E278 | NEUVC | On going from working in startups to working in VC with Helery Pops, Investment manager at Practica Capital

0:08Welcome to the latest episode of the special series New VC hosted by Freddie, an analyst at Isomer Capital and Linda, an associate at Karma Ventures. Today, we are happy to welcome Hilary Pops, Managing Director of Honey Badger Capital. She works together with the founders of PipeTracks, investing their money into early stage sustainability and impact initiatives. She shares her story of entering the industry from an operational background, building out a deal flow engine, and her thoughts on the VC industry and its compatibility with impact. Are you tired of only knowing what European VCs sound like?

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1:08Good morning, Hilary, and such a pleasure to welcome you this morning at our podcast. And I preface this by saying that, as we both know, there are many women at the top levels of really the Baltic investment scene and broader as well, so not limiting to here. I think that it's a fantastic story that you have to share. So firstly, first and foremost, I'd love for yourself to kind of, in your own words, to say, you know, who are you? What do you do? what is Honey Badger and what is your superpower and then how do you use it as well? Okay very cool I think it might become a little bit of a bit of a monologue but I'll try to keep it a bit shorter so professional background started at Pipedrive where I went into sales I studied finance as an accounting in university and I hated it and I knew that if I'm gonna get a job I wanted to be at a company I really like so Pipedrive came up I got a job at sales and was super happy there I did it for a couple of years then went into research and then product management as well it just evolved very naturally I think because at one point after doing sales and research I had spoken to most of the customers at Pipedrive and then just building the product seemed quite obvious then I went into Amplir Bikes to work as a product manager as well which was kind of funny because I thought that at that time I already knew what a product manager does I was in a in Pipedrive with 600 employees and and a really well organized product structure and then I thought I would go to Ampli Bikes and do the same there but it was like 30 people working there and and there was one developer and one designer and I think it was it was completely different than I started doing OKRs I started hiring a team and at one point somebody even called me and was like so my computer broke what should I do?

2:59I was like the IT person of the company, although I didn't know anything about it. And then I did so many other things on the side that I liked. I did hackathons, organized, mentored, participated. I was a part of a governmental accelerator trying to see whether we could sell Estonian health insurance to digital nomads. It didn't work, thankfully otherwise we would have been in a lot of trouble during covid times and then honey badger i came along quite surprising the person i'm working with right now and just called me one say and said let's start a fund i laughed i said no i like where i'm right now i have no idea what a fund does how it works i don't know what a term shit is i don't know anything and then i took some time to think about it and realized that i could have quite a lot of impact doing this job and maybe this is a good place to segue into what I think my superpower is as well so yesterday I went skiing for the first time in my life cross-country skiing and it was so horrible that it was it was amazing I did like three kilometers and it took me an hour and I fell down and it was scary and bad but I really enjoyed it and I think that's why I enjoy Honey Badger as well because I like starting at zero.

4:21I like being bad at things and then seeing myself evolve. And I do think it's something that's pretty important in this business because especially for us with Honey Badger, we don't have a clear focus. We don't know what we're going to invest in. It could be anything. So having that disposition of being open to learning new things is quite important. As you kind of already alluded to as well, obviously there was a lot to learn from the beginning, started from, you know, what do these things even mean to how do I do these things? So how did you even start that journey of figuring out how the venture industry works?

4:59And what did you find perhaps the most challenging? Was it more on the kind of technical side of making deals? Or for you, was it more on the, you know, how do I even get into deals? Or how do I kind of get access to all of these people who are already in the industry? Yeah, I started with trying to speak to as many people as I could get access to at first to understand what this business is about. I think one of the first ones were Alexis from Icebreaker, Seam from Lemonade Stand. And the first call with a startup that I had was, at the time, join others now. Those little, I like to call them the startup kids that actually have built a really good company by now.

5:37So I just tried to get into it, understand what it's about. and then Google two years ago. We didn't have ChatGPT yet, but I could just Google what does a VC does, what is a term sheet and so on. But now coming to your question about getting deals, it has never been a problem for us. And I don't think it is until today because I work with Dragnarsis, Martin Dior and Martin Henk, who are all Pipedrive founders and their own networks were quite strong to begin with. And the more I got into it, the more I got to know people myself and deal flow has mostly been inbound and I haven't had the problem yet of having to go out and look for them.

