Vsquared Ventures had been looking at industrial heat in the 100–200 °C range. Heat pumps are the most efficient solution, but none of the companies the fund looked at could make them work. Upheat could. Investment Partner Patrick Tucci explains why backing it was one of the Munich-based deep tech fund’s fastest investment decisions.
Deep tech with a business case
Tucci was Vsquared’s first employee and helped build the firm with its three founding partners. Vsquared invests only in deep tech, but broadly, across themes from new space and robotics to new computing, AI, tech-bio and energy transition.
Most of Tucci’s own investments are in the energy transition. Here, Vsquared looks for what he calls techno-economic feasibility: a clear technology roadmap and a business case the customer can see. Upheat is a perfect example. It has a positive impact on the climate, but that is not the main reason customers buy it. “Upheat is an energy transition investment. You implement it, and you actually make money with it.”
Process steam at the right cost
“Industrial heat is a very big problem, and we are wasting far too much of it,” Tucci says. Before Upheat, Vsquared had looked at many alternative technologies, from new types of boilers to thermal energy storage. “But you can never get as efficient as with heat pumps.”
A heat pump recovers waste heat from the process and raises it to a usable temperature. Depending on the conditions, it delivers three to four times as much heat as the electricity it uses. The hard part is reaching steam temperatures. “Our goal was to invest in a heat pump startup in this field. But none of the companies we looked at could show they could go above 100–120 °C at a cost level that makes sense.”
Upheat’s Finnish team, with long experience in oil-free turbo compressors, was building steam-generating heat pumps for 100–200 °C, with technology that could make the economics work. “I was immediately switched on. When I talked to them, they presented exactly what I was looking for.”
The decision to invest was one of the fastest Vsquared has ever made. Upheat is also the fund’s first investment in industrial heat.
Built to scale
What surprised Tucci most was the compressor technology. “A few companies around the world know how to build high-speed turbo compressors, but Upheat’s team truly understands the technology and how to adapt it to industrial heat.” He has not seen another startup building industrial heat pumps on this technology.
The design also makes Upheat easy to scale. The product is modular and designed for serial production, and the know-how behind it is protected by intellectual property. “Each installation is still tailored to the site, but Upheat is as standardised as it can get.”
“Finnish rock stars”
Vsquared knows the Finnish ecosystem well: its team was among the first investors in the quantum computer company IQM. To Tucci, Upheat’s founders are “Finnish rock stars”. “They have very relevant backgrounds, and each of them has proven what it takes to build a company. It’s a no-nonsense approach. You can sense that they know what they’re doing, and we really love working with them.”
The team’s experience shows in everything it does, Tucci says, “from their approach to technology and product to their work with customers. They know industry from the inside.”
Even cautious industries want in
Upheat’s main industries are pulp and paper, food and beverage, chemicals and pharma, industries that demand proven technology before they invest. Even so, Tucci sees strong demand. “Upheat has a strong pipeline of serious industrial customers. In these industries, that’s quite an achievement.”
“The heat pump is installed alongside the existing boiler, so customers can start using it without changing how their plant runs.”
The most important sales message, in his view, is the payback. “The customer knows this is an investment. I’m investing money now, and in one to three years I have paid it off. After that, I’m making money with it, for decades.” The payback time depends on gas and electricity prices and on the site, so it varies, but in Central Europe, Tucci says, it is well below what customers are used to.
Customers don’t like to finance a smaller carbon footprint alone, he adds. When the investment also pays for itself, the decision is easier. For Vsquared, that is exactly the point. “For us, Upheat is the definition of what we look for in this field.”
About Vsquared Ventures
Vsquared Ventures backs bold entrepreneurs engineering groundbreaking technologies addressing some of the world’s most pressing challenges to become global leaders. Investing in deep tech companies, Vsquared Ventures focuses on new space, energy transition, robotics and manufacturing, new computing and sensing, AI and next-gen software and tech-bio. Vsquared Ventures has built one of Europe’s strongest deep tech portfolios, including industry disruptors Isar Aerospace, IQM Quantum Computing, Zama.ai, Neura Robotics, Cylib and The Exploration Company. www.vsquared.vc
