European Circular Bioeconomy Fund holds first close

The fund is backed by the European Commission and will focus on companies based in the EU that operate in circular and bioeconomy-based industries, such as companies that focus on the use of raw materials, biomass and renewable energy to produce sustainable products.

The vehicle is advised by general partners Michael Brandkamp, Michael Nettersheim and Dirk Saßmannshausen. Brandkamp joined the firm from High-Tech Gründerfonds in January 2020, as reported. The firm is headquartered in Bonn.

Hauck & Aufhäuser is providing fund management services, while Schnittker Möllmann Partners and Arendt & Medernach provided legal advice for the Luxembourg-domiciled vehicle.

Asked about the fundraising process, Michael Brandkamp told Unquote: "The fundraising was a bit of a rollercoaster and was slightly delayed due to Covid-19 – we had wanted to start investing at the end of May. At the start of the crisis, many potential investors told us they wanted to come back to us later, when there was a higher level of certainty, given what was happening in the public markets. But that has now changed and we now have a better environment, so the expectations are more positive. We used the time to prepare our first two transactions."

"At the moment we have the European Investment Bank (EIB) as our cornerstone investor, and we have corporates with strategic interests," said Brandkamp. "We are also talking to institutional investors and are open to these type of investors, as well as other national promotional banks that are interested in the bioeconomy." The LP base also includes corporate investor Corbion, and the family office of Andreas Hettich. EIB has committed €65m at the first close and will commit up to €100m.

The fund is targeting significant returns for its investors, Brandkamp told Unquote. "Our general return according to our business plan should be IRR of 23% plus, which is ambitious. We will aim for a money multiple of around 2x on our investments across the three stages we focus on. We want to allocate around €10m for each company across different rounds."

The vehicle will provide both equity and mezzanine capital. The fund will have a five-year investment period and a 10-year fund life, with an extension option of two years in total.

The fund has announced its first two investments, backing Germany-based Prolupin and Netherlands-headquartered PeelPioneers. ECBF backed Prolupin's latest funding round, which took place in March 2020. The company produces milk, ice cream and non-dairy products produced from lupin, which it sells via its consumer range called Luve. PeelPioneers has raised a round of €10m. The company processes orange peel and pulp in order to make products including essential oils and animal feed.

"We have a good pipeline and are talking to some companies following the first close," said Brandkamp. "We think we will have another investment to announce by the end of the year and probably two in Q1. But we want to be careful, of course. Still, the bioeconomy transformation is speeding up and valuations are increasing, so it's good to invest now."

Asked about the fund's sector preferences within the circular bioeconomy, Brandkamp said: "We have a preference for B2B companies and we have some industrial companies in mind, such as companies that take waste streams from food production. We are also reviewing a company that deals with insects in our pipeline, which are used to increase the quality of food for fish."

The fund aims to hold a final close by August 2021, said Brandkamp. "It's always difficult to have a clear timeframe, but we are targeting €250m and we are optimistic that we can achieve this – we could well double the fund size by the end of this year, and then we would take another eight months to reach the target. The investor pipeline is increasing and we have four LPs currently doing final due diligence."

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