Venture capitalists are shoveling money into deep tech, including robotics, industrial tech, defense tech and, of course, AI. Wavemaker Partners arrived on the scene way before deep tech was cool.
The Singapore-based VC firm, which backs early sustainability-focused tech startups in the Asia-Pacific region, isn’t interested in popular technologies where a small check is sure to get a big return. Instead, it looks for the ideas that need building, proving and convincing.
“Anything of significant long-term value has to be difficult,” co-founder Paul Santos tells ImpactAlpha. “It’s not that you’re looking for the difficulty. But the difficulty is a sign that you could be well rewarded if you solve it.”
Its latest investment is Neocrete, a company in New Zealand that has developed an activating additive for concrete that reduces the need for emissions-intensive cement. Many startups have raised hefty sums of capital to improve the environmental footprint of the ubiquitous building material, which is responsible for a full 8% of global CO2 emissions. Last month, Wavemaker invested in Neocrete’s $3.5 million pre-Series A equity round.
“Silicon Valley likes to go for moonshots, like trying to make new kinds of cement,” says Santos. Neocrete is focusing instead on an ingredient, which is less costly. “No one would believe you can build a deep technology with a few million dollars, but we’re at the cusp.”
Wavemaker invested in Neocretek Trust’s Catalytic Capital for Climate and Health. The VC firm first invested in Neocrete in 2023. The latest funding will enable Neocrete to meet a key milestone – clearing customers’ in-house lab testing – and expand its pilot projects. It has already secured a test with a ready-mix concrete company in Brunei
“Once you cross that milestone, then the customer orders and you’re well-positioned to raise a big round and move into production contracts,” Santos says. “It’s capital-efficient deep tech.”
Deep tech and enterprise tech
Santos started Wavemaker with entrepreneur and VC investor Eric Manlunas15 years ago. Santos had also racked up the hours as both an entrepreneur and angel investor in his native Philippines before moving to Singapore, where the government was investing heavily in the nascent local startup ecosystem.
The partners were committed to supporting entrepreneurs with a social or sustainability lens, and zeroed in on sectors where they knew they could spot overlooked or under-valued opportunities: deep tech and enterprise tech.
“Most people don’t want to take technology risks in our region, they only want to do business model innovation,” says Santos.
One of its enterprise tech portfolio companies is Growsari in the Philippines. The company helps the country’s more than one million “sari-saris” – mom-and-pop shops – business management functions like logistics and bill paying
The 10-year-old company was an early mover in providing such services to small and informal businesses; the concept clicked with Santos, who has spent his early career in consumer products with Procter & Gamble. Wavemaker invested a year after Growsari got started.
“Not too many VCs would understand this business,” says Santos. Similar companies in larger markets like India and Indonesia were able to raise because VCs spotted the opportunity for scale. “Many of them got too much money and focused on scaling,” says Santos.
Growsari focused on its margins. It’s now expanding into those bigger markets. “This is a business that rewards capital-efficiency. There’s margin if you know how to do it,” Santos adds.
Putting the fun in fundraising
The partners raised $6 million for their first fund, mostly from friends and family. Its second fund raised 10x more capital and attracted Temasek and the International Finance Corp., which have reupped in subsequent funds. Funds three, four and five are each over $100 million. Temasek has invested in each one.
“When you invest in the stuff that we do, which is not popular because it does not look like the things others have seen elsewhere, you have to fight to prove that you deserve the money,” says Santos. “We’re hopeful, because even when it’s been tough to raise money, we’ve been able to raise, and our startups have been able to raise.”
Wavemaker has also now fully exited its first fund, returned money to investors, and it’s working on exits from its second fund.
“If you have a valuable company, somebody will want it,” Santos says. “So we focus on getting companies to a certain scale, delivering a certain kind of value, and we believe we’ll find buyers.”
Wavemaker impact
The Wavemaker team also helped launch a climate-focused venture studio called Wavemaker Impact, which now manages its own fund under the name 100×100.
Wavemaker Partners has chosen to stay focused on a broader set of impact tech companies. Climate is a key theme. Developing green and net-zero cement, for example, is key to the low-carbon transition because the building material is ubiquitous and responsible for 8% of CO2 emissions. It’s also in high demand by building and construction companies.
The European Union this year implemented an emissions-based tax on imported cement, steel and other carbon-intensive materials.
What’s novel about Neocrete is that its dry-powder additive can be mixed with relatively cheap, low-performance materials like volcanic ash and fly ash – a waste product of coal plants – “so they perform like cement,” the company says.
The result is a heavy-duty concrete that requires as much as 50% less cement. Concrete makers don’t have to greatly alter their production plants, making it a lower-cost option than other green cement solutions that require expensive production facilities or equipment, like on-site carbon capture systems.
Neocrete is working with Readymix Brunei, a concrete maker in Brunei on its first commercial application in the redevelopment of the kingdom’s largest port.
“Greener concrete that is better and cheaper than traditional concrete – it sounds too good to be true,” says Santos. Neocrete’s team of 15 in Auckland, New Zealand, wasn’t on anyone’s radar against “well-funded, better pedigreed” teams in bigger tech hubs, he adds. “The true spirit of venture is you take a risk other people won’t take.”
