IPM, an asset manager that has pioneered investment into the emerging infratech area — the intersection between infrastructure and technology — is planning to raise a $1bn investment fund, co-founder and managing partner Marian Bocek says in an interview with bne IntelliNews. 

Taking the infratech concept and applying it to real deals, IPM “tried to merge the world of technology and the world of infrastructure, and focus on the venture-to-value build-up,” he explains. “I don’t know any other asset manager that is doing that under a single umbrella; the big guys tend to have an infrastructure fund and a tech fund … we are industry leaders and first movers.” 

IPM’s existing investors include South Korean institutional investors and large conglomerates such as Samsung. Among the major assets in its portfolio are a 39% stake in Dunkerque LNG, one of Europe’s largest liquefied natural gas (LNG) terminals, and the OCI Solar Energy Fund 1 targeted at solar projects in South Korea. However, over the last few years it has focussed increasingly on tech breakthrough companies in Silicon Valley and Europe.

So far, IPM has been investing in tech companies on an asset-specific basis. Two of its investments — R&D and battery production company InoBat and semiconductor startup Tachyum — are on their way to becoming billion dollar companies, according to Bocek, and the asset manager is now setting up its Avanea fund (the name combines ava meaning life and nea meaning novelty), to be launched towards the end of 2Q19. 

The target size of the fund is $1bn, which means IPM would double its assets under management. “If you want to have an impact, the infrastructure element especially is pretty capital intensive, so we are going for sizeable first fund,” says Bocek. “We believe this fund will be a global impact fund that really will invest in the key trends — electrification, AI, big data — to create a next generation of conglomerates and become a significant player in climate change discussions.” 

Some of IPM’s existing investments like Energy Storage Systems (ESS), an environmentally friendly, utility-scale energy storage technology producer, are in the green energy space, while for others decarbonation is an important part of their impact: for example, InoBat’s batteries for electric vehicles (EVs) and the Tachyum processor’s potential to significantly reduce energy consumption at data centres. 

The next big things

It’s clear that the sectors picked for IPM’s tech investments are right at the centre of some of the biggest growth sectors of the coming decades: ESS in clean energy, InoBat in electro-mobility and Tachyum in big data. 

With the next few years seen as critical for tackling climate change if global warming is not to escalate out of control, governments are providing incentives for renewable energy and companies are investing around the world. ESS’s latest round of venture funding in 2019 was co-led by SB Energy, whose senior vice-president Rich Hossfeld commented at the time that “cost-effective long-duration energy storage … is needed to improve grid resiliency and enable the high renewables power system of the future.”

In an interlinked story, big data is already a massive energy user, consuming more electricity each year than the UK, and by 2040 is set to account for 40% of the world’s total energy consumption, making it the single biggest energy consumer. 

Tachyum, whose CEO and co-founder Radoslav Danilak Bocek dubs the “Steve Jobs of the semiconductor chips industry”, has developed Prodigy, the first universal processor that will reach mass production next year. 

The next part of the plan is to scale up that investment into building a network of data centres in Europe starting in Slovakia and the Czech Republic. These will be powered by the Tachyum chip, which would help to address the huge energy consumption bill from big data by creating low-cost and high efficiency data centres. 

“We are looking to take the power efficiency and the chip that is ten times less energy intensive than traditional chips, and migrate it into an infrastructure fixed asset that will provide a valuable resource that is very much needed … Tachyum-powered data centres could be the answer to the biggest burner of electricity on the planet,” says Bocek. 

Finally, InoBat and Wildcat Discovery Technologies are in the electro-mobility field, which is set to achieve massive growth in the coming decades as drivers shift from fossil-fuel powered vehicles to EVs. Like renewables and data processing, this is a huge growth area. OPEC estimates there will be 240mn EVs by 2040, up from the current 3mn, all of which will need batteries. Bocek forecasts a total addressable market for batteries of €150bn, of which “we would love to have at least 10%”. 

Venture with a difference 

While IPM has made venture capital-style investments into ESS, InoBat, Tachyum and Wildcat, Bocek stresses that it is not a typical venture investor. Specifically, while most venture capital firms hedge their risks by spreading their investments among a range of companies, in the hope at least one of them will deliver big returns, IPM has a very hands-on approach that it calls “venture-to-value” in building up the small number of companies it backs. 

“We don’t believe in the statistical probabilistic game … instead we want to invest in companies where we will be in the driving seat along with the founders,” Bocek says. 

