E95 [AI-Translated] – ZKB Pionierpreis | Farmy | AcceleratorX | Market Snapshot April | Gründerteam-Bewertung | Covalo

00:00:00: The original podcast was recorded in German.

00:00:03: This podcast was translated using Artificial Intelligence, Burnrate the Venture Insider Podcast with Max Meister and Guy Gioffredi.

00:00:12: Hello!

00:00:13: Welcome to Burnrate – the VC Insider podcast.

00:00:16: I'm talking here with Guy Giaffrede about the startup scene with a focus on venture capital.

00:00:21: We've reached episode ninety-five.

00:00:24: We are recording on Wednesday, May the thirteenth at

00:00:44: nine o'clock in And.

00:00:53: as the third news item, we will briefly discuss Accelerator X a new European startup acceleration program that also has partners in Switzerland.

00:01:03: As the main topic We have the burn rate market snapshot for April on the programme and The listener question revolves around the gut feeling of VC investors.

00:01:13: At the end, we will discuss Kovalo's financing round as a transaction of First, there was a keynote in the official part about failure.

00:01:46: Quite different topic for such as startup prize where actually yes mostly most promising startups are awarded.

00:01:54: and that topic is acceptance of failures should be integrated better into our culture And they were also few examples Of course.

00:02:00: always with first it's a failure then basically Phoenix from The Ashes something exciting still emerges In end comes back to successes after failures and that you shouldn't give up, I found it interesting.

00:02:17: Then all nominated startups were able to pitch.

00:02:19: so five start-ups two minutes each.

00:02:22: It was definitely well done very well prepared i think we won't reveal here who one.

00:02:26: And yes afterwards there was of course an extensive aperitif with networking opportunities There where quite a lot exciting colleagues from the ecosystem met few new people.

00:02:39: And yes, all in all I would say it was a well-organized and good event.

00:02:43: Five startups were in the final RTDT One.

00:02:47: We know the company with a sensor system for wind turbines.

00:02:50: The main prize is famously endowed with one hundred thousand Swiss francs and rtdt Is developing Aerosense?

00:02:57: A flexible sensor patch that is directly attached to the rotor blades and measures pressure vibration and stress there.

00:03:04: And this data flows into a digital twin and is then intended to help make wind turbines more efficient, reduce material stress and ultimately lower maintenance costs.

00:03:15: It wasn't just an RTD T-show – two other startups were recognized as runners up!

00:03:20: Glyco Era, a biotech company developing new approaches for targeted treatment especially of autoimmune diseases and preparing a phase one study.

00:03:29: And Roboa which is building a robotic system that is basically kind of robot snake for inspections in hard to access environments This technology apparently already being used by infrastructure operators Revenue.

00:03:46: In addition, there was the audience award worth five thousand Swiss francs that went to Seacraft.

00:03:52: The startup is working on high performance chips based on thin film lithium Neobates.

00:03:58: I had to read That out.

00:03:59: so a technology that converts electrical signals very efficiently into optical signals.

00:04:04: This is relevant for For example, fast data transmission in fiber optics, datacenters AI infrastructure and future communication networks.

00:04:15: Yes guy when you look at these finalists wind energy autoimmune therapies robots for infrastructure photonic chips energy infrastructure is this for you a good picture of where Swiss deep tech currently stands?

00:04:29: before we go into the question here I would first like to briefly express my congratulations to Aris and Emad.

00:04:36: We know RTDT very well, we already covered them on burn rate.

00:04:41: they also gave us feedback on that And Aris was one of our employees actually a VC turned founder and joined RTDt as late co-founder.

00:04:51: The guys celebrated it extensively.

00:04:53: It's really nice how happy the two were.

00:04:57: To come back your question whether these startups are good picture I would say, yes.

00:05:04: in my eyes that really stands out.

00:05:06: We had topics that are not only technologically demanding but also operate in very large markets.

00:05:13: so energy health care infrastructure data transmission and yes roboa in construction tech.

00:05:19: these are not just small problems niche problems But they all solving problems in large markets That also represent enormous potential.

00:05:28: it also shows the Swiss startups Are often strong where it is about complex research precision and long development cycles.

00:05:36: We have perseverance there, It may be a little less loud than some consumer app or consumer facing product but potentially much more substantial because enormous amounts of IP are being built there And especially with the prize like ZKB pioneer prize which really has visibility.

00:05:56: Yes, you could see very well now that deep tech is not just a buzzword but yes something really being pursued concretely in Switzerland.

00:06:04: Now as an investor Max which start-up aside from the winner RTDT of course do find them most exciting?

00:06:11: I

00:06:13: quite like Seacraft everything related to AI infrastructure and making data centers more efficient.

00:06:24: If the chips really enable high data rates while consuming less energy then they are sitting on a very exciting topic here.

00:06:32: I naturally think so too, i also had good discussions with team after their presentation and yes overall to wrap things up briefly event works not only as an award ceremony but is great showcase for different forms of deep tech from Switzerland.

00:06:50: For me, the real takeaway is that The ZKB Pioneer Prize doesn't simply show a single winning startup but rather fairly broad picture of what's currently being worked on in Switzerland.

00:07:01: And this I find interesting!

00:07:03: Let's move onto the second news item... It's a bitter one.

00:07:06: eFarmy is finished, the Zurich based online farm shop has ceased operations immediately and it's initiating bankruptcy proceedings.

