Episode 39 – Part 3: Venture building to decarbonise the built environment with Vighnesh Daas from Sensicon Ventures

The following transcript is autogenerated so may contain errors.

Matt Nally: In the final part of this episode with Vighnesh, decarbonize the built environment. So if you haven’t watched the first parts, we’ve looked at new materials coming to the industry the challenges in adopting them, but now we’re also looking at what type of support is available for helping bring new materials to market.

I suppose there’s a couple of few things we can look at here and what interests venture capital into the industry and what puts them off. But I suppose the first point I suppose is we need. Entrepreneurs coming into this market to develop these new materials. We touched on PhDs, is that the driver in terms of people looking at stuff in research labs and so on, or are there actually other ways that entrepreneurs are coming into the industry now?

Vighnesh Daas: It’s an interesting space. This one, Matt conventionally PhD researchers usually go into academia as research assistants, associates, and go into teaching. And that’s that’s still massively followed. But there’s also an interest now in, in commercializing and seeing these innovations actually work in, in, in the real world.

And I think that’s that’s a massive driver. And that’s that this space is seeing these days. I left academia almost 10 years ago for the very same reasons. I was like, no, I need to see this work. I want to see this work. I would like to see the impact, the benefits. Sometimes when I’m down in Cornwall or in bank station in London, or, something like that, I do feel.

A sense of almost pride, I would say, because it’s like, Oh yeah, I helped do this. And I think that’s a huge motivation for civil engineers and people in this industry. Another one is, when you work in a big corporate firm you get to learn so many different aspects. So there’s so many positives that you can take from those environment.

And then you potentially want to bring that to your own, you method of thinking. So if you wanna mold and shape something that is yours, I think starting a startup is the is the natural way. So imagine you put together a PhD researcher or someone who’s finished their PhD, who’s come up with some sort of an innovation or a res piece of research that has a strong ip and you put together someone from the industry with a bit of a commercial background or who knows, how the the ins and outs of the industry work is.

It’s the recipe for success. You wouldn’t think you would think right. It’s a great startup. And I think that’s what is happening. In the construction tech sector a lot of people are coming together and there are whether this be through research projects whether this be through corporates working with universities or innovate uk funding grant projects and people knowing each other through that.

There’s been an organic. Partnership Almost forming in this in the sector, which is refreshing. It’s different because, this exists in the U S this exists in Singapore, in Japan where, you know MIT and the likes of them have their, what they call us tech transfer offices where they would go and find people to push IP strong IP, protect it, push it and commercialize it.

And it’s starting to happen in the uk and it’s very refreshing to to see that. However there are challenges around it. It’s you put two people together, but how do you fund it? Where do you find the money? It’s too is it too early for vc because venture capitalists need to see returns.

Are there what stage of innovation are you at? Are you a lower technology readiness level, TRL or. Are you at a lower funding level, which is pre seed or are you at seed? So multiple tricky challenges to be met. The main one that I do see with quite a lot of founders is where do they start?

Because where is this training coming from? Has, is anyone training them? Because an academic has an academic experience and a consultant has a, as a commercial experience, but Who’s training them to actually form and run a company? You know I’ve done that for several years now. I’ve been part of, I’ve been a director in SMEs and all of that, and I know running a company is it potentially the hardest thing that you can take up and to do that, you would agree, you’re all firm. Add that to the mix of coming out and doing your own thing and coming up with an innovation You would relate to this you fund it you run it and you’re spending all your time into it and doing that in an industry where you don’t know when you will get your first trial or you don’t know whether vcs will find your model.

Investor investment worthy. It’s it’s a tricky one and it’s really hard and which is where, something that we have decided to do is bring our experience into the space. And and we’re helping, founders get grants and find connections with international VCs.

Because international VCs really see UK as a very good starting point. It’s always been the gateway to Europe. And something that, that, It works very well for us. But one thing that we are still quite, at a, at an essence stage is we still don’t know how to commercialize innovations from and research from universities.

I think that spinning off is quite a tricky one. The business models aren’t there yet. Some universities like Imperial have what they call as undaunted, which is an incredible platform where they put together they’re researchers along with people like that and they venture build and they are getting huge success from it, Oxford and Cambridge always always there Queens, Belfast.

They’re doing something really incredible over there too. But when it comes to construction, just construction, I don’t think the focus is still there yet. And I think this requires the support of corporates. This does require support of innovator doing a great job in putting this together. And I think this is where tier ones and corporates, they could find some budgets to put into this area because they are the ones who will benefit the most because they will be the ones who will be profiting from from both.

A planet perspective and a people perspective and then a perspective, right? So it’s planet people and profit if you’re looking at these three aspects Then it’s quite natural for you to go and look into funding these extremely early stage innovations so that thereafter In two years time, or whatever time it takes to scale it from a lab to a factory you’ll be the first ones to benefit in gaining new frameworks, in making, producing more sustainably, building more sustainably houses can be more energy efficient dwellings will be would be better for, it’s inhabitants and we will have, warmer flats and warmer houses to to stay in while colder in the summer when it gets cold hot here.