He considers there are two main reasons why venture capital investments fail: they are unable to reach the customer (for example they don’t manage to convince large state-owned utilities to use their technology), or they are unable to access long-term money. 

IPM, meanwhile, tries to act as a bridge between the separate worlds of utilities and venture investment. In addition, by bringing US companies to Europe and creating European joint ventures, they are “Europeanising” companies and thus allowing them to get access to new sources of finance from national and EU-level institutions.

“This is a unique model because by giving access to big customers and long-term non-diluted money, we give the companies breathing room to develop the product they need to sell large off-take volumes to big customers,” Bocek comments. 

From Silicon Valley to Danube Valley 

Another key plank of what IPM does is bringing technologies to the region that Bocek, who hails from Slovakia, dubs the Danube Valley, spanning the Czech Republic, Hungary and Slovakia.

Tachyum was the latest to move into the region, announcing on April 7 that it has opened new offices in Slovakia as its business in the EU grows. The move will give Tachyum a foothold in the “strategically important European marketplace”, as well as enabling it to leverage the technological expertise of its Slovakian employees, the company said. 

Similarly, InoBat’s joint venture with San Diego-based Wildcat will bring the latter’s technology to Europe, as the two companies — both backed by IPM — plan to set up a €100mn, 100-MWh battery production line in Slovakia this year. The deal also fits with IPM’s venture-to-value approach, as Wildcat brings to InoBat its technology that will accelerate battery performance improvements and reduce R&D costs. 

InoBat has another strategic partner agreement with ESS to develop energy storage applications and opportunities in Europe. Under an agreement with Czech utility CEZ, InoBat is working on a battery manufacturing plant in the Czech Republic, thereby bringing ESS’s proprietary salt water and iron-based technology from the US to Europe. The joint venture, InoBat Energy, will start testing the battery using CEZ’s utilities in the first quarter of this year, with the long-term aim of building a mass production line, InoBat said in a press release. 

IPM was looking for an energy storage company, as it already has a significant solar portfolio, and discovered ESS. “When we found ESS we knew we could be the right partner to take its technology to the European market, help distribute and manufacture it,” said Bocek.

Discussing the reasons for bringing companies to the Danube Valley, Bocek highlights the engineering industrial heritage of the region, and points out that manufacturing arrived on the heels of its expertise in R&D: “Big car manufacturers are opening their plants [in the region] not because people are cheaper but because of the legacy of super smart engineers and good education systems.

“I would like to develop Danube Valley as a concept, really put it on the map with companies like InoBat and Tachyum,” he added. 

A critical moment in Bocek's life was when he was sent to high school in the US on a scholarship. This experience inspired him to give something back to other young people from Slovakia and he used his first Wall Street bonus to set up the GBE Foundation to send talented young students from underprivileged backgrounds to study in the US. Many of these students came back to Slovakia, and several are now part of IPM or its portfolio companies. 

Bespoke batteries for European EVs 

Slovakia, where InoBat is based and where it is setting up its battery production, produces the highest number of cars per capita in the world. Nine of the 18 European OEMs produce within 200 kilometres of its new facility, making this the most concentrated supply chain for the automotive sector in the world.

The pilot project involves developing bespoke batteries for automakers, a strategy that turns the existing model on its head. “We are trying to take on the existing supply model we believe is very flawed, based on big Asian suppliers approaching automakers with a catalogue "take it or leave it" approach. As they have no alternative, automakers are stuck with the challenge of building the car around the battery,” explains Bocek. 

By contrast, InoBat brings designers into the equation upfront, to design a battery that fits the design of the car, made possible because of Wildcat’s technology: “We are taking the latest technology from Wildcat and putting it into the production of batteries customised for European automakers, trying to solve the European dependence on Asian suppliers.” 

InoBat is in the process of raising a new round of venture funding, expected to close on €100mn, which will finance the pilot line. The company is securing equity from IPM’s anchor investors and partners, and is in discussions with both the European Investment Bank (EIB) and Slovak Industrial Holding, the largest sovereign wealth fund in CEE. 

Work on building the production line is due to start in the second half of this year, and Bocek says the schedule shouldn’t be affected by the coronavirus (COVID-19) pandemic, even though this has caused factory closures across CEE, including in the automotive and components sector. IPM and its portfolio companies have adapted to the crisis situation, with InoBat, for example, organising virtual site visits for investors. 

“Our partners are typically strategic, long-term, countercyclical … they thrive at times like this,” says Bocek.