00:07:15: And yes for both Farmy & Pico-Lebensmiddle with which Farmy had only merged in.

00:07:21: Farmy had long been one of the better known Swiss food startups.

00:07:25: Founded in two thousand fourteen, grew strongly then received another major boost during covid.

00:07:31: at its peak The company employed over to hundred people but after the pandemic volume apparently declined sharply and never really recovered.

00:07:40: In twenty-twenty four, there was already a harsh restructuring.

00:07:44: The Akhublan's location was closed.

00:07:46: Twenty nine employees lost their jobs and the merger with Pico Lebensmittel was supposed to bring synergies and reduce costs but according to CEO Thomas Zimmerman ,the revenue decline recently intensified.

00:07:59: now There is no sustainable perspective left he said And more than one hundred employees are likely to lose their jobs.

00:08:06: Guy is far me perhaps a classic COVID boom case, meaning the start-up that generated huge revenues during pandemic but later realized that change consumer behavior simply would not last permanently.

00:08:20: I'd say this's certainly a classic Covid boom case... They were active much longer than COVID existed, but during COVID they grew enormously.

00:08:30: Accordingly it really is a textbook example of how dangerous it can be to interpret temporary growth during the Covid period as a structural shift in society.

00:08:38: During covid It looked like everyone would now only order groceries and everything else online But afterwards Many customers apparently fell back into their old shopping routines, and accordingly there was less revenue for Farmy.

00:08:52: And food delivery or online grocery-delivery services... In addition to that the margins are extremely tough and highly competitive.

00:09:01: these are fresh products.

00:09:02: it revolves around cold chains logistics then there are returns last mile delivery.

00:09:08: all of this is extremely expensive.

00:09:10: when volume declines model suddenly collapses again under fixed costs.

00:09:14: If we zoom out a little now, Max.

00:09:16: What is the biggest lesson from FAMI for you?

00:09:18: Is it that food e-commerce in Switzerland is extremely difficult or that startups should pay much earlier attention to profitability and cost structures after a hype

00:09:27: moment?".

00:09:28: It's

00:09:28: a difficult question!

00:09:29: We also saw this with

00:09:31: stash...with

00:09:32: quick delivery.

00:09:33: I mean The costs are simply very high in Switzerland And uh You can't just make them disappear unless you work together With delivery robots.

00:09:41: There are also first attempts there, they also existed in Switzerland but especially the USA.

00:09:47: Yes and cost structure is already ugly right?

00:09:50: And I mean naturally food e-commerce in Switzerland is difficult anyway.

00:09:55: You have a small market relatively high wages, high logistics costs but on the other hand you also have very demanding customers right?

00:10:04: The real problem if your model strongly depends growth and volume then that volume must not suddenly collapse.

00:10:12: so focus immediately on profitability.

00:10:15: okay Fair enough, do that.

00:10:18: But then you will never be in a position to achieve market share an interesting market share.

00:10:24: That is exactly the problem that farmy had that we had at stash right?

00:10:27: We grew very strongly but You cannot have both and when the markets suddenly changes And everyone screams for profitability Then of course you can not let's say correct The business model within eighteen months.

00:10:38: it simply takes longer Right!

00:10:41: Yes...that Is what happened To Farmy as well.

00:10:43: I mean they Had the luck.

00:10:45: during COVID demand existed.

00:10:46: I remember that well, it exploded right?

00:10:49: Suddenly you had huge numbers of people paying crazy basket prices and then of course Farmi also thought yes now we go full speed!

00:10:56: Now will become many higher-many people and so on... And they assumed –and you can't blame them for–that growth would continue after Covid or rather nobody knew how long Covid would last…I mean that it went so quickly.

00:11:09: the solution was found and so forth..nobody knew all this.

00:11:12: You'd have been stupid as a starter not to use that opportunity, right?

00:11:17: And then having to backtrack afterwards is very difficult and they simply couldn't manage it.

00:11:22: Therefore this now unfortunately the logical

00:11:24: consequence.".

00:11:25: Yes I mean... That's an important point you raise especially for startups with physical logistics.. ...that one must keep in mind again-and-again.... ..the story can be super exciting!

00:11:37: Farmy everyone really ordered there was truly extremely cool.

00:11:40: their service also well done.

00:11:42: but at the end In such cases operational excellence also decides.

00:11:47: and with groceries yes as you said.

00:11:51: The room for error is extremely small.

00:11:54: if demand drops a little then suddenly u are below the margins,

00:12:01: Exactly, let's come back to the third news item.

00:12:04: With Accelerator X a new program for AI startups is launching!

00:12:09: The exciting thing that it isn't primarily about coaching pitch training or investor access but early market access.

00:12:16: The three month programme brings start-ups together with potential pilot customers from their very first week.

00:12:22: For this, AcceleratedX uses a network of thirty four marketing and communications agencies in thirty European countries.

00:12:31: This network includes over two thousand specialists in marketing and communications primarily.

00:12:37: In Switzerland, for example the Sankt Gallen agency Die Boatschafter is participating as The Swiss Hub.

00:12:44: The target group are AI startups in the seed phase that already have an initial functional product version And they're looking solutions to real problems For

00:12:54: e.g.,

00:12:55: in MarTech, HealthTech, FinTech, RetailTech or ClimateTech.

00:13:00: Applications are open until June.

00:13:02: thirtieth, twenty-twenty six.

00:13:04: Ten to twelve startups are planned and the program will begin in September.

