Executive Summary
In this episode, Max Narr, General Partner at Blue Forest Ventures, discusses their strategy of bridging the gap between scientific innovation and investment by translating complex ideas into compelling equity stories. Blue Forest Ventures focuses on deep tech investments with ticket sizes between 500,000 and 1,000,000 euros, excluding heavily regulated fields like drug development. They leverage alternative data sources and AI for market evaluation and emphasize the importance of impactful solutions and diverse founding teams. Max shares insights on their evaluation criteria, investment approach, and recent innovations, highlighting their commitment to combining financial success with positive impact.
"Naming the Fund with Purpose": "However, the truth of the matter is that it's a combination of one of my favorite strategical frameworks, which is Blue Ocean, which is about, having a different perspective on your strategy and trying to think outside the box."— Max Narr - General Partner at Blue Forest Ventures
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The Dilemma in Early Stage Venture Capital: "The one thing that always bothered me in early stage venture capital is that the conflict you have between having to look at 100 and 100 of companies in order to find the companies you're interested in, on the one hand. And your fund size is limited, so the budget you have through your management fee is limited. And so there's this conflict of you don't really have enough money to do a proper job in evaluating all the companies you look at."— Max Narr - General Partner at Blue Forest Ventures
Introduction
Welcome to another episode of Startuprad.io! Today, we dive into the world of deep tech investments with an exciting conversation featuring Max Narr, General Partner at Blue Forest Ventures. Max sheds light on the critical role of translating complex scientific ideas into compelling equity stories, especially for founding teams and investors who often speak different languages. We explore Blue Forest Ventures’ strategic focus on a diverse portfolio of deep tech companies, their unique approach to evaluating investments using alternative data sources, and the importance of a data-driven methodology in predicting market trends.
Max also shares insights into the evaluation criteria of technological readiness levels and the significance of problem-solving with strong economic benefits. He discusses a case study involving a company revolutionizing soil hydration and crop yield, emphasizing how deep tech can seamlessly combine financial success with positive impact.Join our host, Jörn “Joe” Menninger, as he delves into Blue Forest Ventures’ data-driven philosophy, the essence of heterogeneous founding teams, and the fund’s mission to bridge the gap between academic research and the commercial world. Discover how Blue Forest Ventures leverages AI tools and computational advancements to support early-stage deep tech companies and drive meaningful innovation. Tune in for an inspiring discussion on the future of deep tech investments and the unique ecosystem Blue Forest Ventures is fostering from their hub in Berlin.
"Importance of Being Data Driven": "Because the data driven allows us to make much better predictions of future market developments and future product developments in order to assess not what's the market right now, but what will the market be when the product's ready."— Max Narr - General Partner at Blue Forest Venture
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The Benefit of Diverse Founders in Startups: "According to the data, it looks like, a heterogeneous founders team, which means if you have a large diversity in the founders team, right, once you cross a certain threshold is very beneficial."— Max Narr - General Partner at Blue Forest Ventures
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The Power of Diverse Teams: "It's also friends and, you know, you get along anyway, so you become a team. Yes. That makes it easy at the beginning, but don't fall into the trap that there is a risk if you always have the same opinion."— Max Narr - General Partner at Blue Forest Ventures
Questions Discussed in the Interview
What are the primary challenges Blue Forest Ventures faces when translating complex scientific ideas into compelling equity stories? How do they overcome these challenges?
Max Narr mentions that Blue Forest Ventures avoids investing in heavily regulated fields like drug development due to regulatory risks. How does this focus on less-regulated fields impact their investment strategy?
The podcast mentioned Blue Forest Ventures’ use of alternative data sources for evaluating potential investments. What are some examples of these alternative data sources, and how do they differ from traditional financial data?
How does Blue Forest Ventures balance the need for significant economic benefits with the drive for impactful deep-tech solutions? Can this balance lead to potential conflicts?
What is the significance of having a heterogeneous founding team in a startup, as emphasized by Max Narr? How can diversity within the team contribute to the success of a deep tech venture?
Max Narr discusses the technological readiness level (TRL) in deep tech investments. Why is it important for companies to progress beyond the theoretical stages to attract investments, and what indicators signify this progress?
What technologies in data transmission and storing excite Max Narr, and how do these technologies underpin advancements in fields like quantum computing and AI?
Blue Forest Ventures integrates impact measurement into their investment evaluation. How does this integration influence their investment decisions, and what metrics do they use to measure impact?
How does Blue Forest Ventures stay informed about new deep tech innovations? What sources do they rely on, and how does this information influence their investment choices?
The episode mentions a company evaluated by Blue Forest Ventures that developed a material to help soil retain water and minerals. What are the broader implications of such innovations on global agriculture and sustainability?
