The advantages of the Evergreen SPV model with built-in liquidity ♻️
Guest Post in Impact Supporters #1
Intro from August Solliv 👋
Once a month, I will from now on invite a friend from the impact VC landscape to write a guest post for Impact Supporters on a specific angle in the impact VC space. These articles are a bit more niche and specific on certain topics. Hope you find it interesting!
This time, I invited Etienne to write about the specific model they use at Asterion. They build individual SPVs for each investment, which gives liquidity options for investors while ensuring that only the most relevant investors come onboard and provide hands-on support for their start-ups.
Getting LPs into impact is one of the major tasks of the impact VC space - this is one of the new ways to do it - take a look 💥
If you want to be the next person writing a guest post in Impact Supporters, feel free to text me with your idea and we can discuss the opportunity! E-mail is august.solliv@gmail.com.
Intro about guest post author 👋:
I am Etienne Duriez, a senior associate at Asterion Ventures. Originally from Northern France, I developed a passion for climate and deeptech investing. I joined Asterion to help entrepreneurs transform their ideas into sustainable and impactful solutions.
Key points discussed 📋:
The Evergreen SPV model and its benefits
Portfolio optimization, risk management, and liquidity
Strategic partnerships and active support for portfolio companies
Discover Asterion Ventures ☘️
Asterion is a venture capital firm that funds innovative companies in sectors such as decarbonization and climate adaptation. Founded by entrepreneurs, Asterion focuses on high-impact investments that respect planetary boundaries while generating financial returns. Asterion has quickly gained recognition in the French early-stage ecosystem. In just three years, Asterion raised 39 million euros from 700 successful entrepreneurs and C-level executives in the French tech sector, investing in 23 impact startups. With investment tickets ranging from 500,000 to 3 million euros, Asterion aims to support 100 startups over the next five years to become a leading impact venture capital fund in Europe.
Understanding the Evergreen SPV model ⏳
The Evergreen SPV model is a flexible and adaptive investment structure offering several advantages to investors:
At Asterion, each investment is made through a Special Purpose Vehicle (SPV), which is a separate legal entity created for a specific investment. This allows us to focus on one opportunity at a time, ensuring dedicated resources and attention. Unlike traditional funds, Evergreen means that our SPV doesn’t have a fixed closing period, allowing continuous investments over time. This approach gives investors the flexibility to enter and exit according to their own timelines and liquidity needs, much like the Sequoia model.
Flexible and adaptive structure:
Unlike traditional funds, the Evergreen SPV model mirrors the flexibility of the Sequoia model, allowing for continuous investments without a fixed closing period. This structure is particularly friendly towards impact startups focused on hardware development, as it provides the necessary runway for extended R&D cycles typical in deeptech sectors. By accommodating the unique timelines of these startups, the model supports both the scaling challenges and capital intensity that hardware and deeptech ventures face. Furthermore, the Evergreen SPV model offers the flexibility to adapt to market shifts without sacrificing returns, as evidenced by McKinsey's data showing that deeptech investments yield a 16% weighted net IRR, surpassing traditional tech funds. It is equally beneficial for SaaS companies, where extended development cycles and the need for scalability are also critical.
In fact, as Zach Ullman highlighted, companies today are capturing a greater portion of their value while still private. For SaaS companies, the value creation dynamic has shifted, with up to 90% of value being generated before an IPO, allowing them to scale and optimize operations without the pressures of public markets. Therefore, evergreen funds can bring additional value in a world of close-ended funds by staying invested until IPO.Improved risk management: Each SPV is dedicated to a single investment opportunity and syndicates operating angels with key experience for the startup. Investors can spread their investments across multiple SPVs by investing within the fund.
Built-in liquidity options: Asterion’s Evergreen SPV model offers liquidity provisions directly within the SPV structure. Investors can participate in follow-on rounds, reinvesting in successful portfolio companies as they scale. During key equity events, such as exits or major funding rounds, investors have the option to sell their shares, providing a level of liquidity rarely available in traditional venture capital frameworks.
For instance, in our latest Series A round, co-led by a European fund, we were able to offer liquidity to our seed investors. This not only rewarded early supporters but also facilitated the addition of key personnel with international expertise, helping the team’s expansion into European markets.
Portfolio optimization and diversification 💼
Investors seek to optimize their portfolios by integrating impact investments without sacrificing financial returns. Asterion’s Evergreen SPV model addresses this need by offering:
De-risking through experienced entrepreneurs: Asterion involves repeat mentors and C-levels, known as operating angels, who are committed and invested in the success of the companies. These experienced investors provide capital, expertise, and networks, enhancing the growth prospects of the startups.
High-growth investment opportunities: Asterion focuses on innovative companies with high growth potential, offering investment opportunities with potentially high returns.
We’ve been lucky to have been able to invest in a wide range of startups and the evergreen SPV model is adapted for all. 50% of our portfolio is focused on B2B SaaS companies like Weefin and Aktio, and the other half roughly consists of industrial startups split among three models.
We have placed significant capital in First-of-a-Kind (FOAK) gigafactory projects such as Caeli, recognizing their potential to disrupt the industrial landscape through large-scale, high-CAPEX ventures developing cutting-edge facilities for breakthrough goods. Additionally, we’ve invested in companies like Diamfab and Ever Dye, which license disruptive green technologies, enabling industries to leapfrog innovations without needing their own production infrastructure. Finally, we’ve also participated in build-own-operate models within the energy-as-a-service sector with Spark, helping to drive forward sustainable solutions at scale.
Why investors like the Evergreen SPV model 💰
Investors appreciate the liquidity and flexibility offered by the Evergreen SPV model. This model allows investors to maintain confidentiality about their investments while quickly responding to market opportunities and accessing liquidity through follow-on investments or equity events.
A club of entrepreneurs at the service of startups 👥
Asterion’s "deal by deal" financing model, inspired by the U.S. ecosystem, involves individual investors in each SPV. These "operating angels" commit to helping the funded startups, providing not only capital but also strategic and operational advice. This model creates a strong bond between investors and founders, enriching the entrepreneurial experience while maximizing impact.
Highlighted startups from Asterion Ventures 🔎
EverDye: Revolutionizing textile dyeing
Ever Dye is leading the green revolution in the textile industry with a dyeing technology that combines an innovative process with bio-sourced pigments. This technology allows manufacturers to dye textiles with 90% less energy, integrating into existing infrastructures without additional investments. Ever Dye's solution enables cold dyeing, significantly reducing energy costs and carbon footprint. Their pigments meet quality standards and are used by brands like AdoreMe, Chanel, and Petit Bateau.
WeeFin: Leading the way in sustainable finance
WeeFin specializes in sustainable finance, offering a SaaS platform called ESG Connect that automates ESG data processes for asset managers. ESG Connect integrates and centralizes data sources, to enhance the quality and coverage of sustainability indicators. The platform allows for customization of ESG indicator calculation methodologies and automated large-scale production of regulatory reports, ensuring compliance with European and French regulations.
Spark: Innovating hydrogen and carbon production
Spark is developing a new method of producing hydrogen and solid carbon through methane plasmolysis. This technology uses controlled-temperature plasmas to convert (bio)methane into hydrogen and solid carbon, resulting in a carbon-neutral or negative footprint with up to five times less electricity consumption than water electrolysis. Spark offers competitive hydrogen produced on-site, suitable for decarbonizing industrial heat in sectors like metallurgy, cement, and glass production.
Thanks for reading this guest post! Hope you found it interesting and that it inspired you to see a new way of getting LPs into the impact VC landscape!
See you soon for the next weekly issue, and next month for the next guest post! 👋