00:13:08: Accelerator X was co-initiated by Axel Toma lecturer at The University of St Gallon.

00:13:15: His point is interesting –the biggest hurdle for AI start ups–is often not technology and not necessarily capital either but market access.

00:13:25: And he's off course…not wrong there Guy, do you find it plausible that for many AI startups today the bottleneck is no longer technology but access to real customers and concrete use cases?

00:13:39: It depends somewhat on how deep or strongly deep tech-oriented the AI startup is.

00:13:47: There are of course start ups developing a completely new model in there which may be less relevant But just few weeks ago we had Oli Fluckeger from Vibe.vc As a guest with us and with Vibe.vc, they focus precisely on application cases built with AI And I would say these are rather less deep tech very close to applications.

00:14:12: There you really have to say especially in AI.

00:14:14: the market for application AI meaning basically rappers that already contain some technology is extremely loud at the moment.

00:14:22: there are many teams building demos and tools, at first glance they all look impressive when they are pitched.

00:14:30: They're also created very quickly with AI meaning that it's very quickly copyable.

00:14:35: It is further developed at rapid speed which means the decisive question then becomes yes!

00:14:41: Are you really solving a problem for your customer?

00:14:44: Is someone paying for this?

00:14:47: That is why I find the focus on pilot customers of the program from Meaning Accelerator X rather interesting.

00:14:55: An AI startup can look very good in a pitch, but in real customer context that's where it becomes clear whether the product actually works and whether there is willingness to pay?

00:15:05: Would you say that Accelerator X especially exciting for MaTeX startups max precisely because of the agency network or are they also for other AI start-ups as mentioned by several industries?

00:15:19: Can this become relevant too?

00:15:21: The obvious sweet spot is MarTech because the network comes from marketing and communications agencies.

00:15:27: And there are also direct use cases such as content, campaigns analytics

00:15:32: etc.,

00:15:32: and agencies can relatively quickly test whether a tool helps them or their customers Although I believe it can definitely also be applied more broadly, especially because these agencies are active in thirty countries.

00:15:48: A startup can get feedback from different markets relatively early on.

00:15:52: that is valuable provided they have a clear communication sales or customer side application That Can Also Be Tested Well and for me the core message Is An Accelerator Especially Valuable When It Doesn't Just Talk About Market Access But Actually Creates real access.

00:16:10: And that is exactly what Accelerator X is trying to do!

00:16:14: This episode is presented by AARE Ventures, the Bernie's Business Angel Club.

00:16:20: AARE ventures connects ambitious Swiss startups with experienced investors who offer more than just capital – a strong network, real expertise and hands-on support for the crucial early steps.

00:16:32: If you want to grow as startup or an investor are looking for access Then apply for our next event at www.araventures.ch, Wenger and VLE – your partner law firm for startups!

00:16:48: Whether founding financing round or exit, start-ups face complex legal challenges.

00:16:54: Wenger & VLE supports founders in every phase of their company with tailored advice on corporate law, financing tax matters and IP protection.

00:17:06: Let's move on to today's main topic, the burn rate market snapshot for April.

00:17:10: twenty-twenty six.

00:17:11: And as always we start with Switzerland.

00:17:13: We have of course compiled the entire list and according to this around two hundred and twenty-two million Swiss francs were invested in twenty eight financing rounds in swiss startups and scale ups during april.

00:17:24: In addition there were eleven million francs in grants and loans.

00:17:27: There are also various transactions where no amounts were disclosed.

00:17:35: Back then in March, three hundred and thirty-three million were invested in nineteen financing rounds with Kandu of course accounting for the lion's share of the volume with one hundred and seventy five million.

00:17:47: The breadth is significantly stronger though.

00:17:50: In April we see not just one or two large outliers like in march but a whole series of relevant rounds across different sectors

00:17:57: Exactly.

00:17:58: And it's important to emphasize again, our compilation is of course not completely sharply separated between equity debt secondary grants or loans especially in April.

00:18:10: this is particularly relevant because we have several special cases a secondary at BLP digital for example a pre IPO financing at Centiel capital increase at Onward Medical and then as mentioned several undisclosed or strategic transactions.

00:18:26: If you look at the large financings, BLP Digital naturally stands out with a US dollar secondary from Goldman Sachs.

00:18:36: This is not fresh primary capital for the company but very strong signal.

00:18:41: A profitably growing Swiss AI scale-up of more than four hundred and fifty enterprise customers Is being viewed by global asset manager as category leader candidate in AI supported enterprise automation.

00:18:55: That is quite interesting.

00:18:57: And the second major transaction as well, Onward Medical was a capital increase of forty million euros not a classic startup fundraise but really financing on the capital market.

00:19:08: then we have Gentiel or Centiel with around thirty million they raised shortly before the IPO The Reverse Merger with HT-Five.

00:19:16: that's also an exciting Swiss Capital Market story.

00:19:19: We've also discussed it on burn rate.

00:19:21: you can gladly listen to.

00:19:23: It is almost the opposite of a classic venture capital financing.

00:19:27: Yes, we had several other transactions between ten and twenty five million Acutronic with twenty-five million US dollars in defense tech or aerospace operations case.

00:19:38: Then The Climate Tech Case from Planetary With Twenty Two Million Swiss Franks And The Fifteen Million Round From DAFNET Technology Was Also Communicated.

00:19:47: There was also an exciting transaction in cybersecurity, namely that of Bug Bounty Switzerland with twelve million.

