Partner says: Investing together in deep-tech companies with impact

April 11, 2023

Artificial Intelligence (AI) is a “key technology” with a growing impact right across all sectors. This offers opportunities, for example, to recognize diseases faster. Startups entering the market with an AI application are often looking for funding. LUMO Labs – an impact investor from Eindhoven – and Oost NL are pulling together in this regard. Andy Lürling, Founding Partner at LUMO Labs, and Saskia Leenstra, Team Manager Tech at Oost NL, tell what they encounter in the process.

AI almost seems like hype. What do you see in the market? Is one startup after another coming to pitch?

Andy: “Indeed, we get a lot of pitch decks from AI startups. In recent months, about 50% of all incoming pitch decks are from AI startups. However, we should note that not all of these startups are actually AI startups, because they are just using algorithms or, for example, deploying third-party AI.”

Saskia: “We definitely see funding requests from AI startups increasing, but just as Andy points out, the AI component is not always obvious.”

What AI applications are of interest to you and what stands out?

Saskia: “A multitude of applications are of interest to us, for example, within agri-food in predicting the shelf life of fruit and vegetables, as the Enschede company OneThird does. Or think of digitizing manufacturing industry so that defects can be recognized earlier. And also, in healthcare (earlier recognition of cancer on scans) or energy storage (taking all kinds of external factors into account to predict optimal energy consumption and storage). But there are also interesting developments going on at the scientific level that we are following. For example, neuromorphic AI potentially requires significantly less computing time and is therefore more energy efficient.”

“We must ensure that these applications are ‘for good’ and comply with European standards and values.”

Andy: “With the arrival of ChatGPT from OpenAI, we now also notice a hype of parties who have started working with this. We do expect this to have a very large effect on the acceleration and diversity of AI applications. However, we must make sure that these applications are ‘for good’ and comply with European standards and values. In addition, it is essential that good business models underlie them and they are validated in the market. Still, we often see this is missing in the early stages of these startups.”

What does the collaboration of Oost NL and LUMO Labs mean to you?

Andy: “We have with LUMO the Cooperative (growth fund), with a seed as well as a pre-seed fund underneath. We are often the first private investment fund in a startup. By joining forces with Oost NL, the startup has more capital. In addition, Oost NL brings a different network to the startups than we as LUMO Labs have. Furthermore, Oost NL is also a highly valued investor in our fund, and we work together to promote the startup ecosystem. For example, we organize the Draper Pitch Event and the Founders Lunch, the latter together with CapitalT.

Saskia: “LUMO is one of the few (pre-) seed funds that invests in startups at this early stage. This is often a risky phase for investors so you don’t find many investors in this phase, while there is a lot of demand for funding from startups. In addition to providing funding, LUMO Labs also has a program where they mentor their startups in order to increase the success rate of the startups. So, in addition to funding, LUMO Labs also puts their knowledge, experience and their large network to help the startups move forward. In addition, LUMO Labs invests in AI and other new technologies in the tech domain. Accordingly, the fund manages the CoE’s TTT scheme on AI. Like us, LUMO Labs strives for impactful investments.”

“LUMO is one of the few (pre-)seed funds investing in startups at this early stage.”

So, Oost NL and LUMO Labs are pulling together on investments in startups. What kinds of companies are they?

Andy: “We have picked up two investments together so far. The first investment is through our TTT.AI pre-seed fund: Aiosyn. This is a spin-off of the Computational Pathology Group of the Radboudumc in Nijmegen. They have already completed a nice follow-up round and the company is reaching the next milestones. There is a lot of interest in the product from the Netherlands but also already from the United States.”

“The second is Enliven from Arnhem. This company has developed a VR platform for empathy training to promote a safe working environment with training against discrimination, workplace bullying and transgressive behavior. If you ask me personally, I would advocate that all employees of organizations, and perhaps schoolchildren already, should receive this kind of empathy training. In my opinion, there is far too little attention to this in our society. This results in a lot of sickness and absenteeism, which is not fun for the people involved but also has a huge cost for society. Again, prevention is better (and cheaper) than cure.”

What do you pay attention to when an entrepreneur comes forward with an AI proposition?

Saskia: “We pay attention to several aspects: the scalability and uniqueness of the AI, such as the complexity database and the self-learning nature of the software. But also, to what extent the market for the final application has already been tested and validated. And we look at the composition of the team. For example, is there enough entrepreneurship on board in addition to technological knowledge? In addition, the ultimate social impact of the application is very important to us. Together with entrepreneurs, we want to accelerate technological renewal and innovation in food, healthcare, energy, industry and circular economy.”

Would ChatGPT be a good investor?

Saskia: “In the early stages that we invest, I’m afraid it’s difficult to get that done by ChatGPT. Often the technology is still in development, the markets are new and it is also about more human aspects such as team composition and leadership. In addition, whether investors and entrepreneurs are a good match often depends on the dynamics while exploring an investment. Also, negotiating with an entrepreneur remains human work for some time, I suspect.”

“The most important factor in whether or not to invest are the startup founders themselves”

Andy: “As we invest in AI, we naturally follow the developments around ChatGPT. We are also deploying ChatGPT as a test, alongside Google searches, for example. We foresee that ChatGPT within Venture Capital can actually contribute to more data-driven analysis and due diligence of startups and speed up the process. However, as Saskia points out, it will be a supportive process for now, as one of the most important, if not the most important, factor in whether or not to invest is the startup founders. For now, that will indeed remain human work.”