START Summit : Interview with VC Impact Investor Isabelle Canu from GET Fund

Julien (nonoise.club): Hi, today I'm very honored to have as a guest on the Start Summit St Gallen Conference Isabelle Canu. Isabelle as myself is a French-German impact investor, but a much better one I would say. Hi Isabelle, thanks for being here.

Isabelle (GETfund): Thank you for inviting me.

Julien (nonoise.club): So it's great to have you here because at nonoise we speak a lot about impact investing. And for a lot of founders, for lot of innovators, it's hard to understand what's VC case, what's impact investing, and how do you scale your startup with investments. So I have you today to discuss this topic, but maybe first of all, can present yourself, and you are an investor at GETFund, you are the co-founder of GETFund. tell us a bit more about that.

Isabelle (GETfund): Well, yes, I can tell you a bit more about me. So I was born in France and I studied in Paris and I moved to Germany a long time ago. I started my business life in Munich and then I moved to Berlin in the mid of 90s. And since then, I've been working for 25 years in finance, half of the time in the funding of startups and in venture capital. And what is perhaps more interesting for the podcast is that I've been now working for 20 years in the field of sustainable finance. I started doing that by chance actually as I was working at the Federal chancellery It was the very beginning of the programs for energetic renovation of buildings and that was the first time that we had to decide what does it mean a green loan. What is green? So it was more a technical question and the question for finance people like me was how to include non-financial KPIs in a financial product. talking about this experience this way, you understand this is still the issue that we have now.

Julien (nonoise.club): It's still an issue now, even if you develop something.

Isabelle (GETfund): I've this for debt and equity and for all types of assets, so from private households to SMEs to corporate municipalities, regions and in the last 10 years obviously for startups. And always you have bit different challenges but the main topic is the same. and so I've set up for the federal government a fund which is called Copalion. It was a state-owned fund. was one of the managing director. I stopped this at the end of 2020, then I set up my own business in the field of ESG and impact for VC and PE funds. So I was explaining them how to set up a ESG strategy. And at that time, a team that has been working in Cleantech for more than 12 years with a very good track record contacted me and wanted me to join them to have more impact, doing impact investing. than explaining others how to do so. So that's why we have launched the GETfund together. We had the first closing in May last year and we have four investments now and very interesting LPs and we have a very specific framework to assess impact. So that's probably what you want to hear from me.

Julien (nonoise.club): Exactly, we'll speak about it. First of all, GETFund, that's a green European tech fund. What's green? You spoke about clean tech. What's green in reality in the US with your 20 years of experience?

Isabelle (GETfund): Yeah, so that's one of the, that's interesting that you asked the question this way because we were fighting a bit whether we should change the name. But we had changed once between Munich Venture Partners to Green European Tech Fund. And in fundraising, it was impossible to re-change names because it was a mess already with the different names. So that's why we stick to green, but we define it as a positive impact for the environment. speaking and so and that's why we are quite open to assess environmental positive impacts. So the question of water, of biodiversity, of noise probably or of CO2 are as qualified to be green for us.

Julien (nonoise.club): qualified by the ESG pillars.

Isabelle (GETfund): Yeah, so ESG is a bit different story. perhaps I restart somewhere else. So what I wanted to say before, by non-financial KPIs in a financial product, that we consider every... Everywhere in everything we look at it as a multi-dimensional issue So there is always a financial issue and this is most of the time the easy one to assess and then you have a Different layers of other dimensions without which are all non-financial They could be culture or you can call this ESG. So you have three layers of non-financial One layer is E and that is what we just mentioned with green more or less than the social aspect and which involves also the human rights. And the last layer is governance and it's a very broad one because it goes from ethic to governance to compliance, whatever. So that's a broader one and that's quite difficult to assess but it's key for me because it's so important to behave the right way if you want to do good things anyway. So that's a combination a bit of everything.

Julien (nonoise.club): Like for instance, startups like B-Corp startups which have a specific governance or in specific vision associated to the governance, right?

Isabelle (GETfund): Yeah, so I advise the startups where we invest to give themselves a code of conduct, or you can call it culture deck, which is basically the same thing. sounds more serious and the other one's more hip, but basically the same story. So it's to define what are the... the values and the ethical drivers of the team and where you say that's the way we want to work. I think it's key to do that in a company to be able to have good success and that's why... I always trust this one, although the regulatory is very high level on that. So you are not necessarily, nobody can tell you exactly what they really want. For me, it's a real criteria because it's a way the people want to work.

Julien (nonoise.club): But for you it's a real criteria.

Isabelle (GETfund): internally, but also with us as their investors. So if they have certain values and you know that you will be aligned with them, we also have done this work for us as a team and you see quite quickly whether it matches or not. So we ask them already in the due diligence, but most of the time they are small so they don't have a written document or whatever. But it's a cool workshop if you do an offsite, to just think, okay, what are we doing altogether? So it's not necessarily something that is seen as, my investor want me to do this, but you can use it as a...