Matt Nally: Yeah, definitely. That’s the flip side challenge. If we over insulate, we’re too hot in the summer. I suppose they’re, yeah with, if you look at tech, for example you, you hear a lot in the headlines around, I don’t know, an AI project that’s was basically an idea, but it’s got loads of funding.

Cause it’s sounds quite exciting. Does that happen in, with materials or I’m guessing not because there’s still too much ambiguity around from idea to getting to a. natural material you can use. So where does the funding typically come in? I’m guessing the idea stage like you might get with tech just doesn’t tend to happen.

It has, you somehow have to get it further down the line first.

Vighnesh Daas: Absolutely. Yeah. Unfortunately building materials, when you start something new or something different how do you start? Because conventional materials have their design standards, right? So they have to hit certain numbers and criteria, but this new material Can you fit it into those same numbers and criteria?

Sometimes you can, but a lot of times you can’t. And when you can’t, how do you come up with a way of measuring the impact, positive or negative of this new innovation? And it’s hard for investors to go and, go and say, yeah, we’ll let you trial and error this. But you still have to show some sort of let’s say traction, whether it be commercial traction or whether it be interest from the industry or whether it be data from university research labs saying that, yeah this looks promising.

And for that to happen, you still need funding. Universities Can’t just, give their research labs away and say, yeah, please feel free to trial wherever you like. You still have to pay for estate costs and whatever else, which in the UK is a major challenge because sometimes they can be quite high because of how how everything is, energy costs are high, et cetera, et cetera.

So the only way sometimes turns out to be grants and public grants. And, I always say it’s a luxury. Public grants are always a lottery. You can do your best no matter how good your application is unless it fits the criteria and the boxes You’re not guaranteed anything. And you are spending a significant amount of times a few weeks at the very minimum to just write these things, you know So when you are a small team of two or you’re starting your own company and you’re writing a grant for six weeks It means you’re leaving everything else alone, right?

So again, it goes back to that chicken and egg thing which I mentioned, some companies if they are really promising they do end up being successful for these grants. And somehow I’ve seen that this almost becomes a marker for for pre seed or seed funding.

So if a researcher or an innovator has received a grant. They are at a very good position. They’ve set themselves off fairly well, to prove to investors that oh, yeah Five reviewers or seven reviewers or whatever number of reviewers have assessed our application and deemed us fit for a grant worth whatever, amount of money and and we have carried our tests and these have been the results And it looks promising and for the next stage We would like your funding and that does give investors a chance bit of risk management to then look at it.

And but then it also gives the investors an opportunity to talk to people like me or other people from the industry who, have done this previously, have succeeded, have failed to find gaps, to help with due diligence, To look at, okay, this one looks like it’s promising or this one could be promising in, I don’t know, in Argentina.

So if you’re a VC who has investors from Argentina or partners in Argentina, you’re probably well worth looking at this piece of innovation. But if you’re based in Scandinavia, it’s probably not for you. Like you mentioned, geography, you mentioned stage of innovation we’ve talked about the quality of team all of those become incredibly important, but self funding, these building material and material based startups.

Personally, I wouldn’t recommend it. Because it’s, you don’t, because people, we’re always confident in ourselves, right? We would like to believe in ourselves and our product, and we think it’s a great product, but do your testing, do your market testing much earlier than people would say.

Always go to the market first, then start working because if the market says, yes, I like it. Yes. I’m going to work with you and your researcher partner. Then you’ve got something to start. If the market says, we’re not really sure if this is going to take off now, it’s going to take off in five years. It’s a hard one.

I’m not saying don’t do it at all, but I’m saying it’s much higher risk. What if you’re doing it?

Matt Nally: No, I can completely understand that. I think with any, with anything you do, even if you’re a surveyor listening, wondering if you launch a new surveying products, you still, you’ve got to understand from the market, whether they’re interested in it before you put the time into the same with materials, my final question on this around the sort of the venture building, you meant you mentioned there, there are more VCs that are starting to understand this sort of area and investing in materials. Have you seen a growth in the last few years as to the number of VCs? VCs that are investing and how much they’re investing.

Vighnesh Daas: Yeah, absolutely. I think again, it’s come to those drivers we were talking about earlier the net zero targets and the incentivization from financial institutions towards developers and contractors. So I think those two are incredibly key drivers and that’s changed the focus of a lot of VCs who were investing in what they would call as prop tech.

Prop tech is, Airbnb is a prop tech, right? But if you’re a VC who’s investing in Airbnb, do you have the skillset or do you have the internal team to be able to value both financially and technically some of these innovations it’s hard, right? Because how do you, how, if you were to tell me a comment, help me out with doing due diligence on, on surveying based products, I can probably help with, market testing and all of that, but I wouldn’t be able to go into the technical details of your of your profession because that’s a that’s something that you would know much better and I think that’s the challenge that vcs have faced or are facing still there’s not enough technically capable people in that world to be able to evaluate these kind of innovations and I think Being savvy financially is incredibly important.

