Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Alain le Loux was recorded on July 2019.
Alain le Loux is General Partner at Cottonwood Technology Fund. The firm invests in hardcore technology startups in Northern Europe and the Southwest of the United States.
Sramana Mitra: Let’s start by introducing our audience to yourself as well as to Cottonwood.
Alain le Loux: I have a technical background. I graduated in 1994 at the University of Twente. I have a double Master’s degree. I had a long corporate career. I ended up on an executive level with 1,000 employees and $30 million in revenue.
I also graduated from my executive MBA. I was also a lecturer at a business school for strategy and marketing. In 2008, I became the CEO of a tech startup in the Netherlands. That company was sold to a German multinational.
I then didn’t want to go back to corporate. I started with 14 investments. In the meantime, I was hired by an incubator in the Netherlands, and I was also hired by the European Union to set up a coaching program for startups all over Europe. I coach startups in Paris, Berlin, Stockholm, and Helsinki.
Then in 2015, I met Cottonwood Technology Fund. We had a similar approach. I ended up as a general partner.
Sramana Mitra: How big is the fund?
Alain le Loux: Fund one was a $21 million fund. It was in New Mexico. Fund two was $25 million. In 2015, we opened a European office with a focus on the Netherlands. Now we are raising $100 million for fund three. $100 million will be invested 50/50 in the Southwest US and Northern Europe.
Sramana Mitra: What is the connection between the Southwest US and Northern Europe? How do you define Southwest US, and why Northern Europe?
Alain le Loux: We like to be in regions in the world where there’s a lot of innovation. There’s a wealth of innovation in Germany. There are lots of PhD and technical universities. It’s the same in Southwest US, but there is a lack of early-stage capital. There is almost no early-stage capital available.
In the US, all the money is in Silicon Valley, Boston, or New York. There is almost no money in New Mexico, Colorado, or Arizona. That is the perfect sweet spot for us.
Sramana Mitra: Let’s talk about some of the industry sectors that you invest in.
Alain le Loux: We do not invest in software and artificial intelligence. Our focus is on hard science. Think about robotics, clean energy, automotive, nanotechnology. We like to invest in pre-seed to early-stage.
We can invest between $1 million and $3 million in the founding stage. Around 90% of our investments are pre-revenue and pre-customer. If it’s really breakthrough technology with really unique IP, we’re interested.
Sramana Mitra: You do invest in robotics but you don’t invest in artificial intelligence or software. How does that compute? In our world, robotics is part of artificial intelligence.
Alain le Loux: Yes, but we like to invest more in the hardware platform. You use artificial intelligence, but you also use artificial intelligence just as a software platform.
Sramana Mitra: You do the hardware robotics part of artificial intelligence; not the software.
Alain le Loux: Yes.