What does it take to secure funding for asset-heavy, circular startups?

In this episode, Jakob Röskamp, CFO at Traceless Materials, shares how customer validation builds investor confidence, why off-take agreements are key to de-risking CapEx-heavy models, and how combining equity, debt, and grants can reduce the cost of capital.

While this series looks at how VCs select circular startups, it’s equally important to understand how startups choose their investors. Jakob shares practical insights on what that process looks like from the startup side. He also talks about Traceless’s approach to lifecycle assessments, as well as managing complexity when scaling a circular solution in the real world.

This episode is part of VC for Circularity – the Venture Capital Perspective on Circular Economy Startups.

Video Impression

Selecting the right investors for your materials startup

People

Jakob Röskamp, CFO at Traceless
https://www.linkedin.com/in/jakobroeskamp

Patrick Hypscher, Circular Business Strategist, PaaS Expert
https://www.linkedin.com/in/hypscher/

Chapters

00:00 Intro
01:59 Favorite philosopher: Aristotle & ethics
02:40 Overview of Traceless Bio‑based Materials
06:24 Scaling the Production
08:35 Equity, Grants & Debt: Mixed Funding Strategy
09:22 Choosing investors: impact, tech, commercial
21:43 Off-take agreements: reducing investor risk
26:36 Redefining growth within planetary boundaries
28:39 Advice for circular founders
29:15 Circular trends & Jakob’s invitation

About

Traceless is a Hamburg-based company on a mission to fight plastic pollution with truly sustainable materials. Founded in 2020, Traceless has developed an innovative, plastic-free biomaterial made from agricultural plant residues.

Their materials are fully compostable, leaving no harmful traces in the environment, and offer a real alternative for products where recycling isn’t practical. By combining cutting-edge science with a commitment to circularity, Traceless is helping to shape a future where everyday products no longer contribute to the global plastic problem.

Further Links

https://www.traceless.eu/post/successful-funding-round

Transcript

[00:00:00] Intro

Jakob Röskamp: The ability to raise capital is increasingly correlated with your ability to convince customers that your product is an actual value‑add for them and solve the pain point for the customer.

Jingle: My name is Patrick Hypscher, and this is Circularity fm, the podcast about understanding, building and managing circular business models.

Patrick Hypscher: Welcome to VC for Circularity, the venture capital perspective on circular economy startups. In the last episode, we listened to Bengt Steinbrecher, Head of Digital Partnerships and Startup Partner at Holcim MAQER Ventures, talking about corporate venture capital strategy and circularity in the construction industry.

Today’s episode will be about securing mission-aligned investors to scale bio-based, compostable materials. But before we start, I have an offer for you: if you want to get the actionable one-pager about this conversation, sign up for the Circularity fm newsletter. You can find it at www.circularity.fm.

Patrick Hypscher: He graduated from the University of Mannheim and the London School of Economics. Afterwards, he joined Finance in Motion, a company running 10 article 9 funds. Later, he was investment manager at DEG, which offers financing and advice to companies operating in developing and emerging‑market countries.

In 2022, he joined Traceless as CFO, where he led the process of securing the 36 million Euro series A investment round. Welcome, Jakob.

Jakob Röskamp: Thanks for having me.

[00:01:59] Favorite philosopher: Aristotle & ethics

Patrick Hypscher: Jakob. You studied business administration, economics, and philosophy. Who’s your favorite philosopher?

Jakob Röskamp: That’s a good question. I focused a lot on business ethics and moral theory, but I think you can’t go wrong going back to the Greeks, and going back to Aristotle in general, when you want to understand the basic principles of philosophy.

Patrick Hypscher: Okay. Yeah, definitely agree. What he wrote never gets old. Yeah. We want to talk about Traceless and your experience with fundraising, but before we do so, let’s get an understanding about the product and the business model. So, what does Traceless Materials offer?

[00:02:40] Overview of Traceless Bio‑based Materials

Jakob Röskamp: Sure. So Traceless Materials is a bio-economy startup based in Hamburg. We’re about to be five years old, have around 75 employees at the moment, and what we are doing is to produce a material that replaces conventional plastics in applications where plastics today often end up in nature.

