EUVC #288 Elsa Hermal, passionate angel investor and co-founder of epicery

0:00Welcome to the Super Angel Podcast. we are so excited about this conversation because we have been looking forward to talking to Elsa for a while last time we had to unfortunately jump out of the recording and not get it done after all so this is awaited with great expectation from both me and I think this is a dream no it's not a dream I'm an angel why would God send me an angel because God knows that everyone needs a little coaching now and then I'm loving angels. I saw an angel. Oh, angels say. Follow me. Please say it's me, an angel. The smile on her face. We're here to get that photo of me.

0:43Been touched by an angel, girl.

0:49Hi, hello, both of you. I'm super happy. Thank you for inviting me. And with no amount of pressure at all. Exactly. Expectations are high now. I'm kidding. So excited to have you on the show, Elsa. Heard fantastic things from Roxanne Vars as well, which we had on the show, and the ecosystem as a whole. So let's get started. Do you want to start by sharing a bit about your story and what got you into angel investing in the first place? Yeah, sure. My pleasure. So I'm French. I went to business school, like a lot of founders. I explored a little bit the corporate world where I definitely didn't feel I could fit in because I was always hungry to create more and to kind of like expand on my creativity business-wise.

1:36So a few years later when I got the chance to start Episcery, my first startup, I really felt like it was an opportunity for me to discover and really be myself. I've been always passionate about sustainability, impact, food. So it's no surprise that my first venture was an impactful business in food. Episcree is an app where you can order online from local grocery stores, such as butchers, fishmorgas, green grocers, and get delivered at home. So it allows people to shop healthy food conveniently and get delivered at home. So yeah, that was a beautiful adventure. And a few years later, I was lucky to be able to sell my company, which opened for me the door of engine investing.

2:31And well, I never started entrepreneurship to really make money. I don't think actually any successful entrepreneur can really have only this drive because it's such a hard path that it's not sustainable enough for you to fuel on that. But as a business angel, the same motivation when I started investing came from me wanting to see the change happen in the world in the different industries and areas that I thought change was necessary. And so 2021, when I sold my company, so very recently I started investing and I invest mostly in impact. And right now I've been investing in like 13 or 14 companies already.

3:23So it's been quite an interesting and intense journey, but it's still the very beginning of the journey for me. Very, very exciting and happy it's the beginning of the journey. And, you know, hopeful that we have more impact investors out there and very, very curious to unpack that a bit later. But do you want to actually share a bit about a few memorable deals with the listeners? Yes, absolutely. So usually when I look at investment opportunities, I'm very proactive in the way that I source deals. So I usually look at industries and topics that already interest me, that I understand. and where I kind of see there is needs for solutions.

4:04So I've been very proactive in terms of industries and type of deals. And it's also a way for me to kind of like do entrepreneurship by proxy, right? So I usually think about what are the industries that I would like to invest, and then I look at what are the most impressive founders and businesses that are being built out there. So I've been quite unconventional in the type of innovation I've been looking at, because I did only impact-driven deals with a wide spectrum. So it's been from climate to mental health to health, food as well, of course. But I've been doing, for example, deals on psychedelics and on sex tech, which are more unusual and were like a lot of business angels also, so especially in Europe and even more in France, are still a little bit shy to invest in.

5:02But they are the areas where I see there is a lot of need for innovation and change. And that's also where I want to, I see that markets have a lot of space for innovation still to be created. Can I ask you, Elsa, to dive a bit into that balance of being purpose-driven as an angel master versus being financially driven? because you're saying it's one part that yes, the traditional angels and VCs in Europe have not been putting that much money into sex tech and psychedelics yet. But there's also a reason on the, you know, many would say, well, we're not quite there yet. We haven't seen that many founders come up in this space.

5:47We haven't seen how the business models play out. We haven't seen the vertical growth. but also for that reason, we're not ready to put that much money in there or at least fully dedicate ourselves to these. How do you think about that, balancing financial gains and the more proven planet versus saying, no, this is what I want, this is what I'm going to do? Yes, absolutely. So when I look at investment projects and the expected value, I really look at a triple bottom line approach to creating value. So it means people, planet, and profits. And I strongly believe that in the coming years, businesses that are not sustainable aren't going to be, or even like sustainability-driven, are not going to be able to reach customers and talents.