00:19:54: That was a series A and the over ten million round from Alpine AI.

00:19:58: those were all so relatively large financing rounds

00:20:02: And when I look at the list here overall In March The picture was strongly shaped by AI Semiconductors and several monster rounds foundational model and software stories.

00:20:18: But we see AI in enterprise processes like BLP, sovereign AI at Alpine AI and AI diagnostics at Moonlight AI and naturally cybersecurity and climate tech.

00:20:30: that raised rounds

00:20:31: here.".

00:20:31: The exits in April were exciting as well.

00:20:34: Polariton was acquired by Marvel Technology a clear AI infrastructure exit.

00:20:40: Polariton's Plasmonix technology fits directly into the next generation of optical interconnects for data centers, and besides other exits I personally find it noteworthy that the assets of ninety labs were acquired by BD.

00:20:54: And in addition there are two major special topics TerraQuantum they're planning a NASDAQ listing through a SPAC deal with evaluation slightly more than three billion US dollars and Vivardis Through a strategic minority stake by Apollo, it achieved unicorn status.

00:21:12: Yes that shows that April was not only about the financing volume of over two hundred and twenty million Swiss francs but also many other exciting dynamics and events in the swiss-financing world.

00:21:24: The conclusion for Switzerland... ...April wasn't month one dominant mega round But a month with very broad activity.

00:21:32: Particularly strong were AI applications with clear enterprise use cases, climate and industrial tech med-tech biotech and cyber security.

00:21:42: And what is striking?

00:21:43: Many rounds have international investors or strategic players in the syndicate.

00:21:48: so we heard Goldman Sachs Apollo EQT Marvel Taranis Utkar ventures and many more.

00:21:55: that shows Swiss companies are globally competitive.

00:21:58: but The old question remains how much value creation, ownership and upside remains in the Swiss ecosystem?

00:22:22: In March, by comparison there were two rounds more.

00:22:33: Two hundred and ninety-two deals and significantly...more capital!

00:22:37: Seven point five billion euros.

00:22:40: that means almost the same number of rounds but significantly more capital.

00:22:44: Yes exactly deal?

00:22:46: activity remains stable But the large capital blocks are being distributed in a more concentrated and selective way.

00:22:54: Tech.eu therefore describes April as a month in which European tech financings cooled down, although deal flow remained stable.

00:23:04: Sector-wise there was an interesting shift in April while AI dominated in March.

00:23:10: CleanTech led in April with € one point three billion euros.

00:23:15: This shows Europe is not just an A.I story, capital allocation rotates between different industries.

00:23:21: at the largest deal as mentioned was actually even slightly more than one point three billion euros.

00:23:26: if I'm reading this correctly here Steg from Sweden raised one point four billion euros for green steel meaning sustainable steel production and then inevitable intelligence from England.

00:23:36: meeting from the UK raise one point one billion US dollars in a seed round.

00:23:42: so major AI research case.

00:23:44: We are also excited to see how that story develops.

00:23:47: In third place came Aura Aero from France with three hundred and forty million euros, And they're building hybrid electric systems for aviation.

00:23:55: After that we saw several infrastructure in deep tech topics With financing rounds of one-hundred to two hundred fifty million euros per company.

00:24:03: So quite impressive.

00:24:05: Regionally the UK also remained a leading funding hub in April.

00:24:10: UK funding reached nearly two billion euros in April after more than two and a half billion euros, still clearly the leading position.

00:24:20: Exits look rather weaker.

00:24:22: there was a decline from fifty-two exits March to thirty five in April so around one third fewer.

00:24:29: this confirms pattern we have seen for months.

00:24:32: Funding is selectively available.

00:24:34: liquidity through exits remains challenging.

00:24:37: So one can say that in Europe as well, April does what it wants.

00:24:41: activity is there but not really euphoria with all the rain and weather changes.

00:24:47: Not a hype month But A Month That Showed Several Capital Intensive Strategic Deep Tech Bets

00:24:53: Exactly.

00:24:53: let's move on to The Listener Question And this week's listener question comes from Leander.

00:24:58: He asks I would be interested in how you evaluate founder teams at Kojo, meaning our fund.

00:25:05: Do you have a framework for example for leadership conflict capability and role distribution or does it still come down to gut feeling?

00:25:17: Yes of course everyone says we invest people And that is naturally true and you hear it from many investors.

00:25:23: But what does that mean concretely?

00:25:25: How do you recognize whether a founder team is really resilient, so the topic of resilience—whether it can solve conflicts productively, whether their roles are clearly distributed, whether the founders still function when the first plan fails which is almost always the case… When financing takes longer –which is always the cases– or if market reacts differently than expected And that is where it becomes exciting because when it comes to product, market size revenue customer acquisition cost lifetime value or runway many investors are very analytical.

00:26:02: There are models everywhere there.

00:26:04: our benchmarks they're a comparables but when he comes to the team often become more difficult.

00:26:09: people speak about chemistry energy persuasiveness drive or gut feeling and Leander's question addresses exactly at point.

00:26:17: If team dynamics are so decisive, why are they often assessed less structurally than the numbers in the pitch deck?

00:26:24: And is the famous gut feeling of VCs really an advantage or sometimes simply a bias that can become

00:26:30: expensive?".

00:26:31: Guy let's start the discussion with that.

00:26:34: At its core Leander asks...

00:26:44: Yes very exciting question.

00:26:46: I mean gut feeling is certainly an asset and if you are evaluating a food tech startup, you shouldn't do it while hungry or right after eating.