Julien (nonoise.club): Culture framework for your own team growing and growing with the right

Isabelle (GETfund): That's why I love governance and I know I'm bit special on this one, but I really love that.

Julien (nonoise.club): bit special because you mean not every impact in this story.

Isabelle (GETfund): People don't care, know, they don't know what to do with that. I don't know, but I've not seen it very often because it's not put in the regulatory framework. Normally, investors do just what they must do. But I think this one, the culture is so important and that's why I always stress that with my startups.

Julien (nonoise.club): even impact investors? We'll dive deeper on metrics and on the frameworks to analyze the startup in a second. Just how do you see noise pollution as a part of our environmental issues? Noise pollution, a few figures. In France, it's been measured on 150 billion social costs per year. In Europe, it should be something like 1,000 billion per year. That's 500 million of people suffering of hearing disorder. in the world and because everything every noise like we are here on a conference I love the conference and thanks for the organization still it's a very noisy environment if you're outside of the podcast room it's something like 80 decibel if you stay here the whole day you can have a damage on your hearing capacity so it's a topic which is concerning everyone but completely under radar so how do you see that with your impact angle of tackling investing in startup or to see noise pollution out there.

Isabelle (GETfund): First comment, I'm doing fundraising. I am at many conferences. And I lost my voice the first time in Davos two years ago because you are always inside rooms and it's crazy loud and you want to talk and you want to you are here to do business and to network. And I came back and I was really, it was really bad and the doctor told me, well, please don't say a word for at least one week. Otherwise, I don't know if you will recover completely.

Julien (nonoise.club): Not good for the startup pitching you, Internet.

Isabelle (GETfund): It's not good at all and the thing is since then, it's now two years, every time I am at a conference I really have issues to talk at some point I realize that I lose my voice. So that's certainly because it's too loud and certainly because my voice is not good. So yes, I understand that. So from a business point of view, I would say noise is very much related to other type of pollution too because it's more most of the time it's due to some transportation or some construction or things happening around you and that mostly work with engines based on oil probably.

Julien (nonoise.club): So reducing CO2 emissions or GHG in general will help us to reduce noise.

Isabelle (GETfund): I think electrification of many aspects will certainly reduce a part of the noise. I'm not an expert.

Julien (nonoise.club): But I will give you a statistic. very interesting because a lot of investors and lot of people say, so Europe has a goal of for 2030. to reduce noise pollution by 30 % in the mobility sector. that transportation noise. And a lot of people say, through electrification, you're right, we will reduce that. It's true. But the fact is, since they decided we need to reduce on over 30%, we got 2021, we got 1 % reduction working on EV. So electrification will go on, will move on. Still, 70 % of the noise of transportation is just the contact between the wheels. in the room. So nothing to do with electrification. And that's a bit of a first image we have to that, but we need to go much farther than that. And it's only on mobility. We can speak about construction with engines. We can speak about industries, for instance. And if you have an engine, if you work in an industry, at some point it has to be kind of noisy. So we have to protect people as well in a way. it's interesting. It's something I hear a lot about mobility and unfortunately, which won't be enough because one person of 30 so

Isabelle (GETfund): It was my first approach because I'm certainly not the newest specialist.

Julien (nonoise.club): I understand that. I didn't interview you as an acoustician.

Isabelle (GETfund): No, no. that's why that was one of the first things I was thinking about. mean, one of the aspects also is other trains. If you live next to a train station or train railway, it's very noisy. On the other side, we need this type of there again, so then you have to you have to assess what makes sense. But on the electrification, I'm a bit surprised about the figures that you just mentioned. Because yes, I know that the wheels on the road do a lot of noise. But do you remember the beginning of electrification? There was the fear that we wouldn't hear the cars.

Julien (nonoise.club): That's why we're even, I think, obliged to send a signal. They worked on the noise of an electric car to be sure that you hear that.

Isabelle (GETfund): So I think it's a question also of speed. Because at low speed in the city, I think the noise is really reduced. At high speed, probably it's different if you go in the waterway with the...

Julien (nonoise.club): It's even a question of the state of the road itself.

Isabelle (GETfund): Exactly. So we need to invest in many things that will progress on that. machines, you are obliged to give the decibel, the noise emission, and we have an emission regulation in Europe. And as you say, we have goals. I'm sure we will have difficulties to do.

Julien (nonoise.club): to follow this goal and to reach the goals. Is regulation the one lever you look at as an investor to see if there is a market for that or not? Is regulation the number one?

Isabelle (GETfund): Well, regulation, we always take it into account, but we always know this is something that can change anytime, very quickly, and we don't invest in business model that are based on a regular.

