SeedBlink Blog

Investing in hard science and deep tech is not a path every venture capitalist chooses to tread. It requires a keen eye for innovative ideas, a comprehensive understanding of complex technologies, and an unwavering belief in the future they’re sculpting. Today, we’re fortunate to pull back the curtain and step into the world of Alain le Loux, General Partner at Cottonwood VC.

With a distinguished career spanning over 25 years, Alain has seen the tech industry from every angle – as an executive board member, a startup CEO, as business angel and now since 2014, a deep tech venture capitalist. His wealth of experience, unique insights, and impressive track record make him an influential figure in the deep tech venture capital landscape.

In this exclusive interview, Alain sheds light on his journey into investing, shares insights into Cottonwood's investment thesis, discusses the value of hands-on business development support, and reveals some of the trends he's watching in the deep tech space.

Join us as we dive deep into the world of venture capitalism with Alain le Loux and explore the story behind Cottonwood VC's unique investment approach.

Can you describe your journey into investing, and what motivated you to transition from executive roles and entrepreneurship to venture capital?

During my corporate career, which started in 1994, I started first (since 2002) as an independent board member and found out I liked the startup scene more than my corporate job. In 2007 I was recruited as CEO to manage a high-tech startup; after the exit, I started as a business angel and founded, co-founded and funded 17 startups. In 2014 Cottonwood, originally a US-based VC, came to The Netherlands to open a European office and they recruited me as a partner. I really enjoyed working with real VC professionals and acting as a team; as a business angel, you mostly decide on your own. Also, a big difference is as a VC we could directly provide a high ticket (so serious money is on the table to build a real company).

What is the investment thesis of Cottonwood VC and how does your personal experience shape it?

Our investment thesis is that we invest in early-stage disruptive technologies in DeepTech (always in a B2B market, where we mainly focus on corporates). 90% of our companies have no real revenue and no paying customers and are often still in the prototype phase. And part of our thesis is we invest in companies where the industry would say something like “not possible”, “bullshit”, “can’t be done” or “this problem exists already for 30 years, and no one could find a solution”. Most of our companies have no direct competition; sometimes substitutes but often the only ones with a unique technology. We also know it takes more time to enter the market, but if the company is in the market, they have created its own greenfield situation and can enter mass markets.

Cottonwood VC focuses on hard science and deep tech investments, excluding certain areas like software, AI, and crypto. Can you explain why you've chosen this specific focus?

Cottonwood’s investment approach and focus are on hardware, (pre-) seed and early-stage funding for IP-driven companies with a focus on Key Enabling Technologies. This stands in contrast with the dominant venture capital model, which focuses on later-stage consumer and niche technology companies, which creates limited big winners and low average returns with many losers.

Can you name a recent investment from your portfolio and discuss why it stood out to Cottonwood VC?

Last year we invested in SmartNanotubes Technologies, based in Silicon Saxony (Dresden). They were super keen to have Cottonwood on board as a professional VC, because of our huge corporate network in the USA, Middle East, Asia and Europe. And also our extensive experience in venture building of these kinds of Deeptech companies.

Specifically regarding your investment in SmartNanotubes Technology, what about the company aligns with your investment thesis and how do you plan to support its growth?

Also here, SmartNanotubes provides a unique smell sensor. There are a lot of smell sensors on the market, but all of them are too big in size, or too heavy, or need a lot of energy consumption, or too expensive. SmartNanotubes Technologies is the only one who tackled all these issues and can provide a chipset for the mass market (small in size, lightweight, less energy consumption and relatively cheap).

Cottonwood VC emphasizes hands-on support in business development and raising next rounds. Can you share some specific strategies or methods that have worked well for your portfolio companies?

Our main strategy is we bring our extensive corporate network to the table; from over 100 corporates we personally know the CTO or head of business development or head of venturing. That is a super entrance to evaluate technologies or bring the technologies to the attention of the corporate. Mostly these corporates are also our co-investors for follow-on rounds.

Looking back on the successful companies and exits, what common traits or factors contributed to these successes?

Success is always a result of providing great technology in combination with execution power. And to be successful in the execution you need to have patience before the first market entry, a corporate network, more capital, multiple rounds, and good management.

From your perspective, what is the biggest challenge when investing in deep tech companies and how do you overcome it?

Everyone would always say “the technology risk” is the highest risk and biggest challenge, but we have never seen a company that couldn’t provide a working product. The biggest challenge in Deeptech is always “market entry” and also the time it will take before real market adoption.

Looking ahead at the next 1-3 years, what trends or opportunities are you particularly excited about in the investment landscape?

Cottonwood Technology Fund is sector-agnostic; we don’t know which technologies will come to the market. We don’t really focus on trends; our companies are mostly the first ones who are been able to open a new market and set a new trend; for example, we invested in advanced materials company Flexiramics; they are the only one which can provide flexible ceramics; it’s not part of any trend at all, but it’s a billons market. Next month we will announce a new investment in quantum computing and are pretty excited about it.

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