Global investment company Eurazeo recently announced the final closing of its Eurazeo Smart City Fund II 1 at EUR400 million (US$445 million), joined by five sovereign wealth funds and development institutions and 18 corporations in Europe and Asia.
In a press statement, the company said that this fund is dedicated to new technologies and digital innovation for sustainable cities, targeting the key sectors of the low-carbon economy: renewable energy, advanced mobility, logistics, manufacturing and the built environment.
While Eurazeo primarily invests in Europe, it also invests in companies in Asia, Israel, and North America. The fund has already invested in several climate tech startups such 1Komma5° (carbon-neutral residential solutions and power services in Europe), Electra (fast-charging network electric vehicles in France, Italy, Benelux), Swapp (AI-powered construction documents) and Urban Chain (peer-to-peer renewable energy exchange platform in the UK).
It aims to invest in 25 companies with investments ranging between EUR1 million (US$1.1 million) and EUR20 million (US$22 million), targeting seed, Series A, and Series B companies with a “sweet spot” in Series A companies with an investment ticket of EUR5-12 million (US$5.5-13.3 million).
In an email interview with e27, Julien Mialaret, Operating Partner at Eurazeo, says that the company is looking for global leaders in climate tech. As an Article 8+ Sustainable Finance Disclosure Regulation Impact fund (SFDR Fund), it is investing in solutions that address eight points in Sustainable Development Goals (SDGs), including poverty eradication, affordable and clean energy, as well as industry, innovation, and infrastructure.
Eurazeo has this requirement that 50 per cent of the portfolio must demonstrate a verifiable environmental impact, measured through specific KPIs and monitored by an impact committee.
“These are companies developing new technologies and digital innovation for sustainable cities. There are five key sectors to achieve the goal of the renewable energy transition, net zero emissions and transition to a low-carbon economy: new energy, advanced mobility, logistics, Industry 4.0, and the built environment. This is where we focus, and we seek regional and global leaders to support,” he says.
Building sustainable cities
Mialaret shares the most crucial development and trends in sustainable cities that Eurazeo aims to pursue with its investment.
“New digital services and technologies that make life in major metropolises more sustainable and improve quality of life. We are not only interested in new buildings or districts, but more often in the legacy city: the city that needs cleaner mobility, power, logistics and green buildings,” he says.
He also points out that there are several challenges that climate tech startups face in growing and building a sustainable business, and it centres on the adoption rate and affordability of their solutions.
“We are displacing legacy (carbonated) technologies with more sustainable, carbon-neutral ones. This takes time, capital and industrialisation as a scale to have better unit economics than the older technologies being displaced,” Mialaret says.
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In supporting its portfolio companies, Eurazeo offers two main benefits outside of capital:
1. Cross-border development to new markets
“Eurazeo is present globally with 12 offices spread across Asia (Singapore, Shanghai, Seoul), Europe and the US. We can help entrepreneurs move into new markets,” says Mialaret. He gives the examples of WeRide, the Chinese autonomous mobility company that is now localised in Singapore, and WeMaintain, a French/UK proptech company that is now operating in Singapore as well.
2. Building new companies with the 18 corporate partners investors in the Smart City fund II
An example of this would be EVCO in Singapore which is a JV between SMRT (an LP and investor in the Smart City II fund) and DST Car (a portfolio company from China in the Smart City Fund).
According to Mialaret, partnerships with different parties are crucial in helping climate tech companies grow their businesses. This is why Eurazeo has five sovereign investors in the Smart City II fund.
“Partnerships with large corporations are also critical to help startups scale faster. By being a supplier to these corporations, entering technology partnerships or growing new JV with them,” he says, giving the example of EVCO’s partnership with SMRT in Singapore.
For the rest of 2023, Eurazeo plans to continue on expanding its team in Asia. Ernest Xue has recently joined the company as Investment Director – Venture Smart City in Singapore; the company has also invested in six companies in the Asia region.
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“We are accelerating with almost half of the 18 corporate partners from ASEAN/Asia. We want to give these corporations first mover advantage in new sustainable services for cities like SMRT with EVCO EV logistics,” Mialaret closes.
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