"Founding a New Venture": "We got together and, and we we founded Blue Forest Ventures, and, took on right away a long term, a long time employee of mine that I've, hired right out of university 4 years ago."— Max Narr - General Partner at Blue Forest Ventures
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"One of the primary examples of that and really hats off to them is what the ETH Zurich has created in Zurich around the ETH."— Max Narr - General Partner at Blue Forest Ventures
The Audio Podcast is set to go live on Thursday, June 13th, 2024
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Maintaining Sustainability by Design: "What we're able to do, and this is really nothing that I want to take too much credit for because it's just because we're new and we can set up structures new, is we integrate the measurement of impact and the measurement of, you know, the effect of the companies in future, the likely effect. We integrate that into our evaluation system."— Max Narr - General Partner at Blue Forest Ventures
The General Partner
In this episode of Startuprad.io, we are thrilled to host Max Narr (https://www.linkedin.com/in/max-narr/), the General Partner at Blue Forest Ventures. Max brings a wealth of experience to our discussion, having a unique blend of expertise in both venture capital and the scientific community. Before co-founding Blue Forest Ventures, Max co-founded Endosane, a company focusing on creating drugs for psychiatric and neuropsychiatric diseases through clinical trials. With Blue Forest Ventures, Max has shifted his focus to a broader horizon, targeting deep tech companies that are navigating the challenging transition from academic research to commercial success. Based in Berlin, the fund aims to cover an expansive geographic footprint, including Europe, North America, and selectively Southeast Asia. Max’s role at Blue Forest Ventures is pivotal; he operates as the business-oriented anchor of a team that helps scientific founding teams translate complex ideas into compelling equity stories, ensuring innovativeness does not drown in academia but rather thrives in the commercial sector.
Blue Forest Ventures, the brainchild of Max Narr, reflects a fascinating fusion of strategic foresight and technological advancement. The fund’s name is quite intriguing, derived from the Blue Ocean strategic framework and the random forest algorithm, symbolizing their data-driven and predictive approach to investments. With a clear focus on early-stage investments in deep tech industries, Blue Forest Ventures is set on aiding companies that face non-technical yet critical challenges, often overlooked in the initial phases. Despite their broad scope, they steer clear of heavily regulated fields such as drug development due to the complexities involved. Instead, their portfolio includes innovative solutions with tangible economic benefits, like a material that helps soil retain water and minerals, significantly reducing irrigation needs and boosting crop yields. As they plan to build a portfolio of around 40 companies with initial and follow-on investments, their average ticket sizes range between 500,000 and 1,000,000 euros, aiming to balance financial success with profound positive impact seamlessly.
"How We Find the Next Big Thing in Startups": "Our model is based on a fairly unbiased gathering of information. So what we do typically is actually go to the universities into the accelerators and try to have a fairly objective look at the entire cohort of StartupRadio is there."— Max Narr - General Partner at Blue Forest Ventures
The VC Fund
Blue Forest Ventures (https://www.blueforest.ventures/) is a Berlin-based venture capital fund that centers its investment strategy on early-stage deep tech companies, specifically those transitioning from academic research to commercial applications. With a focus on facilitating the translation of complex scientific ideas into compelling equity stories, Blue Forest Ventures bridges the communication gap between scientific founding teams and potential investors. Their portfolio aims to include around 40 companies, emphasizing initial investments in the range of 500,000 € to 1,000,000 €, with the provision for follow-on investments to support continued growth. Avoiding heavily regulated fields like drug development, the fund leverages alternative data sources beyond traditional financial metrics to assess market potential, ensuring that their investments not only yield financial returns but also create meaningful impact.
Under the leadership of General Partner Max Narr, Blue Forest Ventures may play a pivotal role in supporting deep tech innovations with substantial economic benefits. Max, a seasoned professional with a background in science and venture capital, stresses the importance of a heterogeneous founding team and a data-driven approach to predict future market and product developments. The fund stays informed through a diversified information stream, incorporating data from universities, accelerators, scraping technology, scientific publications, and patent registrations. Notably, Blue Forest Ventures combines financial success with a positive societal impact, seamlessly integrating impact measurement into their investment evaluation process. Their strategic vision, inspired by the “Blue Ocean” framework and the “random forest” algorithm, underscores a commitment to pioneering scientific discoveries with commercial viability across Europe, Southeast Asia, and North America.
Endosane
You can find the interview with Max — Published in June 2022 — with Endosane here:
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Links / Further Readings / Additional Resources
Random Forest: https://en.wikipedia.org/wiki/Random_forest
Blue Ocean Strategy: https://en.wikipedia.org/wiki/Blue_Ocean_Strategy
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The Interviewer
This interview was conducted by Jörn “Joe” Menninger, startup scout, founder, and host of Startuprad.io. Reach out to him:
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Automated Transcript
Jörn "Joe" Menninger [00:00:00]:
Hello, and welcome, everybody. This is Joe from Startuprad.io, your Startupradio podcast, YouTube blog, and radio station from Germany, Austria, and Switzerland. Today, I would like to welcome Max again. Hey. How you doing?
Max Narr - General Partner at Blue Forest Ventures [00:00:13]:
Hey, Joe. How are you doing?
Jörn "Joe" Menninger [00:00:15]:
I'm doing great. Thank you. People may know you as the cofounder of Endozane that I interviewed recently, but we're here because you kind of shifted careers?
Max Narr - General Partner at Blue Forest Ventures [00:00:29]:
I mean, I think that's a lot to say. Endosane is still very much up and running. And, as a matter of fact, in December, we closed our last financing round. We were kind of discreet about it because, we don't really profit from a lot of media attention at Endosane, and, that's why we're not searching for it. However, as you might remember, Endosane is focused on creating new drugs for the treatment of psychiatric and neuropsychiatric diseases. And as such, we conduct clinical trials in order to obtain FDA and EMA approval. And now these trials and why these studies are running, my personal involvement as nonscientific founder, cofounder of of Endosain, is somewhat limited. So, my my primary duty is always to create the infrastructure, the setting, and primarily the, the financing needed in order to conduct studies.
