Leitmotif, a venture firm that has been quietly investing in decarbonization startups over the past 16 months, has finally revealed the source of its funding: the Volkswagen Group. The German automotive giant has committed $300 million to Leitmotif's first fund, making it the sole limited partner. This significant investment is a testament to Volkswagen's commitment to reducing its carbon footprint and supporting innovative startups in the decarbonization space.

Leitmotif's portfolio already boasts an impressive 20 startups, including EV companies, space and battery plays, and four nuclear fusion startups. The firm's managing partners, Matt Trevithick and Jens Wiese, aim to deploy roughly one-third of the $300 million fund so far, with plans to spin up successive funds that draw in more European industrial interest beyond Volkswagen. This ambitious effort comes at a time when securing funding for hardware startups, especially those with a significant manufacturing component, has been challenging.

Trevithick believes that now is the right time to invest in these kinds of companies, citing the potential for the United States to "supercharge" technological progress in the coming years. Wiese, who previously headed Volkswagen Group's M&A, Investment Advisory, and Partnerships division, shares this vision, stating that the overarching goal of Leitmotif is to "create a bridge between the European industrial establishment and the US innovation ecosystem."

Despite the current geopolitical turmoil, Leitmotif is building a transatlantic fund that will focus on investing in "category-defining companies" within its fields of interest. The firm also plans to identify "new pockets of innovation" that could benefit the Volkswagen Group. Wiese expects roughly one-quarter of Leitmotif's portfolio to interact with Volkswagen and its various brands, citing EV truck startup Harbinger as an example of a company that has had discussions about collaborating with Volkswagen's trucking division.

Geographically, Leitmotif's investment strategy is structured to deploy roughly 70% of its capital in the US, with the remaining 30% invested in the EU. The firm will maintain offices in both Palo Alto and Munich. Trevithick stated that 70% of Leitmotif's global investments in this first fund will be made in startups that are "solving today's known problems" and exist in "billion-dollar plus markets with customers ready to buy the innovation." The remaining 30% will focus on "revolutionary innovation" that will create "billion-dollar markets in the 2030s and beyond."

So far, this strategy has led to investments in battery recycling company Redwood Materials, reusable rocket company Stoke Space, and circular polyester startup Syre. Leitmotif has publicly backed 13 startups to date, with more in its portfolio that have not been announced. The firm plans to eventually have other funds, with robotics and AI being eyed as potential areas of focus. Volkswagen will have the right to invest in these funds if it chooses, but Leitmotif remains independent and focused on finishing out its first fund.

The timing of Leitmotif's launch is significant, coming as it does during a period of fundraising slowdown for startups, especially those focused on hardware or "deep tech." Trevithick believes that this environment has actually worked in Leitmotif's favor, allowing the firm to secure access to high-quality startups that might have been out of reach during more buoyant times. Wiese's and Trevithick's backgrounds, which include experience in venture capital and industry, have also helped attract interest from startups and investors alike.

As the clean tech industry navigates a period of uncertainty, Trevithick remains optimistic about the potential for firms like Leitmotif to thrive. He believes that the unpredictability of the current environment will present more opportunities for entrepreneurs, startups, and venture capitalists. Wiese shares this confidence, stating that Leitmotif feels "very confident" about its portfolio and its ability to identify companies with strong business cases that will succeed regardless of the prevailing themes of the day.