6:41And this is why it's very important for me that businesses take in account these two criterias. And obviously, sustainable businesses that don't have a strong profitability can't be sustainable on the long run. So I really try to look at KPIs in these three areas before I make any kind of decision. One of the things when you're investing in something that there's not that many other investors that are doing as of yet, one of the risks that you have big for you is the finance risk. Will there be others to follow on in these businesses? How do you think about that? How do you gauge that? Do you err on the safer side in terms of the growth plans for this type of startup as well?

7:28Right now, I'm still having a very cautious approach because it's the beginning of my investor's life. So I do look at businesses that are already growing, founders that already have experience or that I can trust. And I can go back to that a little bit later, but evaluating founder is definitely what I'm the best at. But yeah, I see a lot of business angels out there looking at taking big risks for a potential 50 plus return. I try to look at more sustainable businesses, which some of them are going to make me maybe a little bit more rich. Some of them are going to make me way more rich, but I don't look at the 50 times return in terms of money.

8:12but by having businesses that are fulfilling their impact purpose from day one I'm already having the value created so technically I'm not I'm not losing on any of my deals so I'm trying to look at deals that are safe with founders that are going to be building sustainable growth and I think I can call it more or less like slow investing the same way we've been seeing like transformation on the way we eat and the way we want to produce I think it's also important that we start looking at different ways to invest if we really want to change the system and the paradigm that we are in. I love speaking to impact investors because there's always this philosophy of a system of change that you apply to your investing, which is something that you very rarely hear people outside of the impact vertical talking about.

9:08But I actually think in many ways, it translates very well. I'd love to ask you, Anthony, and pull you into this because just as Elsa has dedicated herself to some of the more quirky or newer frontier techs and verticals, you've done the same thing but to fintech, which is one of the most probably strongest industries in Europe. So I'd love to ask you how you think about having made that decision and why you think that it's such a big strength of yours that you're focused entirely on fintech. So I will start by saying when I started in fintech as an operator initially in 2013 and then as an investor in 2014.

9:49So in 2014, as an investor at Anthemis, we couldn't raise our first fintech fund because LPs were saying the fintech's time wasn't big enough and they weren't sure that startups can disrupt banks. So yes, now it's the biggest sector out there, but in the beginning, it wasn't. So the number one thing I'll say is that sometimes it's not as obvious. Now it's much more privileged and easy to say that. But I would say that at this stage, well, at the time I took a risk, which was, is a sector going to explode? And that was the risk. I was early mover to it in some respects, and I could build a sustainable differentiation, a prepared mind, networks, connectivity being top of mind, right?

10:29And if you think about the craft of venture, that pays off a lot, especially early stage venture. And it did pay off in terms of tailwinds in fintech. And for now, why am I continuing to do so? Because I think fintech is a horizontal. So the second wave or the third wave of fintech is not about thinking about neobanks and payments and lenders. It's about thinking about how you can enable with vertical fintech, sextech. How can you enable solar and climate? How can you? And so I am doubling down on the things I know well on the access loop I have by being top of mind that the networks I've developed in what I believe can break bounds from what people define as fintech today.

11:11So I don't know if that makes sense, but I guess back then it was not as obvious of a decision. I wrote the wave of specialization and now I think it breaks out of what the conform is now. One more remark I want to say to something that was touched upon before by Elsa and yourself is that, and it's actually, I think a pity sometimes, is that new frontier areas sometimes are not tapped into because there is a problem on the access loop, right? So investors won't invest in it because other investors are not investing in it. And because there's a lot of fundraise risk to the next fundraise, because maybe some early stage founders or operators create funds or do angel investments because it's a passion area of them and it gets started.

12:00But then they're afraid because there's not going to be growth investors. And the growth investors are not going to invest because there's not been big outcomes yet. But how are you going to see big outcomes if you don't back those founders, right? Anyways, it's an interesting thing that we can fight, but I'm glad there's people like you're also like starting and getting started. And sometimes maybe it takes slow investing or sustainable investing to start seeing breakouts and then getting an industry going and rolling. I think right now we're in the midst of a huge mental health crisis that nobody can deny.

