Last week was not a good week for Volkswagen. First, Europe's largest automaker had to explain to its shareholders how 2024 profits plummeted by almost 31%. Then, Northvolt filed for bankruptcy in its home country, Sweden. The once-promising battery company, where Volkswagen is the largest shareholder, failed to secure long-term funding commitments from investors. In the end, Volkswagen itself was no longer willing to provide financial support.

However, this does not mean that financing forward-looking and capital-intensive climate protection technologies is completely off the table for the Wolfsburg-based company. This is exemplified by the US venture capital firm Leitmotif, to which Volkswagen has committed 300 million dollars as its sole investor. The investment was previously only identified as coming from „European industrial interests“ but news portal TechCrunch recently identified VW as the investor.

Founded in October 2023, the investment firm specialises in innovations for decarbonising the economy with its first fund. It has invested in the US battery recycling company Redwood Materials, the Munich-based electric motor startup DeepDrive, the fusion energy startup Proxima Fusion (also based in Munich), and the US reusable rocket manufacturer Stoke Space. By the end of December 2024, Leitmotif had already invested 115 million dollars in 14 startups.

Leitmotif is well aware of the risks associated with such capital-intensive portfolio companies. „Investing in hardware is undoubtedly tough“, says Managing Partner Jens Wiese. The former head of M&A at Volkswagen co-founded Leitmotif with Greentech investor Matt Trevithick, who also clearly outlines the differences from the traditional software-driven approach in the VC industry: „The projects we invest in are expensive and long-term“, he notes.

Volkswagen's bet on Northvolt was costly – the automaker invested a total of 1.4 billion euros in the Swedish company, and wrote off the entire stake in 2024. However, comparisons are inappropriate, say the Leitmotif founders. „Northvolt and the investment in our firm are two completely different things“, explains Trevithick. „We are an independent company where Volkswagen, as a sole investor, participates in our profits.“ But the automaker has no control over Leitmotif's investment decisions.

This independence is generally a key advantage, says Wiese. „We make our investment decisions primarily based on financial criteria. Our task is to make money and ensure that our company becomes self-sustaining over time.“ In contrast, traditional corporate venture capital firms usually have strategic considerations in addition to financial ones, which can limit investor independence.

At the same time, the two investors gladly embrace the advantage of having a major company like Volkswagen as a limited partner. The automaker's industrial expertise could prove useful for certain startups in the portfolio – potentially even becoming a partner or customer, Wiese notes. „If that happens, the value of our portfolio companies could significantly increase. And that sets us apart as investors in the market.“

If it was up to the two investors, Volkswagen would not remain Leitmotif’s sole financial backer. Instead, they hope to attract more capital from other European industrial giants. „The goal is to connect Europe's industrial strengths with the strengths of the US innovation ecosystem“, states Wiese.

However, the majority of the raised funds will flow into the US, with 70% earmarked for American startups and 30% for European companies. „You just have to acknowledge that innovation cycles in the US are faster“, Wiese explains. „The US ecosystem attracts more talent and more capital, there is a higher risk appetite, and the drive to make companies successful is greater“, he says. But he also notes that there is still a lack of expertise in transitioning novel technologies into mass production.

Leitmotif does not plan to limit itself to the cleantech sector in the long run. Wiese and Trevithick are also considering expanding their VC activities into robotics and artificial intelligence. The two managing partners told TechCrunch that Volkswagen might participate in these investments as well.