Julien (nonoise.club): Okay interesting.

Isabelle (GETfund): Yeah, because otherwise, I mean, you are too much dependent on things that are not in your hands, and that's bad. So for the time being, you have probably seen all the discussion on the omnibus regulation, whether the... the reporting obligations of companies of corporates will change. And if it's the case, what does it mean for all the startups having business models for all this reporting? So it's a real issue. that's why it's so important to have a very stable framework all the time, political and legal framework. It's one of the main elements of a good ecosystem. And that's why our times are scary, nothing is... we never know what is the normal political framework and that's caring for business because we need that, otherwise you can't act.

Julien (nonoise.club): So if regulation is not a number one or not the main factor because you're scared about regulation changes and you're right, we're changing kind of all the time and if you're in the US it's even worse right now. thing is, what's your main criteria? And then we can go back to the point on metrics. And I think you invented or adapted a framework to measure economics and extra-economical figures.

Isabelle (GETfund): So I mentioned at the beginning, we always see something in a multi-dimensional framework. And the easiest way to frame this is to say there is a financial and a non-financial and impact investing is not a trade-off between financial returns and other returns. You have to combine both. normally, should bring more financial return would bring more impact. That's the two-dimensional way of presenting that. We work with a framework which is called the triple top line. So it's not two dimension but three, which has been developed by Michael Braungard and William McDonough. These are the two persons also behind Cradle to Cradle. And they have developed this framework, this triple top line, as a tool to develop sustainable products. So Cradle to Cradle, biocircular sustainable products. they say you have to take care that you always take into account the three dimensions, economy, ecology and equity in the sense of social equity. so that's the basic for product development. And what we have done is we have transponed this concept to the development of sustainable business models. the same thing, you shouldn't neglect any of the three dimensions, economy, ecology, and social equity. And of course, we are not naive. We know that there are big challenges between economy and ecology, between economy and social equity, but also between ecology and social equity. And what we do is we go, we analyze together with the teams, with the founder teams, because they know their business model the best. We go with them around these three axes and we ask them, which are these challenges? question do you need to answer to make sure that you don't disregard one of the dimensions. And out of these questions we develop the KPIs. So at the end...

Julien (nonoise.club): with Mirageable KPIs.

Isabelle (GETfund): measurable KPIs. Out of each question, we have one KPI. And at the end, we have nine. And these are all embedded in the business model. There is nothing that doesn't make sense for them. And they... And most of them use these KPIs to manage the companies because they are all strategic KPIs. And in two of our companies where we have finished to set up this framework, they also use these impact KPIs at OKR. So really as management tool for the company because they found out, OK. If I cannot answer this question in a proper way, I will have more value. mean, on the top economy, it's always the revenues of the company. And by increasing the impact, I will increase the revenues also. And by increasing the revenues, I will increase the impact. Because if you just calculate a potential impact, you don't have any impact if it is not successful. Yeah. The theoretical impact is...

Julien (nonoise.club): I would say if you don't have your startup anymore in two years, you won't have any impact.

Isabelle (GETfund): So that's the basic of this framework. And it's fascinating. I I've been working in this field for so long and I was sometimes a bit... I had the feeling I was in many dead ends and I didn't know how to go further and how to really find out which are the KPIs that I need. As everyone, I have tried to set up a long list and I thought, okay, I have to take into account all dimensions. Then you end up with an Excel file with 250 lines and you say, no, that doesn't make sense because in... In theory, all these lines make sense, but they don't make sense for each business model. So you really have to analyze it from your business model. So what we say is we don't put an impact model top down on the startup, but we analyze bottom up what is driving the impact in the business model, and then we report on that.

Julien (nonoise.club): I've been a founder and CEO of product-led startups and a chief product officer at enterprise level as well. when you develop a product, you have to have your own all-star to understand what's really your mission, where do you want to go, and what do you need to do, what do you need to prioritize. Including these three factors directly in your product strategy is a very strong lever as well. I don't see that a lot, to be honest, because I see that a lot of strategies are even though sometimes not based on one North Star metric but it's completely great. You intervene, if I'm not wrong, at CSA and CUSB, right? Meaning, do you expect from the startup you invest in during your due diligence that they already implemented such a framework or you do that with them?

Isabelle (GETfund): We do that with them and the good thing is most of the time, since we are serious A, they already have investors, some of them have some Incapac API and we can include their Incapac APIs in our framework most of the time. Some of them are difficult to include, then we add them. But that's okay.

Julien (nonoise.club): Because you're acting as a lead investor.