Max Narr - General Partner at Blue Forest Ventures [00:01:33]:
Once that has happened, my involvement is is not needed to the same extent as before. So we're in this situation, which allows me to to, also follow, other avenues I'm very interested in and leave the day to day operations to the scientific, cofounders of mine, mainly Catherine or Leiter.
Jörn "Joe" Menninger [00:01:53]:
I see. And we are talking because one of those venues you've been talking about is setting up a new VC fund in Berlin. You have announced this, I I do believe, a few weeks ago?
Max Narr - General Partner at Blue Forest Ventures [00:02:08]:
Yes, indeed. Very excited about that. We founded Blue Forest Ventures. We're based in Berlin. However, we invest, across Europe and selectively in North America and Southeast Asia.
Jörn "Joe" Menninger [00:02:22]:
Uh-huh. I see. And, of course, the first important question everybody has on on their minds, why Blue Forest?
Max Narr - General Partner at Blue Forest Ventures [00:02:28]:
Now I could tell you, like, the the beautiful marketing story that's that's, I could make up around this, which is that, I like the metaphorical image of, individual trees representing our portfolio companies that do stand alone but are all interconnected with their roots, below the ground. However, the truth of the matter is that it's a combination of one of my favorite strategical frameworks, which is Blue Ocean, which is about, having a different perspective on your strategy and trying to think outside the box. And, the second part, so the blues from that, and the second part, the forest, is, from, my favorite algorithm for predicting future, for predicting basically future events, which is random forest. And since this venture capital fund, and we'll we'll talk about this in a couple of minutes, I'm sure, is, heavily data driven and heavily, driven by the attempt to use data to predict the future as much as possible. This felt very adequate and and fitting to to a name.
Jörn "Joe" Menninger [00:03:44]:
For, the people now following us, we first may get out of the way that you're early stage investor. That means people can pitch you a pre seed seed. Are you also doing series a?
Max Narr - General Partner at Blue Forest Ventures [00:03:58]:
Typically, we wouldn't. We might in a series a, because, obviously, we do save up a a certain amount of of our total funds in order to be able to do follow on investments. So, if we're already invested through precede and seed financing in a company and we feel for whatever reason we want to participate in the series a, we can. However, that's certainly not our sweet spot.
Jörn "Joe" Menninger [00:04:26]:
What what was what was the core vision, the idea behind it, why you've set up this fund? Is there, was there, like, one event, one minute where you thought, oh, that struck me. That's why I decided to set it up or was it a gradual process?
Max Narr - General Partner at Blue Forest Ventures [00:04:46]:
I mean, I think there's element of both in there. I think at the core, there's a fascination with 2 things. On the one hand, the fascination with science and with the scientific attempt to solve the problems that we face. So we haven't mentioned that so far, but, Blue Forest is focused on deep tech companies solely. Joe, companies that come from a scientific or engineering background. Now this fascination of the scientific approach is paired with the specific stage that these companies we're looking in, into are in, which is pre seed and seed, which means really the 1st institutional money they typically get. So you have a a university project, a PhD project, where a team comes together because they have an idea to commercialize a scientific solution that they've discovered. And now they might become part of an accelerator program or an incubator program.
Max Narr - General Partner at Blue Forest Ventures [00:05:53]:
They might get a little bit of grant funding, but there comes the stage where they need to sort of leave the nest, so to speak, and receive the first external financing. And this is us. We want to help these companies with that leap. And in my experience, and I can tell that from my own experience having founded a biotech before, this first step outside of the protected environment of the of this academic background into the commercial world is one of the most difficult steps to achieve at a start up. And specifically, to obtain, the the amount between 250,000 a1000000 is very difficult because there are not a lot of VCs that are ready to invest ticket sizes that small. And so there's there's the fascination of the complexities of the situation on the one hand. And on the other hand, maybe more towards the, oh my god. Now we can do it.
Max Narr - General Partner at Blue Forest Ventures [00:06:57]:
The one thing that always bothered me in early stage venture capital is that the conflict you have between having to look at 100 and 100 of companies in order to find the companies you're interested in, on the one hand. And your fund size is limited, so the budget you have through your management fee is limited. And so there's this conflict of you don't really have enough money to do a proper job in evaluating all the companies you look at. So you have these VCs that do what what's called spray and pray, and they just invest 50,000 in whatever company basically has half way of a PowerPoint presentation in a certain segment, and they just hope that one of them will make it. And there is the other sort of segment, and I I that that's not an attack on anybody, but that's like, okay. I've come from this world of venture capital. Now I am some sort of a guru and through sitting across from somebody, I can somehow feel whether they will have what it takes to be successful. I don't really think that that's interesting.
Max Narr - General Partner at Blue Forest Ventures [00:08:06]:
Even if it was true, it wouldn't be scalable or repeatable. So the moment that really brought my partners and I to this moment of, yes, we can do it, is basically the possibilities that arose through robot process automation as in AI and the AI tools that are available now in the combination with the computation cost that basically went down dramatically over the last years, which means that the kind of mathematical modeling that was reserved to hedge funds and large funds in the past is now achievable for small funds as well. And that means that we can save so much time and so much effort, on the human resources side that we can do a proper job evaluating those companies. Right? And so, I'm sorry for the for the little bit long answer to that question, but the reality is it's a combination of all these factors that led us to be like, okay. Now is the right time. We're ahead of the curve with this approach, and and we want to do this.