But also being technically sound is important to be able to invest in these kind of innovations and also an appetite for risk and knowing that you probably won’t be getting your returns for the next 5 to 10 years. And if you’re fine with that, it also depends because VCs go and raise their money from, People called our institutions called LPs, which is limited partners, which are much larger institutional investors.

They could be large corporates. They could be banks, pension funds, et cetera. And those guys are answerable to their shareholders. So if their LP is a big building material company. They’re more likely to look into your innovation if you’re a building material startup. And I think that makes sense because that corporate behind that VC would have a technical team in place.

So the VC doesn’t necessarily have to do the due diligence by themselves. They can pass it on to their, LPs and they will be able to look into it much more detailed and say, yes, we like it or no we don’t really see it. So minimizes the risk a little bit for the VCs and also tells their LPs, look, we’re going to go look into this this product.

And I think that’s a key way of looking at it. There are new VCs coming up in this space. Some of them really promising and they are able to invest and they are able to raise very quickly, but I would still say. We don’t have enough venture capitalists in this space at all.

And the deal flow is a critical aspect for them. They need to find decent innovations, decent teams that are capable of commercializing these innovations. If you put a bunch of university professors together and you put one commercial person with them, it’s absolutely fine. But if you put all the universities professors together and no commercial people around them, It would be hard to fund them initially.

But if they are able to find someone with a bit of a commercial acumen, it makes for a great team. So it’s understanding what are the parameters that investors need to look at before, they can fund your innovation. But I do generally think that there’s a massive. space in this market.

And this is why, something we are doing is setting up a venture building fund because we decided that, this space does need that. We need to provide innovators a new space and some initial funding from our own background so that they can go and build and we can advise them on the marketing.

We can advise them on how to build a business. We can advise them, what do you need to get into the supply chain? We can give them introductions to, to really high quality venture capitalists in this space and creating that ecosystem, creating a safe ecosystem to innovate.

Matt Nally: Definitely. I think my final question on this then is it comes actually about the geography there. Are you finding that the certain countries perhaps, or areas are more. Interested in developing new materials or perhaps the funding is focused in certain areas geographically.

Vighnesh Daas: I think,

Funding goes where there’s nice deals.

It’s as simple as that. If there’s a good innovation, strong team and great commercial traction, investment will definitely go there. I don’t think investment is is geography dependent is agnostic. It’ll go anywhere where it sees a good potential deal. Funnily enough.

Actually, it makes sense. It’s logical that innovation usually comes from areas which have been conventionally good in, in those sectors. For example, you can see Sweden, Denmark, you can see Netherlands Germany they have strong technical universities. They have Delft, they have TU Denmark, they have TU Munich then you’ve got KTH Stockholm.

Same in the UK, you’ve got your Imperial, which is an incredible civil engineering university, or you’ve got Cambridge, they’ve got a strong team UCL, Queen’s Leeds, Sheffield so these are the places where almost research or new technologies are born. What happens is previously they would go and do impact criteria for research assessment frameworks and whatever else, but there was nothing commercial coming.

I wouldn’t say nothing, but yeah, commercially it was still far behind than where it could be. And I think this is something that is, is changing now. And, investment like is going into Singapore is going into the same places in the U S is going into places in India, same here. And these are the hotbeds of new technologies.

And if you can find the hotbeds of new technologies, it’s best to boost them. There are upcoming areas and it’s worth looking at those up and coming areas. But equally, investors want returns and to see commercial traction. And that’s usually where the ecosystem is. There’s a there’s a Cambridge clean tech thing, what they are calling as a climate super cluster.

I would recommend people listening to this to look at climate super cluster. And It was quite cool because it’s within two hours of London. Like you have Amsterdam, Paris and all of that. So it’s not that big, but you’ve got some mega cities with some mega innovation ecosystems around.

So if you put them all together, you don’t actually have to go that far to find these cool things.

Matt Nally: No, it’s very true. I think it’s been a really interesting episode over the three parts. If, thank you for coming on. If anyone wants to learn more about the work you’re doing, for example, in this space how do they get in touch or learn more?

Vighnesh Daas: Sure. Please feel free to obviously go to SensiCon’s website. We have SensiCon. co. uk. So SensiCon Ventures are a venture partner to startups and VCs. We help Both these sites scale essentially we’re also raising, like I mentioned previously, our own venture building fund. So that’s an exciting part.

We have got two portfolio companies now which one of them is carpet sequestration. Another one is eco engineering, which is nature based solutions. Yeah, lots of exciting things happening in this space. Please feel free to reach out on LinkedIn. My, my profile is fairly accessible and Yeah, you’ve you’re free to get in touch with us at, in, in London, Liverpool or Yorkshire, wherever you like.

Matt Nally: Awesome. Yeah, thank you very much for coming on today. It’s been a pleasure chatting. Thanks for

Vighnesh Daas: having me, Matt. It’s been an absolute pleasure and a lot of fun.