00:26:54: But with the neutral level of hunger let's say not too hungry and not to full... You just must not confuse gut-feeling with the truth but it is definitely an asset that you sharpen over time as an investor.

00:27:05: You develop a certain instinct for how to assess cases.

00:27:10: in founders I mean you have to say that experience is not worthless.

00:27:16: Critically question and reflect on yourself each time, especially when you have seen many founders.

00:27:22: Then you develop a sense and feeling for how someone thinks?

00:27:26: How they communicate whether there is really substance behind the story.

00:27:29: but The problem is that feelings can also shift very quickly.

00:27:34: suddenly You mistake charisma for leadership and self-confidence For competence or you compare founders to successful founders because they have a certain similarity and then suddenly you read real potential into it, And are completely wrong.

00:27:48: With founder teams It is dangerous because You often have only a few interactions before investing A pitch?

00:27:55: A few conversations Maybe a dinner.

00:27:58: From that you Have to derive whether these people can withstand extreme uncertainty for five-to ten years go through conflicts and endure enormous pressure from the market The team in private life.

00:28:09: That's huge prediction based on very thin data foundation over just a few hours.

00:28:16: Therefore, you can perceive gut feeling as a signal but it should never shift the entire investment case into a definite yes we absolutely must do

00:28:24: this.".

00:28:25: And what would AVC have to concretely do differently in order to evaluate founder teams better without directly turning it into let's say a soulless assessment center?

00:28:35: The

00:28:36: first step I would say is team quality.

00:28:39: You have to take it just as seriously as the market or product and everything else that can be analysed based on numbers.

00:28:46: You cannot simply say, yes!

00:28:48: The team is actually most important thing.

00:28:50: so you also define what means by this.

00:28:53: And there are several examples where you can assess here more closely.

00:28:58: how do founders make decisions?

00:29:00: How they deal with... Contradictions are their clear role distributions between the founders and can they openly address conflicts?

00:29:08: Have they already solved difficult situations together, how do they react when you attack their assumptions.

00:29:15: Those are always exciting assumptions, but sometimes you still have to question them.

00:29:19: And I always try to proceed in a structured way and not ask these questions randomly... ...but systematically integrate them into the due diligence process.

00:29:28: so every team receives a few specific core questions in every conversation.. ..and several people on our side meaning you & i And when we involve someone external, should examine exactly the same topics independently from one another just like you would do with a financial model.

00:29:46: Then yes... We discuss our observations and how we individually interpreted them so that we don't simply have an assessment saying Yes!

00:29:56: The CEO was really strong but instead what did he do?

00:30:00: well?

00:30:01: What specifically I find good?

00:30:04: Where was he or she convincing?

00:30:08: And then you have a basis for discussion, and that doesn't make the process impersonal.

00:30:13: But on the contrary it forces you to look much more closely at how people react.

00:30:19: Now let's turn the question back to you Max.

00:30:22: Why does this gut feeling persist so stubbornly in the VC world even though everyone knows It is extremely prone to error?

00:30:30: Yes, because gut feeling fits the story of the industry.

00:30:34: VC lives from outliers meaning exceptions and from one founder who wins against all odds And from investor that saw something others did not see.

00:30:43: These stories are part of VC culture.

00:30:46: Just yesterday we had a discussion together.

00:30:48: I spoke to you with full conviction about start-up Because i have seen the founder Not because case was rationally interesting.

00:30:56: You, on the other hand had never met The Founder.

00:30:59: Hey, this is a winner type.

00:31:13: He can change the world and his gut feeling gave me good

00:31:17: feelings.".

00:31:17: And that's exactly what is exciting when you look at really big bets especially from Michael Moritz of Sequoia or John Deweyre of Kleiner Perkins.

00:31:27: These were always bets, where at that point in time you could not see it.

00:31:31: It was purely gut feeling from those VCs because they found the founders extremely exciting and believed this person would truly make it And naturally also did due diligence.

00:31:42: But what is especially convincing Was that they recognized much earlier than others That something huge can emerge here.

00:31:49: but thats exactly why danger lies Because when an investment works out gut feeling is often glorified in hindsight, right?

00:31:58: When it doesn't work out people often talk about market timing and product but more rarely.

00:32:04: About whether the team may have been misjudged.

00:32:07: that happens very rarely And I believe many VCs overestimate how well they can derive long-term collaboration conflict capability and leadership quality from short encounters.

00:32:18: Therefore, in my opinion it is important not to conduct these conversations online but exactly as we do at Kojo.

00:32:25: We go there very quickly.

00:32:27: We look at things on site.

00:32:28: We observe the facial expressions and body language of the founders and try to form a concrete picture of the situation.

00:32:37: that brings enormous value...

00:32:39: Not just being cowboys following through analytically and taking everything seriously from day one when you get to know the startup, absorbing and reflecting on these signals.

00:32:51: Max what is a practical takeaway for investors who hear Leander's question?

00:32:56: And say hey okay we want to improve our team assessment.

00:33:00: Yes no rocket science.

00:33:01: build yourselves.

00:33:02: small repeatable system not huge procedure.

00:33:06: No founder psychology show but clear set of questions and criteria.

00:33:11: For example Investors could evaluate four things after every founder meeting.

00:33:16: First, how clearly are the roles distributed within the Founder team?

00:33:20: Second How do they deal with conflict or resistance.

00:33:23: The question is can you even assess that?