Jörn "Joe" Menninger [00:09:17]:
Let me quickly structure my thoughts here. So, at at first, I'm not trying to make light of the situation because an investment the first VC investment may have a life changing impact, hopefully, for the better. But it sounded kind of like you are the business body of a more scientific oriented founder team. Would that be appropriate to say?
Max Narr - General Partner at Blue Forest Ventures [00:09:44]:
I think that's not making light of it at all. I think that's, yeah, I think that's appropriate to say. I I typically, say them a little bit different way, which is we are also translators. Right? We translate, because very heavily scientific founding teams with typical scientific backgrounds, on the one hand, don't really speak the same language, so to speak, as the investors world on the other. And, in a way, there is almost a translation needed from a complex solution to a compelling equity story. And we believe that there is lots of good projects and lots of good ideas and even good teams with high potential where the ideas never get funding just because they were uncapable of translating the idea into a shape and form that's digestible for most VC investors.
Jörn "Joe" Menninger [00:10:49]:
And, the other question I had is where or did the statement or explanation called as you like? Because, you are aiming for around €60,000,000 in your fund. And, the people are calculating in their head, well, they can make up to 60 investments, but that's not necessarily true. As you said, you may participate in a series a round. So that means you have assigned some of the money for the initial investments and then maybe half or even larger part for the so called follow-up investments that you still have, a relevant stake, a big stake in the Startupradio that are doing success for the fund raising instead of growing successfully. Right?
Max Narr - General Partner at Blue Forest Ventures [00:11:37]:
Absolutely. So, we're aiming to have a portfolio size of around 40 companies, which means that we're, aiming to to, invest in 40 initial companies and have the rest as follow on. So now if I tell you that our average ticket size will be between 500 and a1000000, right, you can do the math very quickly that we save up up to 40% to do follow on investments. And that's that's that's a fairly standard ratio, specifically at early stage to to have some dry powder to do follow ons.
Jörn "Joe" Menninger [00:12:14]:
We've been talking about ticket size. We've been talking about the stage. But we have not talked about which industries, which sectors are you investing in. And little disclaimer, if there would be only AI, it would be too boring and we wouldn't have an interview here. You are talking about deep tech, but very, differentiated. What kind of investments you are looking for here?
Max Narr - General Partner at Blue Forest Ventures [00:12:41]:
Look. I think let's start by talking about what deep tech really means because as AI and deep tech feels like this almost label that people slap on onto something, and nobody really knows what it means. So at the core of it, deep tech just refers to technological solutions for complex scientific or engineering problems. Right? So now I understand that that's very broad, and it is broad. Right? And and we're not we're not trying to say it's not, it's it's not a very broad field. Now there's we invest across a very large part of that field for two reasons. 1st, the there's every venture capital fund, every investor has to ask themselves the question of what do they bring to the table for the companies. Right? And, a lot of of VCs specialize in certain fields and certain industries, and so they can bring a lot of industry and field specific knowledge to those companies.
Max Narr - General Partner at Blue Forest Ventures [00:13:47]:
However, that's not what we primarily claim. Of course, we can bring that through our network of advisors and through our network in the industry. But our primary asset that we bring to the table is in the translation, is in everything that's not specific to the deep tech field we're talking about. Because these founding teams often struggle with most of the other issues that are not related to their specific technological invention, right? They struggle with creating a proper business plan, with assessing product market fit, with, with building the structures, with building the teams that are necessary to achieve their goals. And that's where we we come in and we can really help them. And so this is true for all of of of the subsegments of Deep Tech. Now the only reason that this is possible is because of the stage we're investing in. Right? If we talked about the series a company, that wouldn't be possible.
Max Narr - General Partner at Blue Forest Ventures [00:14:50]:
We would need to specialize because the problem that a series a company faces has nothing to do anymore or very little to do anymore with creating a proper business plan. They're past that. Right? So in a way, the stage we have selected allows us to be very broad in our investment approach. And the second part is that the sectors we don't invest in. Right? And and, it pains me to say, but drug development, the the company I cofounded would not fall into our investment scheme. Right? And, this has something to do with drug development and all the the deep tech fields that are heavily regulated. One of the biggest risks they are facing is of regulatory nature. And the regulatory risk is very difficult to hedge outside of being very specialized in the field.
Max Narr - General Partner at Blue Forest Ventures [00:15:48]:
Right? Because we have the scientific side, you have the, you know, what we bring to the table, the financial, the business side, we can handle these 2. Right? But if there is the complexity, the added complexity of a very, very complicated regulatory process that is, highly specific to the specific field we're looking into, that's something we cannot handle on top of it. Joe, unfortunately, drug development would fall into a category of company we cannot invest in.
Jörn "Joe" Menninger [00:16:18]:
So my understanding is that drug development, especially if you want to do it on an impact on a medical scale, is very, very expensive. We do have this frequently in our news that goes up to the billions.
Max Narr - General Partner at Blue Forest Ventures [00:16:33]:
That is so. And the the money is not our primary concern. Although, I mean, we we have we wouldn't participate significantly in the total needed funding. But our primary concern is that you need to be an expert in the regulatory environment in order to be able to handle these kind of investments.
Jörn "Joe" Menninger [00:16:52]:
Talking about investments, what kind of criteria do you use to evaluate your investment? Because as we've been talking, it's very specific. It's very scientific. You you just cannot say, well, it's an ecommerce shop. They do it as much as this. This is the multiplier of public listed company. That is what I can use. That just doesn't work. It it's way more complex than that.
Jörn "Joe" Menninger [00:17:19]:
Right?