12:33And this creates needs for solution and opportunities for businesses. So in this big, big, huge area that is mental health, there are sub-branches, which we've seen major successes like meditation apps and yoga, innovation, whether it's classes or businesses online. And for me as an investor, it's already too late to invest in that, right? But some areas haven't been tapped yet. And sexuality is a very big part of well-being. I mean, there are more people who want to have a great sexuality than people who want to actually do movements in their day. So I think right now it might seem like a little bit niche, but actually it's a huge market, sexuality on the Internet.

13:24Nobody can deny that. But it's also a market that needs new innovation for like a healthier, slower sexuality. And so this is what I see going forward. I see a lot of innovation on mental health, which includes sexuality. And also, and this is where I'm even a little bit more risk-taker and forward-thinking, but I also believe a lot in the psychedelic industry. This is where I went to look for opportunities, for example, in the States, but also for blooming projects in Europe that are ready to invest a market that is still way, way, way before being mature. but I think this is also the areas where like if I could have invested in cannabis many years ago, I would have.

14:13So this is where I think it's important to take some risk when you have a vision of how the market is going to transform and you see founders that are building sustainable businesses in these areas. You dangled a carrot right there in front of us, right? I would love to ask you where do you see the biggest opportunities in psychedelics going forward? What are you most looking at right now? Because I do concur both on the mental health part, but also on the psychedelic space. And we've all seen it with cannabis. And I think it was staring too many people in the eye, but yet we didn't have that many jumping into the space as investors.

14:53So I'd be curious to hear how you're thinking about psychedelics. So in psychedelics, there are different areas. There is the psychedelic-assisted therapies that is limited to certain territories and certain type of businesses. And for example, in the States and in Switzerland, in some markets you have innovations happening in this space and they usually require a lot of investments. Then you have the whole area of micro-dosing, which is something which I like to play with because it's very consumer-centric. But right now we don't know where the legislation is going to go. But there are a few blooming projects in Europe.

15:32one of them that I'm actually currently supporting and that is going to launch very soon in Europe. And this is an area that is going to be very accessible for everyone to play with. And then there is the area of retreats, which is a little bit more tricky, but where there is a huge market as well, because Europe, for example, is the biggest market for well-being retreats. And so I think I'm looking at projects that are playing on different fields at the same time. So for example, the microdosing project I'm looking at is also working with functional mushrooms that are already legal and that have immense health benefits.

16:14But also, if you look at more retreats, the retreat space, you have a lot of projects that are already very strong on the wellness. and that can integrate, whenever the market is ready, innovation with psychedelics inside. So I'm looking at these different areas. Psychedelic-assisted therapy is a bit further away from me because I have smaller tickets and it's an area that requires larger investment. But this is also why I invested, for example, in an accelerator in the U.S. that supports projects in mental health and psychedelic-assisted therapies because it allowed me to enter a door to that industry.

16:53There's something very interesting about that endpoint. I mean, everything of all that is very interesting. I know not much about the space, but I am quite intrigued, which is how you sometimes would do investments that would unlock access to talent and learnings and networks, right? And super connectors like that. But I want to switch gears into what you say you consider your best strength, which is founder assessment. Tell us a bit more about that. Tell us about the traits you're trying to find, if you have any mental models, any frameworks, or maybe it's only art. I would love to hear more about that.

17:26Thank you, Anthony. That actually makes me emotional, just you asking this question. I mean, it's very easy. I was a founder, so I could get into all the books I've read and blah, blah, blah. But I mean, when you've been a founder and you know what it takes, you know how to find founders. Because you know the mistakes you've made. You know what you've been good at. You know what the challenges were. So this is why it's my strongest asset. And this is also what I rely the most on. Because we all know that business plan change. We all know that startup will and can pivot. But if you have the good people that can really sustain on the long run and be trustworthy and deliver, then you have the best chance to kind of have a return on your investment.

18:20But basically, I look obviously at their background, so where they're from, like what they've been through. And then I'm going to have my own criteria that I've built among recruiting talents for my startup earlier on. But I really try to see if they're relevant to what they're doing and if they're relevant to entrepreneurship as well. So I've actually invested in former consultants, which are not the ideal profile for entrepreneurship, but if I've seen that they're able to dig and be really like hands into the dirt. I look at diversity, super important. That's something we share with Roxanne that you mentioned, that in terms of gender, but not only in terms of background, if I can have people who don't only come out of business schools, that's super important for me.