 Especially packaging applications today. So you could imagine, for example, single-use applications such as plastic forks or ice spoons, but also paper and cardboard packaging. Now, our materials are bio-based, 100% bio-based. They’re 100% plastic free, and they’re naturally degradable, meaning when they do end up in nature, they, after a while, simply disappear.

At the same time, the materials that we are producing are free of toxins. So there’s no PFAS involved, for example. They do not produce microplastics. They emit significantly less CO₂ during production and use compared to conventional plastics, and they’re in line with the EU regulation. At the same time, they serve as a drop-in solution for the currently existing value chain of plastic conversion. So the plastic converters can use our materials to simply produce basically the same end applications that they do today with conventional plastics.

And what we’re currently busy with is making sure that we have the production capacity to serve our customers at scale, meaning being able to replace significant volumes of conventional plastics with our Traceless materials.

Patrick Hypscher: Wonderful. that sounds a bit like magic. Maybe two specific follow-up questions: is there any type of plastics, like, specific type of plastics you mostly replace?

Jakob Röskamp: Yeah, it’s not actually magic, but it exists in nature already. So, the chemical background is, effectively, that we are using so-called natural polymers, which are polymers that exist in nature already. Nature has produced these already and knows these polymers, whereas the chemical industry creates artificial polymers and basically joins them together, and then nature doesn’t actually know these polymers and can’t break them down. And that’s the basic principle behind why our material is degradable and compostable in nature.

What we’re replacing exactly is typically a range of different conventional plastics. So this would include, for example, PE, LDPE, usually in packaging applications, PP, PS: these kind of materials that are typically used in packaging applications.

But generally, the way we think about it is by the application that we replace. So our materials are being used in injection molding applications. For example, this creates rigid materials. For example, the plastic fork, or the the fork, I should say. Then, flexible packaging applications for paper and cardboard, coating, hot melt applications, and finally foam applications. So, the typical kind of plastic foam that you would expect in these packaging applications.

Patrick Hypscher: And are there already companies you can share that currently use your material?

[00:06:24] Scaling the Production

Jakob Röskamp: So, basically, at the moment we are in the process of scaling up our production capacity, which means we have a pilot plant up and running close to Hamburg for now almost three years. This plant is being used mainly for research and material development purposes and to qualify materials with our customers.

We are in the process of building a so-called demonstration plant, also in Hamburg. This will be used for the first industrial production of our materials, and it’s going to be commissioned later this year. And then we are working closely with a number of customers, both from the converting sector as well as the end users of our material.

So, the brands that bring packaging applications into the market, in order to be able to bring products to market by the end of this year.

Patrick Hypscher: Okay. Yeah. And I imagine your target business model, is that you sell the material based on volume.

Jakob Röskamp: That is correct. So, we are looking to achieve the biggest possible impact with our materials, and that means bringing as much material to market as possible. That also means that we need to create the production capacity for our materials. And at the moment, we are creating that production capacity ourselves by building production plants.

In the future, there may be different adjustments or variations of the business model in order to be able to scale faster and internationally. That we will also consider. But for the moment, the idea is to Bringing material to market ourselves. Yes.

Patrick Hypscher: Okay. Clear. I said at the beginning you raised this Series A round, and I guess this is mostly to fund the production capabilities you just mentioned. Am I right here, or where is this money going?

[00:08:35] Equity, Grants & Debt: Mixed Funding Strategy

Jakob Röskamp: Oh, that’s correct. So, two main uses of the Series A funding. In total, we raised 36 million—no, 36.6 million euro. This was made up of an equity tranche, which was provided by VC and PE investors, in addition to a debt tranche—conventional debt—which was provided by two local banks, as well as a component of grant funding, which was coming from the German federal government.

Patrick Hypscher: Okay. So, here I already have a couple of questions. So, maybe let’s start with a generic one. So, how did you select your investors?

[00:09:22] Choosing investors: impact, tech, commercial

Jakob Röskamp: So, when selecting investors, we have three aspects in mind. One is the impact focus. We are a circular economy startup, and we strongly believe that any investors that join our mission should also be aligned with that. The second is the technology aspect. So, we are also a deep tech, hardware -based startup, and, scaling a business model and a company like that means that there is a lot of technological expertise that is required. And we see investors provide a lot of expertise in that area, can provide a lot of expertise, and that is also important to us when selecting investors.