Max Narr - General Partner at Blue Forest Ventures [00:17:21]:
That is true, and that's a very, very good question. And I it's gonna be a little bit of a longer answer, but but bear with me. There's there's certainly and and that's something I hear a lot when talking about, this with other early stage venture capitalists that tell me, well, Max, it's it's nice that you say that you're data driven. It's nice that you say that you want to evaluate the companies more in a more in-depth way. But these companies are so young. There is no data on these companies that is available for you to evaluate. And I'm always saying, well, that's only true really in part. Right? Because, yes, there is no data about the companies or not much data about the companies in terms of financial data, that doesn't mean that there is not a lot of other alternative data that's available around the markets, around the scientific field, around the founders themselves.
Max Narr - General Partner at Blue Forest Ventures [00:18:22]:
Right? And we're talking beyond the track record of the founders. We're talking about the background of the founders, even as far as the credit scores of the founders. Right? Those are all information that exists out there. And now before creating a discussions I don't want to create here, I'm not saying that the good or bad credit score is either good or bad. Right? But I'm saying it's a variable we're looking into to feed into our model that evaluates the companies we invest in. Now the the general criteria is still a lot of the times the same across VCs and it's the same for us. Obviously, we need to see a certain market potential. Right? We need to see a certain value that's created through the solution that the company presents.
Max Narr - General Partner at Blue Forest Ventures [00:19:19]:
Because somebody needs to pay for it in future. Right? And people will be willing to pay for it in function of the economical benefits that the solution generates for them. Right? If I can solve a big scientific problem, but if it's if it's not reflected in a big economical problem for somebody, right, nobody will pay for it. Because the person still needs to make more money because he employs he or she employs the solution that's presented. So a quick example. Right? I was working with this company in the field of photonics. Photonics now, is a specific subsegment of electrical optical modulation, which means the translation of an optical signal into an electrical signal. Right? I mean, optical signal, glass fiber, you know, all kinds of information, but our computers or our devices still work with electrical signals.
Max Narr - General Partner at Blue Forest Ventures [00:20:25]:
Electrical signals. Right? And so the modulator, which is the core of every computer chip really, translates the optical signal into an electrical signal. We've inadvertently a lot of people talk a lot about this because, this is really the field, where all the energy is lost and all the, heat is created, for instance, because of the energy that's lost in this translation. So now a big step would be to solve to to create a more efficient and more, capable modulator. Right? So if you were to solve this issue, the problem you would be solving is immense. And the companies, the intels of this world, and other chip manufacturers of this world would be paying would be willing to pay a lot of money for somebody to solve that issue. Now, you might solve some other issue right around that. It's a huge market.
Max Narr - General Partner at Blue Forest Ventures [00:21:30]:
However, if the problem that you solve is not significant enough for the people to change their process, then you will never be successful with it. Right? If you if if the gain in efficiency would be, I don't know, 5 percent, then Intel is not going to rebuild its $1,000,000,000 Gigafactory in order to adapt to it. It's just not good enough. Right? So you you always need to understand that there needs to be a market, that's ready to pay for the innovation you've created. That some people call that product market fit, however you wanna call it. Right? You need to be aware of the market and the that somebody needs to pay for the innovation. And, a lot of people underestimate that that's not a view of right now. That's a view of in the amount of time that you need to get your product ready.
Max Narr - General Partner at Blue Forest Ventures [00:22:28]:
So if you're still in the r and d stage, it's irrelevant what the market looks like right now. What's relevant is what the market will look like in 5 years when your product will be ready. Right? And so this is something where where I think it's possible to start to understand why it's so important to be data driven. Because the data driven allows us to make much better predictions of future market developments and future product developments in order to assess not what's the market right now, but what will the market be when the product's ready. And the second big aspect is, okay, this is the goal where you want to go. What are the resources and capabilities that you need to achieve that? Right and this is when it comes to the team and obviously the team and this is every VC is gonna sell that this is not the reinvention of the wheel and I'm not claiming it to be. The team is one of the core factors that we evaluate. Now the crux of the matter is what specifically, and and I'm I'm not going to go into the nitty gritty of it.
Max Narr - General Partner at Blue Forest Ventures [00:23:33]:
But, it's it's suffices to say that we are very deliberate in the variables that we consider in terms of the team. And it's far beyond, does this person have a prior track record? Or do I like this person? Or do this person seem competent in the 1 on 1? It's a lot of variables that are related to the professional and personal, aspects, of the founding team and the founder we sit sit across. And that again feed into the model that predicts certain variables. An example for that would be the founder's ability to raise money in the future. Right? Because one of the the key aspects of the success of the company is will it have enough money to survive long enough in order to have success? Right? Will will the the team be able to raise the money that it needs to fully develop the product? And, of course, we help with that. And, of course, we have a network and we'll support the support the team. But still, how likely is it that the team is able to do that? And there is now we we I'm sure that everybody here has ideas right away. If I ask you, what are the variables you think that I can look at in order to make a prediction on the likelihood of you being able to raise future money.
Max Narr - General Partner at Blue Forest Ventures [00:24:57]:
Right? What are the personal and professional variables that I could look at? And this is something we spent a lot of time evaluating. We've looked at 100 and thousands of past companies and past, successful and unsuccessful StartupRadio order to figure out the key variables that we need to consider in order to make certain predictions about these factors.