00:33:25: You have to ask and ask about past conflicts?

00:33:28: Third, how well can they learn and change their opinions ?You can test it with a provocative Question for example How resilient is the collaboration under pressure?

00:33:39: That's also highly hypothetical because maybe the founders have never really been under pressure up to that point.

00:33:45: Yes, and very important!

00:33:47: Don't only discuss it together during a partner meeting... ...because then everyone influences one another but instead note it down individually beforehand.

00:33:56: What did I observe?

00:33:58: what my hypothesis was?

00:34:00: where do i need more evidence?

00:34:02: so It is very important here also have bilateral contact with the founders and not simply go into the investment committee.

00:34:12: And a senior partner who speaks first gives a devastating judgment about the founder team, You really have to proceed cleverly there so that you have a realistic representation of reality, so-to speak.

00:34:26: That is what I can pass along to investors

00:34:28: here.".

00:34:28: So let's come to the transaction of the month.

00:34:32: The decision was not easy regarding which transaction we wanted to prepare for this episode.

00:34:37: We discussed it intensively and ultimately decided on Covalo.

00:34:48: Exactly, the startup from Zurich completed a seed extension round of €三 point five million in April.

00:34:56: twenty-twenty six.

00:34:58: The Round was led by Hay Inov with participation from existing investors namely HTGF and Seed & Speed Ventures.

00:35:06: Kovalo was founded in Twenty-Twenty One.

00:35:09: You mentioned it!

00:35:10: They are based in Zurich and operate at the intersection of ingredient data infrastructure BtoB marketplace and AI-supported product development for the personal care industry.

00:35:22: What is exciting, this isn't a classic market place but rather an attempt to become the shared data backbone of an entire industry essentially operating system for ingredient data.

00:35:34: at same time it's exciting because not university case meaning ETH or EPFL spinoff.

00:35:41: they were founded out as a spin off The original platform, what was it called?

00:35:47: Cambry.

00:35:48: Was launched in twenty eighteen as an innovation project within Clarient a specialty chemicals company from Switzerland.

00:35:56: They used the platform internally for several years and had already indexed around forty thousand beauty ingredients And they had already attracted users from several thousand brands and over one thousand suppliers.

00:36:09: then in March In twenty-twenty one, it became concrete and the spin off was established as an AG named Kovalo with the former Canberra employees.

00:36:17: Kovalo was founded by two COCOs Timo von Barman & Jan Gilbers.

00:36:22: They still run their company together today.

00:36:25: What is strategically smart about The Origin story Is that through years at Clareant they not only built a functioning product And an existing user base But above all generated A deep understanding of supply side.

00:36:38: If as a platform you want to connect both sides of the market, for example brands and suppliers then it is an enormous advantage to understand the pain points on both side well.

00:36:49: And that's naturally the case with Timo & Jan.

00:36:53: Absolutely!

00:36:53: You can say this... They are addressing a structural huge problem The personal care industry, cosmetics skincare haircare and all related categories in the FMCG Market.

00:37:08: That is a market of over five hundred billion dollars and it's still growing massively by over five percent according to some research, even over seven percent.

00:37:18: But innovation in this industry depends extremely heavily on ingredient data.

00:37:23: And exactly this data is extremely fragmented.

00:37:27: It exists on some document that gets delivered or maybe stored as a PDF and every single product that people put on their face or wash their hair with has thirty-five to forty ingredients.

00:37:38: And sometimes these ingredients then have twenty, or thirty documents attached to them safety sheets regulatory compliance sustainability etc.

00:37:48: etc...and all of this in different formats from different suppliers!

00:37:53: You can imagine quite a challenge and data chaos that can be generated there.

00:37:57: And that is exactly what makes up everyday life in research and development.

00:38:02: The regulation in procurement is extremely inefficient, teams spend a lot of time manually gathering validating and reconciling data through email PDFs and Excel.

00:38:14: Data exchange between brands and suppliers Is still fundamentally analog.

00:38:19: In addition A new product takes on average three to five years until market launch, and part of the problem for Kovalo comes down to inefficient data management.

00:38:29: They also told us they expect regulatory tailwinds by twenty thirty.

00:38:34: many products are expected to require reformulation especially because off EU green deal micro plastics packaging reforms.

00:38:44: that means a massive increase in data complexity and they want to become the structured database there.

00:38:51: And then, of course also apply AI to their data in order to make the industry's modern digital workflows as efficient as possible.

00:38:59: Very briefly what does Kovalo actually do?

00:39:03: Kovalo started as an ingredient discovery marketplace, meaning essentially a search engine through which formulators can find raw materials compare them and directly inquire with suppliers.

00:39:15: Today, with over eight thousand listed ingredients from more than one-thousand five hundred suppliers it is one of the largest ingredient platforms worldwide.

00:39:24: And the decisive factor is that company then strategically evolved away from pure market place toward central data infrastructure for the entire industry.

00:39:35: In doing so,

00:40:00: Yes, and that is already an important difference compared to classic marketplaces or a business intelligence tool.

00:40:07: Covalo does not simply want to offer better search-or prettier dashboards but rather become a neutral shared data infrastructure – essentially a system of record in which ingredient data is managed in a structured way once and can then be reused everywhere.

00:40:23: Cavallo now also plans to build industry specific AI agents for conversational analytics automated RFI workflows, data extraction but also data enrichment and regulatory compliance checks.

00:40:38: And why Covalo is convinced they can achieve this?