19:06Of course, I look at what everyone else I think out there look, if they're humble, if they can take criticism, if they're smart, if they're passionate, like if they have this fire burning inside them about their projects. If they're creative and resilient, like if they have this ability to think outside of the box all the time to solution a problem, I don't ever go for no people. People were like, oh, I tried this, it didn't work. This, for me, doesn't make any sense. And I look if they have a strong stomach, if they can take it, if they can really take the entrepreneurship route. which brings me to like some a little bit more personal secret sauce criteria so first of all I like I see that I like them if I like spending time with them because I'm going to be spending time with them so I want to have to share a sense of culture and values with them and also if they're self-aware if they are kind-hearted and if they're willing to grow as as a person if they're willing to improve it doesn't matter if you made mistake if you're willing to grow because that's also how they're going to behave with their team, with their partners.

20:16And this is very important as a founder to be able to gather people around you and to have people who trust you. And the last criteria that I look at is how they take care of their health, both mental health and physical health. And this is quite new. And I think this will come in the next years in the way we look at founders and how we choose them and also how we support them. because it's a really, really hard work. And culturally, we used to think that founders can be like really like exploited and tired and work long hours. But right now, I'm looking more like how do they care for their own physical health and mental health and balance?

20:56If they can take a night off, if they can take weekend and holidays, because if they don't, I don't think they can hold on the long run. And for example, I had one founder calling me from the hospital after having a baby to pitch me his company. For me, that was a total turnoff. I was like, maybe it's his way to balance it, but why do you have to mention that you just had a baby and you're calling me from the hospital? So this is kind of like maybe unusual things, but that I learned from experience are so, so important as a founder. I just want to ask you both to comment a bit on this, what we call it, founder hustle porn type thing, right?

21:41With people being obsessed with, yeah, I'm calling you to pitch you while my wife is giving birth to our daughter, man. I'm just here pitching you right now. I'm so cool, right? Maybe lay it off. There's nothing else to do with anyone. I'd love to ask both of you to comment a bit on that culture, startup gore or whatever we want to call it. and tell us how you think about that, both where you've seen the industry move. Have we actually seen us move a bit away from seeing that it's a great thing to be obsessed with your startup and only think about that? How do you balance it? Is there still so much truth in the fact that it's going to be a grueling path to take venture money?

22:19So if you want to go down this route, you need to be a little bit psycho. Tell me where you are on this spectrum and Anthony, I'll let you go first. So I think I'll talk about two things. One is founders and startups and the other one is VCs, if that's also interesting. So I'm hopeful that increasingly there is more of what Elsa is saying in that there's been second time entrepreneurs that are talking about how they started burning themselves out because they couldn't bear the uncertainty of the creative phase of zero to one. and you know because of that they just wouldn't sleep and they burned out and that was only a bad thing right and podcasts and other means have started I think uh shouting a bit more about how it's not about that it is about sustainable building right you can be obsessed about something but you don't need to not sleep you don't need to be pitching after your uh you've just given birth right like for for god's sake and uh now whether you can't help yourself when you're having a shower you're thinking about some strategic topics or something that happened in your at your work right like and you're about strategy like that could be great indication that they're obsessed about the topic but that has nothing to do about burning out right and so i'm not going to say too much right and and because elsa has had much more bottom-up experience and i've just had a bit of operating experience and then top-down observations from the founders I back, that I at least try to give that as a sounding board, right?

23:57And there's increasingly more of that from founders that have done it before that are credible in saying and preaching that, right? Unfortunately, as a venture investor, my role is to never get my hands into the people's companies. And you learn many times that no matter what you say, sometimes people have to experience it to learn from it. So unfortunately, I still can say without naming names that I have people from my portfolio that I've seen them in the root of burning out and I try my best to match them to other people that have done it before to try to reduce that. So I think there's still that culture, whether it's in Twitter or x.com or whether it's manifested on the day-to-day, but there are tendencies of shouting on the contrary or the other direction, right?

24:43So I'll stop there and maybe the VC after because maybe Elsa wants to pitch into that. Yeah, thanks, Anthony. I do think that to be a founder, to be an entrepreneur, you have to be a little bit crazy. You have to be a little bit, have this like wild, passionate fire because this is the fuel that will sustain you. And yes, in the shower at night, you're going to have like dreams and it's going to come. And it's also a joyful thing, right? You have this burning thing. I do think that there is definitely a change for second or third time founders. I think there is also a generational change, especially post-COVID, that people have been questioning a little bit more their lifestyle.