Jörn "Joe" Menninger [00:25:22]:
That's very interesting. So bottom line, I do believe a large impact is on the team, on what you like, think about the team. Before I get to to to to to to my next question or your question following that up, When you've been digging so much into past successes and failures, was there a variable that surprised you the most either predicting success or failure?
Max Narr - General Partner at Blue Forest Ventures [00:25:52]:
That's a very good question. It was surprising to see that, I mean, that that I'm very careful with now, how the interpretation of the data and how I want to formulate this because, we are still in a stage where we try to really make sure that we narrow it down to the right variables because you have multiples Joe the multi correlated variables, right? Where where it's really difficult to say, okay, which of these variables are, in effect sort of predictive in it by itself and which of these variables are just correlated to the predictive variables. But, let me say it like this. According to the data, it looks like, a heterogeneous founders team, which means if you have a large diversity in the founders team, right, once you cross a certain threshold is very beneficial. So this is ironic. And the only way I can make sense of it is like this at the beginning. If you're very different, it makes it a bit harder. Right? At the very Menninger.
Max Narr - General Partner at Blue Forest Ventures [00:27:06]:
Because it's just not as intuitive to to communicate. It's not as easy to find the consensus and so on and so forth. But once you found a working Joe to make that work, it becomes a huge asset because you're much more likely to have a larger spectrum of ideas at the beginning of a problem solving process. Right? And there is other research that backs that up to a certain extent, which shows that if you in an ideation process, if you wanna solve any kind of problem and and the ideation process, you have a very large spectrum of ideas and you start with a large funnel and you narrow it down as a team, that is beneficial to the solution and you'll actually have a better solution. So, we believe that founding teams, right, often you will see that all the time. It's also friends and, you know, you get along anyway, so you become a team. Yes. That makes it easy at the beginning, but don't fall into the trap that there is a risk if you always have the same opinion.
Max Narr - General Partner at Blue Forest Ventures [00:28:15]:
Right? It's beneficial to have different opinions in the team.
Jörn "Joe" Menninger [00:28:19]:
We talked a lot about team. About the ideas, I do believe they're very diverse, especially in this area. If you're talking about research, it's not only they have an idea, they evaluated something and they come around with a PowerPoint presentation. Sometimes it's even a complete life achievement of somebody who started out with a bachelor, did a PhD, and spent years years in a laboratory. But in general talking, the idea to look seriously at it from your perspective should have progressed beyond just the PowerPoint state. Right?
Max Narr - General Partner at Blue Forest Ventures [00:28:58]:
Oh, yeah. Absolutely. I mean, in the field of deep tech or in the field of technological development, you talk about what you call TLR stands for technological readiness, not TRL. Sorry. Technological readiness level. Right? And it goes from 1 to 10 where 1 is really the ideation stage and 10 is interesting for us because that means that you have done laboratory testing. You have built a certain lab scale prototype, and you have generated real data. Right? So, everything before that is really purely theoretical and wouldn't be ready for us to invest in because we think that you need a certain proof of concept, right, in order to move forward.
Max Narr - General Partner at Blue Forest Ventures [00:29:51]:
Now I'll give you an example again to to understand this. There was this, it's a company we're currently evaluating, so I'm not gonna go too deep into the details, but very exciting company that developed a material that if you mix it with water, will have a huge effect on the ability of soil to retain water. So I Menninger you're I mean, to to to make to dumb it down almost too much. Right? You're in the desert. You have no water. Right? Or you're in Southern California and you struggle with dry soils a lot. Right? And the problem with dry soil is water goes right through it and minerals go right through it. So you typically have the problem.
Max Narr - General Partner at Blue Forest Ventures [00:30:35]:
You need to have a lot of irrigation water and you need to use a lot of fertilizers in order to get a proper yield. Now this product, you mix it as it's a it's a gel. Right? You mix it into the irrigation water, and it goes between the soil particles, and it helps the soil to retain water and minerals. And so now on the ideation stage, that wouldn't have been enough to for us to invest. But they now recently did large scale laboratory tests where they tested that with 7 different kinds of crops in the laboratory and literally observed soil with the product, soil without the product. And we look at the amount of irrigation I need, and we look at the yield I get. And this product, for instance, has on average require make made the the the crop require 80 percent less irrigation water and still gotten 30% more yield, which is absolutely incredible. If that would prove correct on a large scale, absolutely incredible.
Max Narr - General Partner at Blue Forest Ventures [00:31:39]:
So but we needed this lab trial to be done before we can really evaluate it. So to come back to your question, as long as it was on the pure ideation stage or maybe, like, on the molecular design of the particle stage, too early for us. But as soon as it had these first lab trials and we come from a technological readiness 3, and and we transition into 4, right, that's when it becomes interesting to us.
Jörn "Joe" Menninger [00:32:10]:
What my what I had in mind when I heard this was also well, there can be some areas that barely get rain. But when it rains, it starts flooding down the stream, and you can also work on those areas. Very interesting thing. Let let's go a little bit from, where you're investing, what do you how you're investing, a little bit into the fund itself, a little bit market trends and the outlook, and then we're good. We are already talking for more than 30 minutes. By the way, did you study philosophy?
Max Narr - General Partner at Blue Forest Ventures [00:32:44]:
No. I didn't. I studied law, which, is a little bit counterintuitive, but, yeah. I've I've I haven't been working in law for the past 7 years, so so it's been a while.
Jörn "Joe" Menninger [00:32:57]:
I see. I see. Well, nonetheless, that it plain explains long answers. Don't worry. Not going to this here. I I really like the answers. They're well thought through. Talking a bit little bit about Blue Force Ventures, the fund and the management.
