Molten Ventures – executive interview

In this interview, Dan Ridsdale, global head of technology and communications, speaks with Ben Wilkinson, CEO of Molten Ventures, about the company’s new growth fund, institutional and pension capital, investments in ICEYE and Isar Aerospace, and its approach to space, SaaS, AI and other technology themes.

Molten Ventures is a UK 250, London-based VC firm that invests in the European technology sector. It has a portfolio of 100+ investee companies and includes a fund of funds programme (as well as EIS and VCT schemes) in the group, as well as its flagship balance sheet VC fund.

How does the new growth fund fit with Molten Ventures’ strategy?

Ben Wilkinson: This is a fund focused on Series B+ companies, which has always been where we’ve invested and therefore aligns very clearly with our investment thesis. These are high-growth companies at the stage where they will have £5–10m of revenue or more. In venture capital, you’re backing innovation and businesses that can scale to be global champions, so that hasn’t changed in terms of the thesis.

What has changed is that the focus of this fund is to allocate public capital from our balance sheet. The listed vehicle is around £1.5bn of capital. We currently manage around £500m of additional capital from third-party sources, which are non-public, and this is about growing the non-public capital portion of that.

We’ve created a fund with a £100m commitment from the listed balance sheet to make sure PLC shareholders still get access to the same deal flow, and we’re allocating capital alongside that. We’re attracting capital in the first instance from the British Business Bank, which has committed £75m as a cornerstone to that strategy.

How does the growth fund sit alongside Molten’s earlier-stage investing?

Ben Wilkinson: We have some earlier-stage investments. We always think about Molten as a platform to access venture capital as an asset class, and to do that you want access at different stages of a company’s growth journey.

At the very early stage, we have the fund of funds programme, where we take an LP position in funds. We’ve invested in around 80 funds across Europe. That gives us access to data and enables us to track those early-stage companies as they come through, scale and mature.

We then look to put capital to work directly at the Series A stage. That’s when businesses will have some commercial traction, maybe 2m-plus of revenue. The key difference between an A and a B investment is really about a proven go-to-market strategy. At the B stage, you have more repeatability in what’s already been proven in the company.

How do you expect the growth fund to evolve?

Ben Wilkinson: If I think about the shape of the European market for Series B investing, the average ticket size will be something like £20m of capital going in, where businesses are raising maybe £40–50m of capital. You therefore need a depth of capital to make sure you can invest consistently and build the right portfolio size.

For a Series B portfolio, we probably want 10–15 investments in that structure. That gives you a sense of the initial capital being 200–300m, but you also need follow-on capital of maybe 40% of the fund to make sure you can continue to back the winners in that strategy. Ideally, we’re targeting a fund size of £350m, so we’re already halfway there.

We want to attract institutional capital, such as the same institutions that are already PLC investors but want to come into a private structure. Pension capital coming from DC pension funds, DB funds or local government schemes would also be appropriate for that strategy.

What is happening across ICEYE and Isar Aerospace following recent funding and launch milestones?

Ben Wilkinson: We’ve invested in ICEYE, which is a Finnish satellite business. It has a distinct technology called synthetic aperture radar, or SAR, and now has a constellation of 76 satellites in low Earth orbit that can take images of the Earth.

We first invested in ICEYE in 2018. We were backing it at the point where the technology was clearly distinct, and the company then had to prove that it could build this constellation of satellites. It has executed that very well. The first use case was commercial: looking at floods and fires, taking the data from those images and selling that into insurance so insurers can pay out quickly and efficiently, for example. Another use case is environmental monitoring, such as monitoring the Amazon.

In the last couple of years, we’ve seen an inflection in defence spending, particularly in Europe, relating to the themes of sovereignty and resilience. European countries recognise that they need their own access to data and communications, and their own ability to see what’s going on at their borders. A significant use case has also been in Ukraine over the last couple of years. That led to an inflection in ICEYE’s valuation and a subsequent fundraise over the summer.

Space is a thematic that links to our broader technology investing themes. Another company we’ve invested in is Isar Aerospace. We first got exposure to Isar through Earlybird, the German VC that invested at an early stage and with which we’ve had a partnership for many years. Again, it’s very much about tracking businesses as they mature.