00:40:42: They are first building the data engine and only afterwards introducing agents that are trained on the data.

00:40:48: according to Covalos This actually one of most important success criteria.

00:40:53: Let's move onto.

00:40:53: traction already connects more than one thousand five hundred suppliers with over six thousand brands today, so definitely growth since the founding or spin-off from Clarion.

00:41:06: And these brands and suppliers are based in more than One Hundred and Forty Five countries.

00:41:10: The customer list contains some heavyweights.

00:41:13: We will come back to that shortly later From the feedback we received from Timo which

00:41:19: The operational metrics available to us support this.

00:41:23: Platform engagement increased by eighty four percent in twenty twenty five with one point three million monthly interactions.

00:41:31: Net revenue retention is above one hundred and forty-five percent, that means existing customers spend significantly more year after year And according to Kovalo the largest customers expand their usage by two three times per year.

00:41:46: That's certainly a strong signal for PMF For product market fit in the platform network effect.

00:41:53: We received feedback from Timo von Bargen.

00:41:55: He said that on the supplier side, they work with large multinationals such as Givaudan and SimRice.

00:42:02: They are in the enterprise tier and have signed multi-year contracts with Kivalo.

00:42:06: That is exciting because there increasingly also winning medium sized players like Shimmer & Schwartz And these companies use Kivalot as their single point of truth for all product data.

00:42:18: So this data case really seems to be resonating in industry.

00:42:22: On the brand side, they work with houses of brands such as Puig and are currently in advanced discussions with eight of the ten largest consumer care brands worldwide.

00:42:31: That sounds quite impressive in terms of traction And these companies all manage billion dollar portfolios.

00:42:43: Let's also come to the financing history.

00:42:46: Kovalo was spun out of Clario at the beginning A seed round led by HTGF, the high-tech Grindefonds Germany with participation from Speed & Seed Ventures, The GECO Group and several angel investors including a former Deloitte Germany partner for chemicals in sustainability

00:43:14: at different valuations.

00:43:22: When I look here, our modelled cap table the first investors paid a pre-money valuation of three point five million and for the following investors The valuation had risen to six and then seven million respectively.

00:43:33: now Three years after the seed the seed extension round off three point Five million follows with high enough in the lead.

00:43:41: Heinoff is a European B-to-B fund based in Paris, Lyon and Munich.

00:43:47: Typically investing in series A & B meaning B to B SaaS and digital infrastructure.

00:43:53: H, TGF and seed and speed continue to participate as existing investors And the seed extension was flat round Meaning shares were issued at same price as those of previous rounds.

00:44:05: Ergo, new investor paid an eight point four million pre money valuation.

00:44:11: The post-money valuation is now twelve and a half million, And the total of five million has already been invested into Kovalo through equity.

00:44:19: So at this point we are pleased to briefly welcome Martin Melman from HTGF, the high tech Grundefons.

00:44:27: He's a principal there.

00:44:29: In his role he acts as board observer at Kovalo led investment in first round also second round.

00:44:36: Naturally We're extremely pleased that you giving us investors perspective here.

00:44:41: Martin, welcome to Burn Rate.

00:44:43: Hello guy!

00:44:43: Happy to be here.

00:44:44: Martin let's jump straight into the questions.

00:44:47: HTGF has been invested in Covalo since twenty-twenty three and is now participated again in The Seed Extension.

00:44:53: What was your investment rationale back then?

00:44:55: In Twenty-Twenty Three And what has developed Since Then.

00:44:58: that made you say hey we are increasing our exposure and participating Again Now.

00:45:04: so I think what continues To fascinate us besides the team's deep expertise which Is not So common in this market Is actually also the sheer market size itself because it's about this immensely large market of FMC Gs meaning fast moving consumer goods and production development of new products in this segment.

00:45:21: And you really notice when you deal with that a bit, When you talk to some players or customers on these markets there is need for automated great deals because complexity has increased immensely recent years.

00:45:32: The whole topic regulation sustainability all things are increasingly becoming part of this entire topic, production and product development.

00:45:42: And the companies there are not overwhelmed I wouldn't say that but they definitely perceive it as a significant challenge in need.

00:45:48: support their and Kovalo is great solution that can offer exactly that namely building these bridges so you understand much better what market offerings even exist when you're formulating new products?

00:46:00: That hasn't changed.

00:46:00: i would even say opposite.

00:46:01: The topic has become more relevant especially we now look at all these tariff issues that are increasingly impacting internationally.

00:46:09: That means a broader picture of the market and available ingredients for producers is extremely important, and Kovalo can help

00:46:16: there."

00:46:17: And that has rather been confirmed... ...and that's why we're happy to continue being part of it!

00:46:31: and then they also have a supernet revenue retention.

00:46:39: Which of these metrics is the most important for you as an investor in recognizing product market fit?

00:46:45: And perhaps, you can also say a word or two about Revenue.

00:46:47: maybe that would go too far though Of course You don't Have to Go Too Far out on The branch there.

00:46:52: So I think There Is Never This One Number That Somehow Makes The Difference But It Is Always A Combination of Extremely Many Things.

00:47:00: We have simply seen that usage has increased tremendously, which in turn indicates this.

00:47:05: need for such a solution is highly relevant.

00:47:07: And above all it also has to be said Kovalo hasn't spent any money on paid marketing.

00:47:12: really not single cent.

00:47:14: everything's organic.