Jörn "Joe" Menninger [00:33:15]:
Can you describe a little bit, how you guys are set up? Because if you currently go on your website, there is a logo on there and 3 locations, Berlin, London and Menninger. But not a lot more. Can you tell us a little bit about the team and how you guys are set up? And I would also be interested because before we talked, we talked a lot about important places where you could find deep tech investments because I do believe you invest all over Europe. Right?
Max Narr - General Partner at Blue Forest Ventures [00:33:47]:
That's true. I mean, let let's unpack the the questions. First off, about us and the team. So, the the idea, to to create this fund, I think a lot of us had sort of simultaneously or ideas around that. And, I personally know my co founding partner, from business school because after studying law, I also did executive MBA at the business school in France. And I met, my co founder, Moises Janae. He's from Mexico. And trust me when I say this is a good example for having a fairly different approach to certain things and, you know, Menninger it arguably a bit more difficult at the Menninger, but now we really see how it how it benefits us.
Max Narr - General Partner at Blue Forest Ventures [00:34:42]:
But, that set aside, I had another partner, in Germany that ironically, I've made 2 deep tech investments with in the past. Well, I advised him. He's an angel investor, and I basically created the contact between him and the deep tech investments, that, that he invested in. And Joe, we got together and, and we we founded Blue Forest Ventures, and, took on right away a long term, a long time employee of mine that I've, hired right out of university 4 years ago, first at Sanity Group, then, transitioned to Endosame, and now came with me to Blue Forest. So he's basically employee number 1, of our fund. So we are 2 full time general partners, myself and Moises. We have our partner, Julian, who is not a full time partner and, hence, not a full time member and, hence, is not a general partner, but is working with us, very intensively. And we have Nicholas, our associate and employee number 1, and now we are in the process of hiring 2 analysts.
Max Narr - General Partner at Blue Forest Ventures [00:36:03]:
Located in Berlin, what else is there? Yeah. Fund size, we've talked about before. We are quite efficient in our process as we've set it up in a way so that it can be very largely automated. Right. Joe, we we a lot of the things that typically take a lot of time away from people, specifically analysts are fully automated in our process Joe that that saves a lot of time. And the other question that you had was the locations and, why we chose certain locations, what we look at. So Berlin is is purely optimistic choice. Right? And I I would love to to tell you that there was some kind of elaborate thought behind it.
Max Narr - General Partner at Blue Forest Ventures [00:36:44]:
But the reality of things is Berlin is a good location for a venture capital fund in general. There's a lot of things going on in Berlin, and there's quite a big ecosystem. Now Berlin is not the most relevant location for deep tech in Europe, but it's the location where I had most of my personal network, and we had the best chance to to get something off the ground, on a short term basis. But we are all quite flexible, and we all travel a lot. So we can easily cover Europe as a whole and even, selectively, as I said, the Menninger, Southeast Asia, North America. And the question of which locations are most relevant for us in terms of finding suitable deep tech companies is mostly related to the ecosystem that research institutes and academic institutions such as universities have created. So you really see a big correlation between the amount of successful deep tech companies, and the support system and the the the information system even that these institutions have created around that. One of the primary examples of that and really hats off to them is what the ETH Zurich has created in Zurich around the ETH.
Max Narr - General Partner at Blue Forest Ventures [00:38:11]:
There's a myriad of accelerators, incubators, support programs, people that will help you, people that will give you advice on on how to set up a company, on what you need to be to be cognizant of and so on and so forth. And you really see that that creates a lot of, it creates a situation where StartupRadio just have a better chance to take off. Right? And so, BK Zurich is certainly or Zurich is is is a very relevant location for us. Munich is a relevant location for us. Eindhoven is location, and certainly Cambridge, Oxford are relevant for us. And and I could list more and more, but essentially, it depends on the ecosystem that is created in and around the research institutions and universities, in these locations. Yeah. That's really it.
Jörn "Joe" Menninger [00:39:15]:
One of my questions would have been how you're trying to support companies, but we've already talked about you being a translator, research into business. I do believe that was already a very valid point. I was curious how do you measure success? On one hand side, there's the financial success. You get a really big company. You you get really successful in terms of finance because the valuation of the company goes up. You list them. You exit it one way or another. That is fine.
Jörn "Joe" Menninger [00:39:52]:
But what else would you consider success with the companies you invest in?
Max Narr - General Partner at Blue Forest Ventures [00:40:00]:
Look. We're very we're very fortunate in the way because the field we're looking into makes it very easy to combine success on the financial level, which I would translate to return, right and positive impact on the other side. Right? And now everybody talks about impact and sustainability. And oftentimes, this is a tough choice to make between being return driven and being impact driven. In deep tech, the compromise you need to make in order to achieve both is not a lot. Because almost in the definition of deep tech, you have the impact that's imminent. Right? And if you have a successful Deep Tech company, you will have a large impact. Now is this a positive or negative impact is something that that obviously is a question that you need to ask.
Max Narr - General Partner at Blue Forest Ventures [00:41:01]:
But generally speaking in the overwhelming majority of cases, we're talking about positive impact and a clearly positive impact. Now there are certain exceptions if we talk about certain defense application where really the only thing you could think of is defense application. But this is the the and and and, obviously, certain cases where I don't know, I guess you could come up with with innovation around, you know, gambling or something that could qualify as deep tech. You know, I'm I'm really shooting from the hip here. But you see, it's it's almost hard to come up with something that that would have a negative impact. So, this makes it very easy for us to be able to say success means it has a great return and has a positive impact. The measurement of sustainability. And, of the measurement of sustainability.