And the third aspect is the commercial aspect, where it is obviously also important to have investors that understand the sector, but are also able to provide connections, to create networks, to basically support in the commercialization aspect of the technology.

Patrick Hypscher: Okay. Right. And if we go one step back, the initial investors have been High-Tech Gründerfonds, and b.value. So, two German-based, let’s say, generic investors, with not particular circular economy focus. Can you share a bit how these first-time institutional investors got selected?

Jakob Röskamp: Sure. So, the seed round took place in 2021. As you said, that was before my time, but the investor that joined the company back then actually fit these criteria that I mentioned very well because not only did HTGF and b.value invest, but also Planet A. So, there were three investors joining the company.

Planet A, being a very well-known German impact investment fund. HTGF is the leading German seed fund for technology startups and also with a very strong backing in the commercial aspects of scaling business models. And b.value is very strongly focused on scaling up of technology.

So, these three investors together provided a lot of know-how, a lot of expertise in order to enable us to grow the company.

Patrick Hypscher: Okay. And then you also mentioned the debt instrument, which I guess was provided by a GLS Bank and Hamburger Sparkasse, the regional bank from Hamburg. That seems to be pretty unusual, especially from the bank’s perspective, given the risk profile of Traceless. So, how did you — so first of all, why did you do that, and how did you manage to get a bank on board at such an early stage?

Jakob Röskamp: Yeah, so, that component was part of the Series A, which we closed in 2023. And you’re totally right. It’s quite unusual to do that, to have commercial debt on the balance sheet of a startup that is about three to four years old. Why did we do it? So, we are currently building a production plant, and that is asset heavy, generally. Asset heavy means that it’s expensive, but it also means that, at least theoretically, it can be funded via debt, which typically is a cheaper option compared to funding something 100% by equity, because the required returns of an equity investor are typically higher than the required returns on debt, which is because debt typically has a lower risk profile compared to equity.

Now, there is a very well-known and established part of the financial system, or financial sector, that deals with funding these kinds of projects. It’s called project finance and typically deals with multi-billion euro or dollar investment projects, for example, in energy infrastructure. This kind of structure and this kind of capital is typically not available to startup companies because they just have a much higher risk profile.

Technology may not be proven to the point where this is possible. You’re still in the growth and scale-up process. So that’s typically not possible. And for these kind of large projects, typically, banks are — they’re specialized banks — that are happy to do these kinds of projects.

Now, in our specific case, we have a CapEx investment project with a significant scope for a startup like ours, and we decided to try to fund at least part of this CapEx via debt, just in order to decrease the capital cost of the project. And that’s basically the reason why we reach out.

GLS is our bank, host bank, so to say. And, they liked our vision and like our mission, and they are very strongly supportive of that. And so they decided to make this possible together with us and together with another bank, the Hamburger Sparkasse, in short Haspa, which also strongly supports local business in in Hamburg.

Obviously the fact that we are a startup does not mean that we don’t need to go through a very rigorous DD, or does not mean that we didn’t have to go through a very rigorous DD process with them. So, obviously they also very deeply looked into how does our technology work, what’s our customer base?

How are the contracts structured, etc., etc. These typical kind of credit approval processes that are required by any bank, basically, to issue a loan.

Patrick Hypscher: I’m happy to hear that because me, as a customer of GLS Bank, from time to time checks where the money is going in terms of debt, and happy to learn that GLS also supports Traceless in that case.

You also mentioned two PE funds that joined the latest round, and shared your three investment criteria, and I guess they fit well.

Can you tell a bit more why you particularly also selected these two or matched with these two?

Jakob Röskamp: Yeah, sure. So, United Bankers fund is a growth equity fund based in Finland, very strongly rooted in the Finnish bioeconomy sector. So, Finland has a very long history of a biorefinery economy based on the forestry expertise, etc. And that is something that is very closely related to what we are doing, technology-wise.

And in addition, they have a lot of engineering expertise in-house. So, we figured out that this would be a great addition, especially now that we are going into the construction phase of further demonstration plant. Having people on board that have already done something like that is a huge benefit.

And the second fund, the second equity, investor that in addition joined during the series A, was SWEN Blue Ocean. That’s a French impact fund with a strong focus on marine health. And obviously, given the plastic pollution that is happening on a daily basis globally, our material can be part of a solution for that.

