Volkswagen-Backed VC Firm: A New Player Emerges

Leitmotif's Funding Source Revealed: Volkswagen Group

For the past sixteen months, a new venture capital firm, Leitmotif, has been actively investing in approximately 20 startups. These investments are largely centered around the crucial area of decarbonization.

The firm’s portfolio demonstrates a diverse approach, encompassing companies involved in electric vehicles (EVs), space technology, battery development, and notably, four startups dedicated to nuclear fusion research.

Volkswagen's $300 Million Commitment

Previously, Leitmotif had only disclosed that its funding originated from “European industrial interests.” Now, the firm has clarified this, revealing that the Volkswagen Group is the sole source of capital.

Volkswagen has committed $300 million to Leitmotif’s inaugural fund, with roughly one-third of this amount already deployed. This significant investment underscores Volkswagen’s commitment to sustainability.

During a recent conference, Volkswagen Group CEO Oliver Blume articulated that Leitmotif’s investments are strategically aligned with reducing the automaker’s carbon footprint.

Furthermore, Blume emphasized the potential for developing a “circular economy” both within and beyond the Volkswagen organization.

Expanding Beyond Volkswagen

Matt Trevithick and Jens Wiese, the managing partners of Leitmotif, envision a broader scope for the firm’s future.

Their ambition is to establish subsequent funds that attract additional investment from a wider range of European industrial entities, extending beyond Volkswagen’s initial commitment.

Navigating the Investment Landscape

Securing funding for hardware-focused startups, particularly those requiring substantial manufacturing capabilities, has presented challenges in recent years.

However, Trevithick maintains a positive outlook, believing that the current environment is opportune for investing in these types of companies.

He expressed his belief that the United States is poised to experience a surge in technological advancements, stating, “I think the next several years are about to produce a number of technical capabilities in the United States that the rest of the world will marvel at.”

Bridging the Transatlantic Innovation Gap

Leitmotif is concurrently establishing a transatlantic fund amidst a period of geopolitical tension, influenced by the policies of the Trump administration.

Despite these challenges, Wiese, formerly the head of Volkswagen Group’s M&A, Investment Advisory, and Partnerships division, highlighted the firm’s core objective.

The overarching goal of Leitmotif is to “create a bridge between the European industrial establishment and the U.S. innovation ecosystem,” fostering collaboration and accelerating progress.

Generating Profit is the Primary Goal

According to Trevithick and Wiese, Volkswagen’s foremost objective when committing capital to the fund was to generate financial returns.

“The initial and most crucial aim is to establish a thriving venture capital firm,” Wiese stated.

Despite Volkswagen Group’s substantial annual revenue, reaching hundreds of billions of dollars, Wiese emphasized that profitability remains vital as it represents “the standard metric for success within the industry.”

Investment Focus and Strategic Alignment

Following the pursuit of financial gains, the VC firm intends to invest in “companies poised to define their respective categories” within its areas of interest, as outlined by Wiese.

Furthermore, the firm will actively seek out “emerging areas of innovation” that could potentially provide advantages to the Volkswagen Group.

Wiese anticipates that approximately 25% of Leitmotif’s portfolio companies will, over time, engage in collaborative efforts with Volkswagen and its diverse brand portfolio.

Harbinger, an electric vehicle truck startup, serves as a prime illustration of this strategy; Leitmotif participated in Harbinger’s $100 million Series B funding round in January, and discussions regarding potential collaboration with Volkswagen’s trucking division are already underway.

Geographical Strategy and Investment Allocation

Leitmotif’s investment approach is geographically structured, allocating roughly 70% of its capital to ventures within the United States.

The remaining 30% will be directed towards investments in the European Union.

To support this strategy, the firm will operate offices in both Palo Alto and Munich.

Balancing Current Needs with Future Innovation

Trevithick explained that 70% of Leitmotif’s initial fund investments will target startups “addressing existing, well-defined challenges” within markets exceeding $1 billion, where customers are prepared to adopt innovative solutions.

The remaining 30% of the fund will be dedicated to “groundbreaking innovation” with the potential to create “markets valued at $1 billion or more in the 2030s and beyond.”

This approach has already resulted in investments in companies like Redwood Materials (battery recycling), Stoke Space (reusable rockets), and Syre (circular polyester).

To date, Leitmotif has publicly announced its backing of 13 startups, with additional portfolio companies remaining undisclosed.

Future Funds and Continued Independence

Leitmotif plans to launch subsequent funds, with a particular focus on robotics and artificial intelligence.

Volkswagen will retain the option to invest in these future funds if it chooses, but Leitmotif will maintain its independence and concentrate on successfully deploying its current fund.

The Significance of Timing in Venture Capital

The latter part of 2023 presented a particularly challenging period for startups seeking substantial funding, particularly those involved in hardware or advanced technologies, due to prevailing high interest rates.

According to Trevithick, this challenging climate proved to be an opportune moment for the launch of Leitmotif.

“It is during market downturns that robust companies distinguish themselves from those less resilient. During periods of inflated valuations, funding is more readily available to all,” he explained.

Reduced Investment Risk Aversion

This deceleration in fundraising activity led other investment firms to adopt a more conservative approach, concentrating their resources on existing portfolio companies, Trevithick noted.

“The availability of new capital for promising companies diminished, as investors prioritized the performance of their current holdings,” he stated. “This situation allowed us to garner significant interest in funding rounds that might have been inaccessible during the peak of the bubble.”

Much of this interest stemmed from the extensive experience of Wiese and Trevithick.

Leveraging Extensive Industry Networks

Wiese dedicated nearly eight years to Volkswagen Group, overseeing mergers, acquisitions, and investments for the automotive giant. During his tenure at Volkswagen, Wiese cultivated a substantial network within the venture capital community, spanning both Europe and the United States.

This network included a strong relationship with battery technology innovator QuantumScape, where Wiese served on the board until 2024.

Trevithick, for his part, spent a decade as a partner at Venrock, concentrating his investment efforts on renewable energy during the initial clean technology surge in the early 2010s.

His most notable investment was an early-stage commitment to Atieva – the company that ultimately evolved into Lucid Motors.

Experience Navigating Market Volatility

Trevithick emphasized that the experience of investing in, advising, and guiding companies through the subsequent clean tech downturn provided invaluable preparation for navigating the current uncertainties within the industry.

Despite the scaling back or abandonment of numerous corporate “net zero” objectives, Trevithick believes the clean tech sector is “entering a more favorable position this time around.”

Furthermore, Trevithick anticipates that this unpredictability will generate increased opportunities for firms like Leitmotif – and the startups they support.

“It is reasonable to anticipate a highly volatile environment. This volatility should disproportionately benefit entrepreneurs, startups, and venture capitalists,” he asserted.

Wiese concurred, adding, “We maintain strong confidence in our investment portfolio. While decarbonization serves as our primary focus, we prioritize companies with a compelling business case for success, independent of prevailing trends.”

This article has been updated to include commentary from Volkswagen Group CEO Oliver Blume.