6:15On that very point of deal flow coming inbound, where have you found the most exciting deals come from? And as you started to develop your own network and build that sort of outbound process, has that created more exciting startups that you come from? Not really. I haven't seen a difference in whether outbound or inbound is better. I think it all works as a nice loop and it feeds into each other that I do go out to events, I organize events and that creates more deal flow and I can't really say that those then deals came from because of this event, it just works continuously. With people coming to you, do you find yourself then as an advantage in gaining your position in a round, being that point person for the startup, or do you find yourselves constantly competing with other VCs?

7:08Really good question. And something to, I think, specify about us is that we are quite small in comparison with actual funds. Our ticket size is about 100 ,000, maybe 150 ,000. And our target is mainly 1%, although we can be flexible with this as well so that means that we haven't really ever found us in a situation where we had to compete with someone else there's always sort of room for us and that has created a really good environment for me because on the one hand side everybody is really nice and helpful and willing to share not just deals but knowledge as well because I don't really pose a threat to anyone right I just rather provide value and on the other hand side the companies are very welcoming as well because they can give 10 % away to Icebreaker, for example, and still have room for us.

7:58On the value side, I know, and having kind of seen you at work and spoken to some of the startups where you're active in, that you do take your commitment as an investor very seriously and you contribute extensively and as much as you can. And it really kind of begs the question from my side is that, at least in my neck of the woods, coming from executive search, a lot of people are under the impression that you need to have a board seat or you need to have, you know, this control or levers in the company more so than just your kind of ownership. Do you agree with that? And do you see that your relationship compared to perhaps to some of the board members or more lead investors is different because of that?

8:45And if so, how is it different it probably is but i haven't realized it yet because we don't demand board seats we don't really need to lead the route either we can if it's necessary and we have but it hasn't been a criteria for us because we see that we can provide the same amount of value to the companies without officially being on the board or officially being a part of it in any other way than an investor but But for us, it mostly depends on the founder as well and how much they want us to be involved. Because we have 12 companies in the portfolio this far and they're both extremes. There are companies where we go out to lunch every week and we talk about not only the company, but everything else as well.

9:28And then there are some founders that we made the investment and then I haven't heard from them since with the exception of the monthly overviews. And that's fine because essentially I'm investing the money of three individuals. I don't have to report to a whole bunch of LPs. So we can be more flexible with everything that we do. Is it being on the board? Is it leading? Or it can even mean geography. And if at one point we want to invest into something completely outrageous, we can, in theory, do it. You know, as you've transitioned from working in startups to working in VC and you sort of described this sort of learning from zero, road.

10:09How has your value add changed over time? I think one of the things that I've realized is that we need to create correct expectations with the founders. So we can never compete with big VC firms that have big teams because it's just myself and then three of my partners who have a million other things to do, right? So before we make the investment, we always say that this is what we can provide. We can provide my time and knowledge, which is in sales and research and I'm with product management. I can make connections. And then every once in a while, if the founder says that, hey, I need some help with the pricing, for example, then maybe Martin Hink can come by and do an hour long session and tell them what he knows.

10:51But we can't be there 100 % of the time, every week, all the time. So creating this expectation, I think, is how I've learned to leverage my value more. And can we dive a little bit deeper into that value add that you provide? You know, on the sales, on the product management, and your own personal network that you built over time in Estonia and the wider Baltic region. But can you dive a little deeper into that? So we invest quite early, pre-seed and seed. I've realized that there's something that's always the same in those companies when you invest early stage, and mostly it is with building up a sales team, and I can help there.

11:28I can help create a playbook. I can help create a pipeline to explain what the salesperson needs to be like and if the founder wants, then this is what I can help with. Again, I wanted to hop back to something earlier you said and something that I found when I visited Estonia was the level of collaboration within the Estonian ecosystem and how it kind of sets people up like yourself who are new to the industry for success. Western Europe is a little bit different, a little bit more cutthroat. Do you see the sort of Baltic ecosystem going more that way? That's a good question. I think maybe Linda can chime in here later as well to say whether she sees it in the same way.