And so, they also decided to join our company and support us, which we’re very happy about.

Patrick Hypscher: Okay, great. When I recently talked to a few venture capital investors, we also talked about, the impact business model and how the circular impact is part of the milestone and payment plan. Did you manage to stay in the lead when it comes to your theory of change and your impact framework?

Or did you also have to adapt to the methodologies and frameworks your investors are using?

Jakob Röskamp: I would say it’s both. So, Traceless was founded based on the work being done by one of the founders, Dr. Anna Lamp, who basically started out doing a lifecycle analysis of the material and trying to figure out whether the material is actually better than conventional solutions. And, having done that, she decided that this has a large potential to provide a solution.

And then also during our series — our seed fund, for our seed funding round — an LCA was done by Planet A, for example. You mentioned that they have a very scientific approach. So, I think there’s work going on on both sides, both at the company and also on the investor side, and also from customer side, increasingly as well, because they also increasingly need to be able to tell a story, but also to prove how the materials that they use are impacting the environment or impacting the climate. So, there are a lot of things coming together.

In general, I would say these are mutually beneficial efforts, because typically the focus is slightly different depending on who needs what kind of insights and who needs what kind of data. For example, we are doing consequential LCA, but also other kinds of LCAs depending on what kind of data is required.

And so, the picture, it’s kind of like a mosaic that becomes more complete over time. And in the end, ideally, everyone benefits from it. It is a little bit of a challenge sometimes to make sure that we don’t have too many construction sites.

So, if everyone comes with a different impact framework, there is a bit of effort needed to make sure that the key insights and the key data basically remains the same. But generally speaking, I think it’s a mutual beneficial effort.

Patrick Hypscher: Okay, that sounds great. I wonder, I mean now I have the privilege to talk to someone who managed to raise a Series A. Many other startups don’t make it to that stage. And you also mentioned the number of customers you’re working with and plan to scale up the volume.

What’s your observation, right now as we speak, let’s say in spring 2025? Is it harder to get access to capital, or is it harder to win customers to replace their fossil-based plastics with bio-based one?

Jakob Röskamp: I think the one is directly connected to the other, and the ability to raise capital is strongly and increasingly correlated with your ability to convince customers that your product is an actual value‑add for them and solve the pain point for the customer. If you can convince a customer that your product works and makes sense, and also from a cost perspective, from a value perspective, then you probably have an easier time to convince an investor of the same.

[00:21:43] Off-take agreements: reducing investor risk

Patrick Hypscher: And a follow up question on that one. Did you need any, or provide any, off- take agreements from customers to reduce the risk of the investors and use it as a proof point?

Jakob Röskamp: So, generally speaking, off-take agreements are considered to be a must-have for raising significant funding in order to de-risk the production ramp up and also give an outlook on where the business is going to go. Because for these kind of business models where you need to have an upfront investment before you’re able to show that the model actually works.

There needs to be some kind of certainty, some kind of de-risking, in order to make that work for everyone. So, yeah, we are also closing off take agreements with our customers, and that’s an important part of our discussions with equity and with the debt investors.

Patrick Hypscher: Would you consider that to be like a necessary requirement to secure, in your case, the series A, to have off- take agreements?

Jakob Röskamp: Yes, that was, that was a requirement, yeah. And it’s an ongoing effort, of course. I think it’s also important to consider that, depending on the sector that you’re working in, off-take agreements can be structured very differently. For example, off-take agreements in the energy sector are much different from off-take agreements in, for example, the packaging sector where we are active.

But yeah, that’s an ongoing discussion and something that needs to be worked out both with customers, but also with capital providers, in order to make sure that all sides understand what do these contracts actually say — what kind of certainty, what kind of security they provide to everyone involved — and to continuously work on these relationships as well.

Patrick Hypscher: So, that sounds a bit like, you should first talk to your potential investors to get an idea about the requirements for off take agreements before signing them with your customers.

Jakob Röskamp: I think it’s generally a good idea to talk to your investors. But yes, of course. I mean, in the end, not only your investors, but also banks. For example, if you want to do debt financing, you absolutely need to understand what their requirements are in order to provide capital to a project. At the same time, you need to understand what the requirements from your customer side are.

