Deep tech and high fashion rarely appear in the same sentence. Nikolai Lefstrup wants to help change this.
Mr. Lefstrup is best known as the co-founder of the quirky-cool fashion label GANNI, which he founded in Copenhagen with his wife Ditte more than 20 years ago.
Nikolaj stepped down as CEO of the company in 2018 to focus on global environmental responsibility. He is also one half of the founding team of Look Up Ventures, an investment platform that supports startups in energy, carbon, food, and of course materials science.
GANNI itself is no stranger to the biomaterials field and is already working on phasing out virgin leather from its product range and launching partnerships with start-ups developing alternative materials. For example, the company recently partnered with Modern Synthesis to launch the former’s signature Bou Bag, which uses a leather-like alternative material derived from bacterial fermentation. [Disclosure: AgFunderNews parent company, AgFunder, is an investor in Modern Synthesis.]
Just don’t call it leather. “Be as careful as possible not to compare yourself to existing material,” Lefstrup warned startups in a recent interview. agfunder news Ahead of a speaking slot at the Rethinking Materials Summit in London in May. Comparisons, he argued, ultimately lead to disappointment in differences and a complete disregard for the possibility of entirely new materials and experiences.
Lefstrup added that biomaterials and other deep tech startups may also consider other funding routes other than VC.
Mr. Lefstrup talks about hard technology financing, the opportunities and challenges of alternative materials, and how Look Up Ventures helps startups navigate this new and critically important space. Read the insights.
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AgFunderNew (AFN): When did you start paying attention to sustainable materials?
Nikolai Refstrup (NR): When we started GANNI as a project, it wasn’t included. At that time, I didn’t know that the fashion industry was in a worse situation than other industries.
I started working on CSR around 2013. [corporate social responsibility] Journey. And by 2016, we doubled down on reducing our carbon footprint. We have started monitoring and offsetting to impose a carbon tax on our activities. When trying to regulate human behavior, nothing beats monetary penalties.
Since then, CO2 reduction has become a major priority for us. When we planned our carbon footprint, we realized how important it is to find new and innovative materials. Because in our case, our products account for 80% to 90% of our carbon footprint. He is two-thirds if not more of the actual material.
AFN: How does GANNI work with new materials and what are the challenges?
NR: The challenge we see at GANNI is very simple. We have a very clear carbon reduction target of 50% by 2027 compared to 2021 in absolute terms. We can only get there if we switch to materials with a better carbon footprint. Therefore, startups and incumbents are needed to bring innovative new materials to market.
There is a huge demand for comparable climate-friendly products. [the materials] You can already be there, so if you can bring it to market, the market is there.
there are big challenges [doing] that. There’s a science component, an engineering component, and a marketing component.
The science part: Our experience has shown that many problems with new product development can be resolved faster than expected. Of course, there are some deep technologies like Rubi Laboratories that have great potential, but may take longer than others because there are a lot of moving parts. But otherwise, we often rely on years of aggregated research before spinning out a startup, so it’s more common to reach a significant stage relatively quickly. I can.
When you get to the engineering or scale-up stage, you need to lower the unit cost. There are funding issues and we need to interact with the market to truly understand what the market is looking for, not only in terms of quality but also in terms of price. Must be dropped into existing infrastructure or supply chain. Things like how much you can commit to in terms of volume and duration.
As it turns out, the engineering and scale-up stages of a project are a bigger challenge than most people anticipated, and are often more difficult than the science part.
AFN: How did these challenges emerge while working with these companies?
new jersey: We run a department or virtual team that we call “Future Fabrics”, where we work with around 30 innovative new materials at various stages, support them, understand them, interact with them and commercially. We try to make it doable. stage. We offer them a clear path to the core of our business. We ask the right questions to help them understand the market and so on, and in the end we end up with a project like this: Renew Cell I did a few things here Joint research laboratory – [including GANNI made with Circulouse]. We try their products, are willing to pay the premium they want, and appoint them as a supplier to one of our sub-suppliers.
And they get pissed. [Renewcell declared bankruptcy in February of this year.]
AFN: How many times has it happened?
new jersey: That also happened in the case of Milo, for example. [a leather-like material from Bolt Threads], we were quite far away. We had launched some marketing strategies, and if we could have delivered them at scale, we would have been fully aligned with the product categories as well.
It’s happening at many small startups. It’s a natural part of the technology ecosystem.Has a software background and a venture background [Reffstrup worked with a range of venture capital firms and startups before co-founding GANNI], I see it over and over again. That’s the name of the game, but it’s difficult for established companies that rely on these products to continue operating at scale.