12:10But as I've said, I haven't really seen competition that much because everybody has been very welcoming. And I don't know whether it's because we're that small and we don't need to compete with everyone or it is because the Estonian ecosystem is that cool. And I hope it's the second. I think it's the second. And I don't think we're going to be changing anytime soon because Estonia being so small, the only leverage that we have is working together. if we start working against one another then I don't think we're going to get very far yeah I would agree I think that there's maybe some characteristics of a younger ecosystem at the moment where the funds are fairly small and you're very connected to everybody in your fund you're emotionally connected to what you do because you know you know everybody in the ecosystem and And you meet all of these people, both in your personal life, in your daily life, in your professional life.

13:04So there's no escaping. So there's no reason to really, you know, have bad relations with someone or not resolve any sort of conflict that does arise. But I agree. And I don't think you see that kind of changing anytime, anytime soon, at least. But I guess from a different perspective for a change, you're very similar and different to a VC fund. And, you know, again, when we kind of share some thoughts on, you know, companies or markets, I think oftentimes we see that we have very different perspectives. what does good look like for you and and and both from your individual kind of standing point what do you look for as Hillary and does that differ from you as a family office slash friends office and and what are you even measured on are you measured on anything maybe a good explanation here would be that one big part of my job is trying to understand what my partners will like and what they will want.

14:08So it's not just working with the founders, but it's working with my partners as well and making sure that the deals that I bring to our sort of version of the IC is something that they can feel connected to as well. And I think connection then is the first thing that I look for, connection with the founder, because I will be the person working with them mostly. And I don't think it's really sustainable if I see that, okay, this can make a lot of money maybe in five years but I don't really click with the person at all so that that wouldn't work for me so that's the first thing I look for and then coming to your question about measuring then impossible to measure financial success this early on I'm afraid we haven't seen anyone fail or succeed in this sense everyone is doing well but we don't know right so so we can't say what our returns will be or what we want them to be.

15:05This being said, it's very important to make money, right? We're not doing any charity. We want to make money to put money into other companies as well to keep this machine sort of going. But currently what I measure myself against is seeing whether the founders seem to be happy with what we can provide to them. And if that's true, then I think I'm doing my job. that one. And your kind of niche, as much as I've seen, has been all around impact, different types of impact and making the world a better place and broader. So how did you end up doing that? And would you say now kind of coming back to the point that you just made, it is important to make money.

15:49And one of the big criticism of impact tech for a while has been that, can they make money? And is it something that companies will actually contribute towards and solutions that companies are interested in? So big question, but I hope to dissect it a little bit from your side. Yeah, it seems like it has been the idea for a while, right? You have two choices. Either you want to make an impact and save the world, or you want to make money. But I don't really think that's the case anymore, because we are realizing as a society, I guess, that if we don't save the world, then we're going to be a really bad situation.

16:28So making money will mean saving the world in the long run, I think. But how did I get into this? I don't even know, to be honest. I think having the possibility to look at everything from education to regular B2B SaaS to, I don't know, creating caravan parking lots, then this is just something that stood out for me. something that combined science and business and making an impact on people's lives as well. What do you love about your role? Definitely, yes. Learning new things every day is something that's really important for me. And that's one of the things I've tried to follow as well, that even if I see from early on that the company that I'm going to have a chat with isn't a good match for them, for us, for both of us, then I say that front but I then say that I would still love to have a meeting with you hear what you're doing see if I can help you in any other way because I think that just helps me understand the entire world better.

17:27Is that purely from a personality point of view or is that from the perceived excellence or the founder? I think it's a combination it's something that I personally like so it's really cool for me to do it but on the other hand side I can be more successful the more I know I think the more pieces I gather from around the world the more I can make connections between them and understand how one company can help another and being so small and not having I don't know a hundred million to to give away to cool companies then I'm trying to constantly find ways to help them in other ways as well not just investing but saying like look this isn't the company we can invest in because we don't know that much about this topic or because we just made an investment and we need some time to think about what the next step should be.