Because they also have restrictions. Sometimes these may come from — especially if you’re dealing with large corporates, which you would typically do — they sometimes have restrictions in terms of limits for purchasing amounts, who is able to sign a specific contract, etc. So yeah, there’s a lot of communication required.

Patrick Hypscher: And let’s zoom out a bit. So, you already gathered quite some experience at Traceless, but also at your previous career. And maybe this is not the last funding round from Traceless. This series looks at the venture capital perspective on circular economy. Is there anything where you say, “That would be great if VCs would do that,” from a startup perspective that would really help you?

Jakob Röskamp: I think what I generally appreciate is the continued support for sustainable circular business models in general, especially from European VCs, despite also — or maybe because of — the volatility of the global environment, being both politically and economically. I think especially for business models like ours, where a lot of investment is required, the increasing use of debt instruments — in order to fund, for example, production facilities, to fund hardware — is generally beneficial.

And I think I personally appreciated that increasing VCs are willing to look at that and look at these kind of models, but also provide expertise and support with structuring these kinds of transactions. I think that’s a good development. I think there are a couple of very promising initiatives in order to further support that, both from political angle, as well as from from the sector itself, in order to facilitate setting up these kind of structures. And that can also involve different kinds of debt instruments, guarantee instruments for these debts, etc., but obviously also the VCs that are willing to take part in this.

[00:26:36] Redefining growth within planetary boundaries

Patrick Hypscher: Okay. And do you see, in particular with VCs from a circular and impact community and with the background, do you see also a different attitude towards growth?

Jakob Röskamp: Generally, I think not. Growth is a precondition for the VC model to work, and I think that’s fine. I also think we need to talk about the kind of growth that we want. We want growth that is aligned with the planetary boundaries that you mentioned, and that is the kind of growth that should be funded as well, in my opinion.

Now, coming back to the economic history aspect of where does VC actually come from — and I think we have a little bit of a short memory in that regard — because the early stages of the current VC sector are actually hardware-based. So, the VC sector started funding the computer revolution in the 1960s, 1970s, and some of the most famous VCs today basically started back then and started some of the first IT companies.

So, VC and hardware is not mutually exclusive at all. As a matter of fact, I think it’s a great match. And If we want to build an economy that works within the planetary boundaries, we will need — that is, an effort that has a basis in the real world — and it’ll need solutions that work in the real world.

Being materials or, yeah, a any other kinds of actually existing things. And VCs are very well capable of funding that, as we’ve seen during the computer revolution. It’s just a question of, do we want to do it?

[00:28:39] Advice for circular founders

Patrick Hypscher: Okay. Yeah, good perspective. Let’s wrap this up, Jakob. I have three final questions. The first one picks up the founder’s perspective again. What’s your tip to circular founders applying for funding, these days?

Jakob Röskamp: I’m not a founder myself, so I’ll answer from a practitioner perspective. Be as well prepared as you can, I think would be my advice. Take time to prepare and expect that it takes longer than you think it will.

[00:29:15] Circular trends & Jakob’s invitation

Patrick Hypscher: Yeah, I feel like many founders are familiar — at least with the “it takes longer that you think it will.” Second one, what trends do you see in circular businesses in the next three years?

Jakob Röskamp: I think we’re going to see a maturing sector of circular businesses and some of the first real success stories over the next couple of years.

Patrick Hypscher: Yeah, that sounds promising. My last question is about people — who should reach out to you?

Jakob Röskamp: We are generally happy to talk to anyone who is aligned with us in building an economy that works within the boundaries of this planet. So, if you’re doing that, and if you think there is a benefit of us talking, then please feel free to reach out to us.

Patrick Hypscher: Wonderful. Thanks Jakob, for sharing your perspective and, yeah, for everyone, please follow the invitation from Jakob — reach out. And thanks again.

Patrick Hypscher: This was Jakob Röskamp, CFO at Traceless Materials. This episode is part of our series VC for circularity. If you want to get the actionable one-pager about this conversation, sign up for the Circularity FM newsletter. You can find it at www.circularity.fm. Let’s drive a profitable circular economy.

And please don’t forget, the most abundant renewable resource is your imagination.

Jingle: My name is Patrick Hypscher, and this is Circularity fm, the podcast about understanding, building and managing circular business models.