AgEye, a company revolutionizing indoor agriculture. Initially developing a computer vision module to monitor plant health and pest issues, AgEye recently acquired a partner to offer a comprehensive solution integrating automation, computer vision, and AI. This turnkey solution empowers indoor farmers by digitizing agronomic expertise, enhancing yield and quality, and ensuring resilience against climate change. AgEye's innovations promise to bring fresh, high-quality produce closer to urban populations, with the potential for tailored flavor profiles, an exciting prospect for food enthusiasts like myself.
Learning from Challenges: Experience and Forward Approach
Reflecting on our journey, we have encountered investments that didn’t unfold as planned. One notable instance, independent of external factors like COVID-19, involved a startup specializing in battery health evaluation technology. This startup developed algorithms to assess battery quality considering contextual factors such as temperature and usage patterns, which were not accounted for in existing vehicle software. Despite the promising technology, several challenges emerged. Firstly, convincing original equipment manufacturers (OEMs) to adopt a solution that might reveal less favorable battery health was difficult. The automotive supply chain's lengthy integration process further compounded this issue. Secondly, while fleet operators were a potential market, they did not yet perceive battery health as a pressing issue, given the novelty of their electric fleets. Lastly, the startup was based in a Middle Eastern ecosystem, presenting significant hurdles in accessing key customers and conducting trials. From this experience, we gleaned critical lessons that have since shaped our approach. One key takeaway is ensuring the problem being addressed is an immediate and recognized issue, particularly for business model innovations. Solving future problems can be challenging if potential buyers do not yet feel the pain. Additionally, while we support emerging ecosystems, we now more rigorously assess their capacity to facilitate customer engagement and trial opportunities. We also understand that more funding is not always the solution; strategic market positioning and accessible ecosystems are crucial.
Turning to the broader landscape, the current startup ecosystem presents significant opportunities and challenges, especially in sustainability and technological innovation. On the positive side, sustainability has proven to be profitable. Many sustainable innovations do not solely rely on government mandates but thrive through opportunities created by funding programs, particularly in the EU and the US. These programs, aimed at energy transition and climate tech, are propelling startups forward more effectively than regulatory pressures alone. However, challenges remain. Regulatory requirements can impose substantial reporting burdens on companies, potentially slowing progress. Additionally, industries with intricate interdependencies, such as logistics, face substantial hurdles in implementing changes. Altering one component often necessitates adjustments across the value chain, posing financial and operational challenges. For example, changes in warehouse packaging standards can have far-reaching effects, requiring investments that primarily benefit downstream stakeholders.
In conclusion, while the path to innovation in sustainability and deep tech is fraught with complexities, the opportunities for impactful advancements are substantial. At Sente Ventures, we remain committed to navigating these challenges, leveraging our learnings to drive meaningful, sustainable growth.
Advice for Aspiring Entrepreneurs in Technological Innovation for Sustainability
My advice to aspiring entrepreneurs looking to make a significant impact in technological innovation for sustainability is to focus on problems that startups can effectively address without the need for large-scale systemic changes. There are numerous opportunities to drive meaningful change, but it's crucial to identify issues that don't involve extensive interdependencies. Attempting to overhaul an entire system is a monumental task better suited for large corporations or government interventions.
For instance, consider the challenge of reusable packaging. This area requires a comprehensive transformation of the entire logistics system, encompassing both outbound and inbound processes. Such an endeavor is daunting due to the myriad interdependencies involved. Instead, entrepreneurs should target specific parts of a system where innovative solutions can be implemented with less resistance and complexity. So, where I have seen reusable packaging work well and scale, it is in the “intralogistics” (middle mile) part of the value chain, rather than all the way to the end consumer. By solving a focused problem within a larger framework, startups can create significant impact and pave the way for broader systemic changes over time.
In summary, aim for scalable, impactful solutions that address discrete known problems within larger systems, thereby maximizing your potential for success and innovation in the sustainability sector.