AFN:What do you look for in the material?
new jersey: It depends on the material, but generally the product must compete with goods traded throughout the global supply chain.
We sometimes forget that as a product moves along the supply chain, each step adds value to the product, and someone is paying for that added value. That motivates us to move forward in the value chain.
In many cases, textile recycling and recycling-based products upend the value chain. Whereas previously we obtained raw materials from the fields at the beginning of the value chain, we now obtain raw materials at the end of the value chain.
This means competing with established, highly efficient value chains that are essentially linear, low margins. You’ll probably get away with a 20% to 40% premium for a while. But the market says no one will pay more than a 10% premium during the transition period. Ultimately, we need to bring prices closer to parity with substitute products.
Particularly in the textile industry, try to avoid comparing to existing materials if possible.
For example, when it comes to alternative leather, the moment you call it “alternative leather” it is compared one-to-one with calf leather.
Consumers perceive calf leather as a premium material. Actually he’s about $25 out of a $2,500 bag. It’s a product. Very versatile. It is made in large quantities. But that perception still exists, right?
I would rather do that [startups] They take what they have and launch it as a new product, like when nylon was introduced to the market.
AFN: What is Look Up Ventures and how are we tackling these challenges?
new jersey: I have been involved in some capacity with climate change issues in various capacities for over 30 years. Recently, we learned that if we want to support the green transition, we need to work on deep and hard technologies. If we want to reach net-zero status, we need to transform everything around us into greener versions.
Look Up Ventures — By the way, this name comes from the movie “don’t look up” — that’s what we call our venture office.
We invest from our own balance sheet and sometimes do SPVs with a close network of people, primarily in the fashion and technology industries. So you can be completely opportunistic. They may also allocate resources to understand serious challenges and build solutions to those challenges in-house. We are stage agnostic in our investments, as the traditional concept of investment stage does not necessarily make sense when dealing with deep tech and hard tech companies. [That model] It is used by software companies. Run pre-seed to get a minimum viable product, and run A and B rounds to build the market.
in this case [hard tech or deep tech], we are in a different situation. You’ll probably need a lot of upfront money to prove the basic science to get started on the engineering part. Then you need to build a factory, but it’s hard to get to Series A because you have no income and no one to fund a pilot plant.
At this point, everyone is fixated on series seeding. What we’re seeing is a seed expansion, or “series pre-A.” Because no one meets the Series A criteria unless it’s software.
So we try to think in terms of readiness for scale rather than in terms of investing. Start with TRL [technology readiness level] And make sure you agree on what TRL actually means and entails.
We then further enhance our techno-economic analysis to understand in detail what is actually happening. [the startup] Think about what you can do, what you need to overcome, and where you can add value. And how do you plan to lower unit costs?
Next, think carefully about how much capital you actually need to get to a pilot plant. Are there soft grants? Is there debt available? Are there other ways to build a capital stack? How much capital do you actually need? Can you aggregate market demand through offtake agreements or other less tangible commitments? Can it be used as a bank?
So instead of just claiming, “This is Series Seed or Series A,” we’re putting all of that together to make an informed investment decision.
Through that, we hope to overcome some of the problems that hard tech companies are not necessarily structured for venture capital.
The end goal of most deep tech and high tech companies is to build factories and produce goods. If I communicated that to venture capital funds outside the universe and didn’t mention the climate, no one would invest in factories producing goods. It just doesn’t exist. We need a new kind of investor here.
AFN: Who have you invested in so far?
new jersey: We have a portfolio of about 15 companies. The last investment we made was Ruby Institute, which captures carbon and turns it into cellulose pulp.promise [of their technology] If we can find a way to overcome some of the challenges they face, it will pay off tremendously.
We made late-stage investments primarily because we wanted to understand alternatives to palm oil. C16 Bioscience with Groundbreaking energy venture But we generally feel more comfortable investing earlier.
But our biggest priority right now is building a platform that fosters market transparency and liquidity by aggregating demand in the form of derivative-like offtake contracts.
There’s a lot that can be achieved with offtake agreements – see what the amazing team at Syre are doing with polyester recycling – but either people don’t understand what it means or There are many industries in which you may have a contract. There are so many loopholes that it will never happen.
There are other industries that have offtake agreements, but they are very difficult to obtain and don’t necessarily offer them to startups.
We get large companies to commit to offtake agreements so that startups know exactly what they’re working toward and know there will be a payoff at the end of it. I think it is possible. Then, using those aggregated offtake agreements, [justify] We are investing in some of these companies to help build the large-scale facilities that we all desperately need.
