New venture capital fund

Eon looking for business ideas via startups

Eon is expanding its venture capital business. A fund has now been launched in which third parties can also participate.

Eon looking for business ideas via startups

In the search for innovations for the energy transition, Eon has now launched a venture fund in which third parties are also to participate. The European Investment Fund (EIF), which is part of the European Investment Bank, is the second anchor investor alongside Eon, according to the parties involved. The fund is managed by Future Energy Ventures (FEV). "Until now, FEV has managed Eon's own investments. Even though we call it Fund 1 internally, it is not a fund in the financial sense, but rather the bundled asset investments of Eon," says Thomas Birr, Head of Strategy, Sustainability and Innovation at Eon, talking to Börsen-Zeitung.

With the first closing, Fund 2 has now raised 110 million euros. The aim is to raise a total volume of 250 million euros from third parties by the fourth quarter of this year. The investment phase begins with the first closing. The fund itself is designed for a term of ten years. Investments will be made in the first five years. After that, there will only be follow-on investments, explains Birr.

The Fund 2 is a traditional fund that is also subject to financial market regulation. In the course of the First Closing of Fund 2, we have externalized the FEV. It now belongs to the employees of FEV," said the Eon Chief Strategy Officer. Although FEV continues to handle the existing VC activities, it does so through a service agreement. The themes, regions, and asset classes are precisely defined in Fund 2, but the specific investments are left to FEV. Eon might find it challenging to attract additional investors if it were otherwise.

Digital Solutions

The new fund focuses on digital solutions for the energy transition. According to the information provided, the investment amount per company ranges from one to ten million euros. The goal is to target 30 investments in the innovation centres of Europe, North America, and the Middle East. The investment is exclusively made in sustainable ventures within the core areas of future energy, cities, and technology.

Eon, actively involved in VC investments since 2016, closely monitors and supports the investments. Eon presents specific requirements from its own business to the start-ups, and solutions are then developed through pilot projects. Fund 1 comprises approximately 50 holdings. According to Birr, a low three-digit million euro amount has flowed back to the company from the previous exits.

Performance is in line

"The performance, measured by the initial investment, is around a factor of two," says Birr. He emphasizes that this is comparable to other funds. "In Fund 1, approximately 60% is invested in Europe, 30% in North America, and the rest in the Middle East and other countries," adds Birr.

Even though it may be surprising at first glance that the EIF engages in investments outside of Europe, Birr emphasizes, "We have closely coordinated the future regional profile of Fund 2 with the EIF." He clarifies that the fund's investments in the Middle East or North America are not due to a lack of opportunities in Europe. "Our focus is more on diversity and other areas such as AI and cybersecurity," explains the Eon manager.

Venture capital is crucial for the energy transition

Private venture capital is crucial for the energy transition, acknowledges Birr, and he is pleased that "the entire sector is attracting a lot of private money, from corporations to private equity to venture capital." Birr supports this statement with figures: In 2019, over 500 billion dollars were invested worldwide in Cleantech and Energy Transformation, and three years later, it had already exceeded 1.1 trillion dollars.

In the past, Eon has taken over majority control in individual investments as part of the exit. However, Birr emphasizes that this is not the primary goal of the VC business.

Better managing energy demand is one of the most crucial challenges of our time, emphasizes Marjut Falkstedt, CEO of the EIF, and adds, "This investment aligns perfectly with the strategic goals of the EIF and our efforts to drive the energy transition forward."