As we saw Isar mature, we co-led its most recent investment round, announced at the start of the summer, and invested €30m into that round ahead of the most recent launch. What we liked about Isar is that it’s a rocket-launch company giving Europe access to low Earth orbit. There’s a significant constraint on satellite businesses’ ability to get to low Earth orbit. Europe needs resilience, sovereignty and its own access, while globally companies also need more access because SpaceX is limited in how many launches it can take. Demand is higher than supply.

The other attractive part is Isar’s repeatable manufacturing. They’re already building rockets three through seven and have a 40,000sqm facility outside Munich. We recognised that we weren’t betting on one launch being successful. This is about repeatability and demonstrating the capability to increase launch cadence.

What are the next milestones for Isar Aerospace?

Ben Wilkinson: They’re really ahead of where we thought they would be with this second launch. It was very exciting watching the launch on Saturday evening – equivalent to watching your favourite football team – with excitement and nerves at the same time.

We hoped they would get to max Q, which is the maximum dynamic pressure and really tests the rocket. They went beyond that, through stage separation of stages one and two, then reached orbit and delivered the five CubeSat satellites that were on the rocket. So, they’re ahead of where we thought they would be.

The next stage is repeatability of launch: improving the speed with which they can execute subsequent launches and delivering on the significant pipeline of orders they already have. If they can prove that they have repeatable access to low Earth orbit, they can then think about other parts of the value chain in the ecosystem.

We’ve seen with SpaceX, for example, that most of its revenue actually comes from Starlink satellite communications. There are other parts of the value chain, such as the satellite bus, where you could see some integration as another opportunity for Isar.

What is Molten’s overall investment thesis for space?

Ben Wilkinson: Like any other sub-theme of technology that we look at, we look at the value chain of that ecosystem. We look at where we feel the value will accrue and how we think the market will develop.

If you think about the satellite business, the cost of satellites has come down substantially. ICEYE and SatVu are both in that ecosystem, putting sensors into low Earth orbit. Data from those sensors can then be sold to commercial customers and into defence applications.

Isar is about launch capacity and giving access to low Earth orbit. There’s a real constraint now: companies want to put a large number of satellites into orbit, but supply of launch capacity is very limited. SpaceX is already full for the next three years in terms of its capacity, so we need more capacity in the market. That has particular relevance for Europe in terms of its own sovereignty and resilience.

How are you approaching SaaS and AI investments?

Ben Wilkinson: This really speaks to why we invest across sub-themes of technology. We’re investing in businesses for the long term. Our average hold is likely to be eight, maybe up to 10 years, so you don’t know which sub-sector in 10 years’ time is going to be performing well. You therefore need a portfolio approach, both in terms of the stage of companies – early-stage, later-stage or more mature – and across different technology sub-themes.

What has served Molten well is continuing to invest in hardware and deep tech, which is now becoming more relevant and more pertinent. At the same time, we’ll continue to invest in enterprise applications that are relevant to the next generation of productivity and efficiency in companies.

We’ll look at AI businesses and the infrastructure layers that can power those companies, and we’ll look at SaaS-type products. If they have resilience because they’re mission-critical to businesses, that’s something we would spend time looking at. Where we will avoid companies is where the underlying SaaS technology is more likely to be disrupted by AI because it is more ubiquitous or isn’t as mission-critical to an enterprise.

What other themes are you seeing across the portfolio?

Ben Wilkinson: SatVu is a satellite business that has launched its own satellites. It uses a thermal imaging sensor, so it’s distinct from ICEYE’s synthetic aperture radar sensor. We’re also investors in fintech companies and digital health businesses.

We’re investing in quantum, where we’re seeing a lot of growth and where the market is coming to the boil over the next couple of years. We see a lot of opportunity there. We want to invest across the technology spectrum in those enabling layers of technology. That can include semiconductors or cybersecurity, for example.

What we’re really doing is thinking about venture capital as an asset class in its own right, giving our public market shareholders, as well as our increasing private market shareholders, exposure to growth that is remaining private for longer.

We’re also seeing a paradigm where Europe, in terms of its own procurement, sovereignty and resilience, needs to back these companies more. We’re seeing more pension capital coming into this market as well, albeit slowly. I really feel the opportunity for us is linking the generational shifts in technology with the increased capital that we hope will come, alongside the themes of sovereignty and resilience, and seeing Molten as a key player in that market.