00:47:15: A lot naturally comes through customer contacts and trade fairs because in the sector still happens.

00:47:22: But they have built a brand awareness that works so well, That they've been able to steadily increase these numbers again and again.

00:47:30: So this is one thing that convinces us And what you can also see when we think about What could do now if We started spending some money.

00:47:36: Then there's lot possible.

00:47:37: The other thing of course Is net revenue retention You just mentioned.

00:47:40: They're extremely loyal customers And the customer sees value in their solution.

00:47:44: There are hardly any churn very minimal.

00:47:47: When it happens It usually because the company Exits market or something like.

00:47:51: But once they are involved, they see the value and then book more packages or want larger solutions.

00:47:56: Sometimes building their complete customer portals on Kovalo's solution because they already have so much data that they can build on And this also enables them to now set up such a customer portal within just a few days.

00:48:08: Earlier That was much more complicated but They invested A great deal of brain power into it.

00:48:12: So there is Now very good Solution There.

00:48:15: Overall we Are Very Satisfied with The Development Disciplined approach, especially regarding the team.

00:48:22: They didn't overpace and hire fifty people or something like that as some others in this segment did who had a backing of large industrial conglomerates but rather did it very disciplined focused very well on the right an important topics And therefore It was no question for us That we would continue.

00:48:37: We are happy to continue This journey with Kovalo Now also together With high enough.

00:48:42: So it sounds As if The seed has really caught.

00:48:45: Earth is now beginning To grow slowly.

00:48:48: What does Kovalo now have to show in the next twelve, eighteen or twenty four months so that this seed extension becomes a really strong series A story with an enormous valuation boost?

00:48:59: Is it mainly about revenue or enterprise customers internationalization.

00:49:04: Or they also want to integrate much more AI into the product?

00:49:08: what evidence do we need?

00:49:10: The starting point for the series a is right one exactly.

00:49:13: so i think what we definitely have to do now is monetize the traction.

00:49:17: We already had even more and converted it in two customer portals and larger contracts.

00:49:22: they all ready know how.

00:49:23: their first contract.

00:49:24: that are clearly six figure contacts, A lot of potential on both sides.

00:49:29: On one side, there are the FMCG brands that depend on the data... ...on the other side you naturally also have the suppliers meaning those actually providing these ingredients and naturally they want to participate.

00:49:40: They also want to offer their customers a very good offering so that they can always access the data And receive the latest information perhaps about new ingredients.

00:49:49: We simply notice Customers are increasingly open to going on a solution like Kavalo because they see that the interaction with their potential users is very high.

00:49:57: That means it's about contracts, naturally also this enterprise fit and bringing in larger customers but maintaining net revenue retention meaning expanding existing customer relationships.

00:50:10: you always have to remember I don't know in a house of brands like L'Oreal or something similar extremely many brands behind them.

00:50:17: if you can gradually work your way through then it makes tremendous sense and is a lot of fun because you can repeatedly share success stories within the corporation, Also, with the understanding that the sales cycles there do not let's say happen with a snap of fingers.

00:50:34: The team is very experienced in this and also acts with certain patients and repeatedly identifies an addresses important players gives them right talking points again.

00:50:42: but it will certainly occupy us even more over next twelve to eighteen months.

00:50:58: everything the way it has now been planned together with you.

00:51:01: Thank You very much!

00:51:08: The data quality, the timeliness.

00:51:24: The AI agents running on top of it.

00:51:27: that is our mode.

00:51:28: second we are investing in sales and go to market.

00:51:32: until now We were very founder led in sales.

00:51:34: That got us far.

00:51:35: but for the next phase?

00:51:37: We need a sales organization that scales.

00:51:40: independently Of John and me

00:51:42: A And they also said something about what their key milestones are To reach further series A. I quote first product expansion.

00:51:50: We are building the next layer above our data layer, meaning intelligence and first productive AI agents.

00:51:56: Second, monetizing the first use cases.

00:51:59: we currently have several pilots running among others in the area of regulatory compliance.

00:52:04: these must transition from pilot to paid product.

00:52:08: And third significantly expand customer base especially on brand side where pipeline is now opening up.

00:52:15: The overarching goal remains clear to become the data backbone of consumer goods industry.

00:52:22: Everything we do upto series A contributes.

00:52:25: that is Timo's statement.

00:52:27: yes when you look at it, if Kovalo manages establish itself as a shared foundation for personal care then an extremely strong vertical platform case emerges.

00:52:38: The industry is extremely fragmented, regulation-driven and hungry for data.

00:52:42: exactly the environment in which structured data plus AI agents can deliver real

00:52:47: leverage.".

00:52:52: I mean, three point five million for the planned expansion is certainly tight especially if enterprise sales cycles at larger companies become long.

00:53:09: Right?

00:53:10: And therefore yes one can also definitely be skeptical as an investor.

00:53:23: Kovalow is an exciting Swiss B-to-B platform case.

00:53:27: We still have those in Switzerland too, one really has to mention that here.

00:53:31: on Burnrate we don't always only have deep tech cases.

00:53:35: this Is not simply a hype topic but they are tackling A real structural industry problem and Have already spent over five years building An impressive user base and traction.

00:53:45: So that was Burn Rate, the VC Insider Podcast.

00:53:49: If you want to support our podcast subscribe to The Newsletter and share it within your network!

00:53:54: Thank you very much for listening.

00:53:55: we wish you a wonderful weekend.

00:53:57: take care and bye.