An interview with Yair Reem, Co-Founder of Beyond Black
About climate change and investments in breakthrough technologies and solutions that address climate crisis mitigation. The latest interview with Yair Reem from Maschinenraum innovator network and Co-Founder of Beyond Black.
interview | 07.09.2020
Dear Yair, tell us a little bit about yourself and the company you have founded?
I’m Yair Reem, the Co-founder of Beyond Black, a venture fund for investments in breakthrough technologies solutions that address climate crisis mitigation and addition. Our goal is to generate financial returns for our investors but – and that is very crucial – at the same time each of our investments should have the potential to significantly reduce carbon emissions. For us, significant means a yearly reduction of at least 1% of global emission. That is the threshold we apply for every investment we are looking at. So, all in all, everything we are doing has to have a major impact on the environment in a good way and has to scale that it really can make a difference. If the fund ends up delivering only a financial return and making no real impact, then we failed. My background is electrical engineering. I turned into Venture Capital about a decade ago when I was working with Hasso Plattner doing direct investments in startups as well as fund investments for him.
What have you learned during your past years when it comes to technology, climate change and investing in promising startups?
I have learned many lessons. First of all, if you want to solve climate change, there is no one solution. Climate change is a multifaceted challenge which can’t be tackled by quick solutions, and software alone will not solve the problem. Therefore, you have to invest in things that are hard, capital intensive and take time. And that’s where normal venture funds face a challenge, since usually funds have a life-cycle which is shorter than the time it takes for climate-tech companies to mature. Thus, one needs to think about new ways to finance climate startups. The second lesson is: everything we do needs to work at scale. A few years ago I invested in a technology that showed highly promising results in the lab but failed at the scaling phase. That’s why we have to make sure that our investments have the potential to work also in real-life conditions and deliver attractive economic results at scale.
What do you think: where does the Mittelstand stand when it comes to innovation and digitalisation? What does innovation mean to you?
Everybody knows that the Mittelstand is the backbone of the German economy. That’s a given. But what is more important to me is what the Mittelstand represents. There is no translation for the word “Mittelstand”, since the meaning goes way beyond referring to small to medium sized companies with up to 50 million revenue or 500 people. Even Henkel or B.Braun would consider themselves as Mittelstand. The reason is that more than anything else the word defines a culture, a spirit of a business and of doing business. With that I mean, usually it’s a family-owned company which is building a sustainable business for generations to come. It is a very conservative kind of business, with long term financing and operating practices. And of course, there is innovation but usually it’s incremental innovation. What it is not: it is not the kind of startup innovation. It is not disrupting and it is not moving fast and braking things as they go. It is not daring and taking risks and that means that Germany and its Mittelstand is probably – and I hate to say it – the last to adapt to technology changes if they do not change.
What has to change so that the German Mittelstand will be innovative again?
It is not without a reason that Tesla was founded in the United States and not in an automotive country like Germany. There are at the moment 200 startups in automotive in Israel, although there is no single car that is being manufactured in Israel and yet there are more startups in Israel than in Germany. So what we need in Germany, what the German Mittelstand needs, is “Mut” instead of ”Angst”. To be bold and daring. If you look at startups, they put a lot of energy in scaling and growing fast, but not on profitability. The German Mittelstand instead is putting an emphasis on profitability. A mixture of that would be great. So, the first step for the German Mittelstand would be: acknowledge that you need to change and have a management and owners that are willing to get out of their comfort zone and do stuff that they haven’t done before. And to do this, you’ll need resources you haven’t had before. And that’s okay. Because that’s where the Maschinenraum comes into play. Maschinenraum is a safe zone for Mittelstand companies to play and break things like in a sandbox. Everything is allowed, you are away from the mother company and you can try out things without being afraid of failing. And there’s even a bonus: while you are at Maschinenraum you are being exposed to others that have the same challenges and go through the same process. The place itself is encouraging to think entrepreneurial and being innovative..
Which vision do you pursue with being part of the Maschinenraum?
A successful ecosystem needs three things: talent (which can usually be found in universities and the Maschinenraum provides good access to them), startups (which are part of the Maschinenraum thanks to the cooperation with Bundesverband Deutsche Startups) and corporates. As startups do not operate in a vacuum, they can only be successful if they have corporates that buy their products or even acquire them. Combining these three elements – talent, startup, corporates – is essential for disrupting innovation to be successful. And that’s exactly what the Maschinenraum does: it brings the German Mittelstand and the startups together and by doing so it helps us as a fund to understand the needs and problems big corporates have and how our fund/our startups can help solve them. There is not a day that goes by that I am not learning something new from my “Mittelstand neighbors” at Maschinenraum.
The best of the Maschinenraum in one sentence?
It is a magnet for amazing and inspiring people. And with that kind of a set-up, anything can happen, the sky is the limit.