25:26And it's been a great opportunity to tap into that. Even I see like first time founders that I've supported, I see them making these moves to take care of themselves. And that makes me very happy. I was actually very challenged when I started investing because I also had only this role model of investors that were super alpha and super like really like working crazy hours and like as a founder receiving a lot of pressure. and it was actually very interesting for me to try to see what kind of business angel I want to be with the founders given the fact that there weren't many different type of role models back when I was a founder so this is when I really tried to connect to all the years I've been doing like self-work with trying to be more vulnerable trying to be more open and caring for my founders and it's been super interesting because I've seen that actually a lot of people I meet whether they're asking me to invest in their company or whether I'm giving doing advice advisory for them they actually really value that to have kind of an open door so they can talk about difficulties they have in their personal life with their partners at work with their partners at home balancing their entrepreneurship lifestyle and I really try to create more and more of these opportunities because I think that's where I can bring them more value because they don't have so many people helping them around that and I see we're in the beginning of a new era for that actually in the states for example it's very common if not mandatory for how for entrepreneurs to have coaches and that's actually how I try to treat entrepreneurs like athletes you know with the care they need, making sure that they have a healthy lifestyle, helping them with tactic and strategic decision, but really trying to be there as a role for the whole path.

27:28And I think on the long run, and maybe you guys will have an opinion on that, VC will be paying to avoid entrepreneurs to have burnout because you want people to be healthy and sustainable to be able to deliver on the long run. This is so important. And this was amazing. I couldn't agree more. And the only thing I'll add to what you started as well and closes the loop here is, yes, you have to be a bit crazy and a bit psycho and obsessed to go all the way. But it's many times about how you funnel that energy, right? You can funnel that energy in the right productive ways. And you can create mechanisms that are stops to that so that you don't burn out.

28:13And I love that parallel with, you know, the kind of athletes that play at the top of the game, right? They have support around them. They're playing that long game. They're high impact. They're, you know, they're high energy, but they do it in a very thoughtful way. The more of that we have and the more tools we have and surround people with those people like coaching, the better. The one thing I will say about founders, right? Which Andreas, you asked me about before and that got me reflecting from the conversation what you were talking about Elsa as well and then my experiences as a venture investor is that interesting mix of stock and flow.

28:53So what I mean by stock is like, does this founder have founder market fit, right? Have they built before in technology? Have they seen this space? Do they understand the problem, right? These are interesting but easy things to assess and very important to like a predictor to a founder success. But if you don't incorporate flow into that assessment, you're missing up so much. Like I give an example. You can find someone who has a very strong founder market fit. It's an operator that's seen a problem and now wants to create a company in exactly this space based on their learnings, right? But if they don't have speed of learning, flow element, and they lack the creativity needed to be founders, right?

29:39To think laterally, to pivot, to shift, because it's not going to be what they want before. They're not going to do well. Conversely, if you find a consultant, you said you've backed a consultant, right? That has all those traits, is learning crazy fast. They have a chip on the shoulder, right? They have everything to prove, an obsession, and they attain that creativity. They might end up outperforming crazy fast. So I'm not saying stock does not matter. I'm just saying that stock and flow matters. And I think it's an interesting thing that many people miss out on when they think about assessing founders.

30:12Yeah, absolutely. It dives into the conversation around founders and your verticals, the ones that you really focus on, without getting a really clear overview of exactly how many startups have you invested in so far. You said 11, I believe. But then what type of portfolio are you looking to build? What type of tickets are you considering? What ownership percentages are you going for? Also, how do you think about doing things like syndicating? How do you think about having a geo mix in it? How do you think about the different verticals? I'd love to get that overview of your whole investment strategy, if you can give us that, because I'm mindful that not all angels think about things in these terms.

30:55Yes, absolutely. So far, it's been a bit less than two years that I'm investing. I mean, two years that I'm looking at the market and a little bit less that I've been starting to write checks. But it's been 13 startups in different industries. So climate subject like decarbonation, agriculture, food, mental health subject, like we talked about sex tech, but also ed tech. also women health and psychedelics and mental health in general so very different sectors which is basically my playground let's be honest I've also backed three accelerators all focused on impact in different areas and one climate fund so that's basically been the bigger overview New ticket sales, I'm doing very small tickets because it's the beginning of my investor's life.