18:12But these are the ways I can help you out. I can connect you with this person because I think you can help each other out. So finding those ways to help founders without making the investment is something that I try to do as well. But from your side, obviously, you're just one person, right? You're one person doing everything from figuring out the company itself, the industry that they're in because you're fairly generalist right understanding the team the the kind of the core of the the kind of the company and then you also then you know presented to to the partners and then you carry on supporting them as well I guess which part of that role do you feel I guess the most you know confident in and then which parts are the ones that you feel that you know I'm guessing you look for outside help quite a lot right because again you're just one person so how do you choose those people as well to help you so two-sided again I try to speak to everyone I can there are of course people that I know that I can go to when it is a science project and there are people I know I can go to where I when I try to understand whether the team is any any good or not but as soon as I find someone who seems to know something that I don't, then I'm happy to invite them out for a coffee.

19:32And a good example of this was geothermal energy, right? I went to this summit at Clean Tech for Europe and I happened to be in the working group of geothermal energy, which I had never really thought about myself before. And I really liked it. So I put out the message in LinkedIn saying that if anybody knows anything about it, come talk to me. And I think I went out to coffee with about three people. And now it's something that I do understand better and while I didn't immediately do anything with this knowledge then I think in the longer run it will become useful. Which parts are the most difficult for you being by yourself?

20:09I think motivating myself as like soft and easy as it sounds being on your own and not having anyone else to complain to when it gets difficult is really hard especially for me because I'm coming from really cool companies with great culture and great people. So I've always had this possibility of knocking on someone else's metaphorical door because we didn't have real doors and asking like, hey, what are you up to? And this is what I'm currently... This problem is what I'm currently facing. Can you help me out? And now it's like trying to figure it out either on my own or just hitting up random people who were not in the same context as me.

20:48So I think having a team is something that I really miss as well. Having people who are thinking along is great, who want to come out for coffee and explain what they're doing is great. But it's really important to have someone with you that wakes up and has the same goal as you do and tries to solve the same problems as you do as well. Can you explain a little bit then the role the Pipedrive founders have in the family office? Do they act as an IC or are they more engaged? It depends. Once again, it depends on what the founder wants. For example, we meet every week on Fridays for sort of an IC where I bring up the companies that I like.

21:30They say whether they like it or not, ask some extra questions, and then the next step would be them meeting the founders as well. So when we began, then the idea was that every one of us, all four of us, would have a chat with the founder and then we would make a decision. We're now a little bit more lenient on this. Having two or three people talk to the founder is already okay. So that would be the first step in making the decision. And then after this, it's me who is going to be a part of the life of the company mostly. But every now and then, if the founder comes with a specific ask or wants a specific intro, then the other step up as well.

22:08coming back to the the kind of the impact side do you kind of all of the partners from your side take the the impact as much to their hearts as you do do you measure the impact do you have like a framework that you use for that or or is it just more like a good to have and you know that's in the back of your heads but the kind of focus is still on making money I don't think they take it as much into heart as I do. I mostly have to like really go and sell it if I want to invest into an impact company and I have to make sure that they understand why in addition to impact it's still company to invest in and that doesn't mean just the potential financial success but also the team and I like to call it maybe the wow factor as well.

22:59Does it do something that's really quite special How do you evaluate impact? Yes, also a very big topic, I think, probably not just for me, but for everyone. You have the possibility of going the very classical route of setting up ESG measures or following the SFDRs or anything else that the EU has put out. But we don't have the necessity to do it. So we realized that maybe we shouldn't be so strict. So we rather go case by case and try to understand whether the specific company that we want to invest in influences positively the environment or the people or creates a new possibility to learn something.

23:45So I think a good example would be Verif, for example. We're not investors in Verif, but it's not a company that anybody would describe as a sustainability company or an impact-driven company, right? and they don't do it themselves. And I don't think any impact-driven funds have invested into them. But if you think about the effect that they have on the world, if there's like a guy in the States that doesn't have to take a three-hour plane ride somewhere and back to sign a document, then that has a huge impact, right? So trying to understand not only those first order impact, but the second order and what it actually improves as well.