Max Narr - General Partner at Blue Forest Ventures [00:42:06]:
And we we are attempting to create something that that we refer to as sustainability by design and, a positive impact by design, which means one of the big things a lot of investment funds struggle with is that they have structures, They have that process. And now there is these regulations that come on top of that and the the regulations around impact. And if we talk about Europe, for instance, you have these, article 6 to 9 in terms of how the degree of sustainability you really want to achieve. And this is quite difficult to implement for a lot of funds. Right? Because they need to basically retroactively take this this set of regulation and apply it to their existing process. Right? And that becomes quite tedious in terms of how do you report that, how do you track the KPIs, and so on and so forth. What we're able to do, and this is really nothing that I want to take too much credit for because it's just because we're new and we can set up structures new, is we integrate the measurement of impact and the measurement of of, you know, the effect of the companies in future, the likely effect. We integrate that into our evaluation system.
Max Narr - General Partner at Blue Forest Ventures [00:43:25]:
They're an integral part of it, which means that, that this is not something that we that we that we take into account separately in the aftermath or something like that. But that's an integral part of the entirety of our evaluation system. And this makes it much easier for us to be able to say, our the companies that we invest in, if they're successful, they will also have a clearly positive impact on society, environment, and the world we live in, basically.
Jörn "Joe" Menninger [00:44:01]:
We are now talking for 45 minutes, mostly you, which is totally fine. The people out there already know my opinion and my voice, enough. And I would only have 2 closing questions. First one, what are the market trends, any any merchant technologies that excite you right now besides from AI? And then I have a second question, but this time, I'll only bother you with 1.
Max Narr - General Partner at Blue Forest Ventures [00:44:31]:
Okay. I'm going to try to keep it much shorter now. I don't know if you heard about the Gartner hype cycle, and basically the measurement of the hype. And I I think that we're all subject to that in one way, shape, or form. What excites me really is data transmission and data storing technology. And I keep it that far because I think that whatever innovation we talk about, whether it is quantum computing, whether it's AI, whether it's the whole term term of, like, more specifically language, speech recognition, and so on and so forth. All relies or, like, all will add to the quantity of data that we, the world, needs to handle, right, and store and transmit and so on. So I think that the the basic data infrastructure that we're talking about on the hardware and software basis is what fascinates me a lot.
Max Narr - General Partner at Blue Forest Ventures [00:45:26]:
That was much shorter. Right?
Jörn "Joe" Menninger [00:45:28]:
That it actually surprised me. Yeah. And and and the last question I would have because it is important for a lot of StartupRadio, entrepreneurs, founders seeking VC investments. How do you stay informed? What kind of media? What kind of outlet? Of obviously, besides StartupRadio, need founders to get into in order to grab your attention.
Max Narr - General Partner at Blue Forest Ventures [00:45:59]:
I mean, we try to not be too much attached to the these hype topics because that would be such a selection bias already at the get go that would skew our entire model. Right? Our model is based on a fairly unbiased gathering of information. So what we do typically is actually go to the universities into the accelerators and try to have a fairly objective look at the entire cohort of StartupRadio is there. We also use a lot of scraping technology in terms of extracting information from certain databases and websites and the Internet in general in order to to fill up our funnel with leads. Now, of course, we follow certain, large scientific publications and, and and certain typical, media outlets, in terms of I mean, I'm not saying too much if I say that we do Canvas for instance, LinkedIn quite regularly, although LinkedIn is tricky. I don't wanna go too deep into that because they're very, very difficult to scrape. Obviously, we're following whatever compliance there is out there, But, there is certain sources, that go beyond publication, which we talk more about registration of patents, for instance, that we look into in order to get an idea of what's happening. We also follow a lot of the actual scientific publications coming out of certain universities in order to know what are the topics that they really focus on.
Jörn "Joe" Menninger [00:47:45]:
I see. So the the the the only question left for me right now, everybody who has listened through this is obviously interested in either becoming an LP or pitching you for money. What is the best way to reach out to you guys to pitch you? Is it LinkedIn? Is it the website?
Max Narr - General Partner at Blue Forest Ventures [00:48:07]:
Both is fine. The website has an email address that's there. And LinkedIn is also fine. We follow both. We're we're we're very receptive for both. I'm also happy, to to be hit up directly on LinkedIn. I'm not very complicated with that, at all. You know it.
Max Narr - General Partner at Blue Forest Ventures [00:48:27]:
We communicate through LinkedIn a lot. So I'm I'm somebody that that does try to answer most messages I get, on LinkedIn, for instance. But, yeah, email is also perfect. You'll find an email address on the website.
Jörn "Joe" Menninger [00:48:41]:
Right. So I do believe that was everything from my side. Thank you very much for this very extensive interview. I I really, really liked it, especially since I don't have to talk a lot. And I do believe that gives a very interesting behind the scenes insight of a early stage investor that is usually not available for most entrepreneurs here. Thank you very much, Max. It was a pleasure having you as guest.
Max Narr - General Partner at Blue Forest Ventures [00:49:10]:
It was a pleasure again.
Jörn "Joe" Menninger [00:49:12]:
Have a good day. Bye bye.
Max Narr - General Partner at Blue Forest Ventures [00:49:14]:
You too. Thanks. Bye bye.
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