24:22There is some exciting stuff happening going forward. Do you want to share a bit more light on what you're building and the application towards the smart cap? Of course. Well, the answer is that I don't know yet. We did apply for the smart cap funding, which is European Union money that's directed into investing into green tech into Estonia, but we didn't get it. But we still have the idea of wanting to do something in this direction. For me personally, I feel like I am missing team, as I mentioned before, and I'm missing sort of direction as well. And so being able to invest into anything is pretty cool, but it lacks this possibility of going deeper somewhere.

25:09So I'm still thinking about the possibility of setting up an actual fund with the aim of impact investing and green tech investing as well. So now the details are now a little bit scattered around in my head and in the heads of other people as well, because SmartCap fell through for us. But I sort of see it as a blessing a little bit because it would have put quite a few constraints on us. With the SmartCap money, you would have to have 70 % of your investments into Estonia and 50 % of them into hardware. And if there are two, at least 30 million funds coming into Estonia with the same thesis, then finding the deals would probably be complicated.

25:55So now we have the possibility to sort of start from zero a little bit to understand whether we want to maybe focus more on a specific area, for example, energy or agriculture, food, land and water, something like this, and widen our geographical scope. And talking about the future, and I think that at the moment, everybody's talking about deep tech and climate and sustainability. And these are kind of common things that I think all of the funds are jumping towards. So bearing in mind, I think, also the demand for it, from your perspective, what do you see as, you know, the future impact investing?

26:37And what is your, I guess, wish or any concerns on that? And how do you see that planning out over the next 5 to 10 to 20 years? There are quite a lot of concerns, especially I think in our region. If there's so much money coming into it, then you would think that it's going to be pretty easy as a startup to get funded. So my concern is how can we differentiate between the companies that actually make a difference and that are just there. either out of malattent or just because they don't know trying to get funding early on. I think that's what the EU is trying to do with all of those impact frameworks as well to help us as investors understand whether it's a good company to invest into or not.

27:24But I think we have to be really careful in understanding what the actual difference is that the companies are trying to make. And how to make this better? I think we just have to be very aware that this is going to be a problem and maybe trying to, as a community, to try to create more of those companies as well. So there would be a little bit of more healthy competition. So whether it's in the form of accelerators or creating a school for engineers or trying to create programs to get more startups to be registered in Estonia or the Baltics, that I don't know. But I think we sort of have to do it together in order to create this deal for ourselves.

28:02And what do you see your role in that wider future in Impact? Currently, I see my role as being able to just give out the money to the right people. Maybe it seems a little bit of like a smart assy, but I do think that being in this business for about two years already, I can sort of make a difference between the companies that can actually make a difference and that cannot. Do you mean that more from a values perspective or do you mean that more from like the company and the product perspective? I mean that from the perspective of understanding and helping the companies themselves understand what the impact could be.

28:45So at New VC, we ask all our guests to share a few personal insights, a quick fire, if you will.

28:57what skills have been surprisingly crucial in your day-to-day life that you didn't necessarily think would be useful understanding people over product or business or finances as we've discussed previously that the new vc this idea of producing a podcast for the sort of young professionals in in this industry. What advice would you give people early in their careers working in BC? Try to talk to as many people as you can. Maybe it's surprising, maybe it's not, but I think people are very open to sharing their experience, especially if they are in the beginning of their journeys as well. Maybe if you find an investor who has been doing this for 30 years, they won't be that motivated to think along with you anymore.

29:44But especially looking at people who have been doing this for a little while and are still on the journey to grow themselves as well then then they will help you out so talk to as many people as you can and don't be afraid to say that i don't know this and i need to learn it great answer yeah fantastic advice and and and i've seen the impact that on myself and and hearing from you as well that talking is actually one of the most crucial things that you probably do in vc so brilliant answer thank you for all of the insights that you've given us today a great conversation so yeah thank you thank you too thank you for listening to this special episode on the european vc if you love our show join our community by subscribing at eu.vc