Isabelle (GETfund): We act as lead investor, but especially because we really, I think we have a value add doing this exercise with them because they want, mean, they have business models that are impact business model, that have a positive impact, but they don't know how to present that. And of course it's a very important strength in their fundraising and for the next fundraising to be able to show, okay, and that's what we can deliver. They are happy to do that. At the beginning, of course, they are a bit skeptical. They think, OK, once again, I have to go with some people about our impact. And they are not really happy to do this exercise. So you see some reluctance. But at the end, they all say, wow, that's really fascinating.

Julien (nonoise.club): GETFund is a new name for many ventures before, meaning you already have track record of how many startups did you work with on this framework.

Isabelle (GETfund): Yeah, so my colleague Beatrice Böhm, she has done this transposition, so that was not mine. She has found that and she has done it exposed with the companies in the former fund. We were convinced that we will be able to use this as a tool if we use it ex ante of each of our investments. And now we are very happy to see that it works. we combine. So one aspect is important. we have as a carry the incentive that we get as a fund investor at the end. 30 % of these carries linked to the achievement of these goals.

Julien (nonoise.club): So you're free, carry on, 30 % of your carry only by achievement of the impact goals. So on environment and social aspects.

Isabelle (GETfund): of the impact. So we have, so the carry is only financial of course, now it's based on the financial returns. And then we work on these nine KPIs with each company. And with our investor advisory board, we decide which one we take into account for the measurement of the impact carry. And they choose because our... pitch is on environmental impact. So they choose most of the time the environmental KPIs. But we want to have the social one also included because we are convinced that this imbalance is so important. So they will not judge us on the social part most of the time probably, but more on the environmental side. But the startup founders don't know which one we have chosen towards our investors. So they work on all of them.

Julien (nonoise.club): Looking at noise, noise is a topic which is concerning a lot for sure environment and you said it's in many cases connected to pollution, to CO2 and to air pollution. Not in every cases, but in many cases. And for sure it's connected a lot to social impact because it concerns a lot of low income, low income population. For instance, in factories, in the industry, it's a lot of low income. workers.

Isabelle (GETfund): people live there.

Julien (nonoise.club): and whether people really want to speak about mobility. I mean, we are privileged people. You said it with a conference and with such days, it's really tiring and we lose our voices. Still, we have the chance to decide. We have the chance to be able to buy expensive devices to protect ourselves and so on. It's not the case for a lot of the people out there. But looking at noise, think on the test, it's quite well. connected to what you do describe. Still a lot of, to have impact, lot of startups need not to develop software only, but software and hardware, sometimes only hardware, material for instance, which is quite a big challenge, quite risky. When you develop an algorithm to develop a material, have to, it's, and hardware you have sometimes five, six, seven years, 10 years. Yesterday I had an interview of a biotech founder. She started 10 years ago and we launched clinical tests this year. So it's great, still very long time. How do you see that as a VC with your, I guess, 10 years fund? How do you invest in hardware startups or biotech or that kind of startups? And is Impact VC the right scenario for such a company having long development time?

Isabelle (GETfund): So there were really many questions. So where do I start? So the first thing is the comparison of deep tech hardware startups with life science startups is good. The only thing which is not working is that for life science, you know where the exit market is and you can exit within a timeframe of 10 years because at arriving at clinical phase two or whatever, there is a market. for this and then you have big corporates buying so that's quite easy also it's a long-term story. On the pure hardware in let's say cleantech if you want to set up air capture factory for instance

Julien (nonoise.club): There is.

Isabelle (GETfund): It's a project type thing, so you set up your first plant and then the second plant and probably after the second plant you have to get out as a VC fund because it's more than 10 years and the company is not at the stage where there is an exit possibility.

Julien (nonoise.club): So exit is the way to look at the time frame finally, the exit strategy.

Isabelle (GETfund): Yeah, our business.

Julien (nonoise.club): It works on of these enemies.

Isabelle (GETfund): If you don't give our LPs their money back, then we have a problem. There is no other way. I fully agree with you. For this type of project type hardware, you need another type of financing. This is not the... what you do best with VC. So what we do is we invest in hardware software combinations. with the hardware, we have most of the time IP in there and a very good relationship with the customer because as soon as you have some piece of hardware for me at your home, for instance, then we have a strong relationship. It's easier. then we have a software layer on that, which is naturally very

Julien (nonoise.club): big

Isabelle (GETfund): important all type of digitalizing the business model is our key and with these you are able to scale to have the growth so what we are looking for are really these other software combinations okay a project type out where we wouldn't invest And I agree with you, there are a lot of investments that are necessary, but they will not be financed by a venture. So we need a new type of financial product. And I'm working on that on a more political aspect. I was at the Sustainable Finance Committee of the former German government, and I hope there will be a new one to work on this topic. And at CleanTech for Europe, There is also a group working on that to find a way of financing this type of business model which are between venture project financing and infrastructure and People do in venture cannot do that people doing only infrastructure tell you well But that's risky because it's not it's a first time. Yeah, and people doing doing project They say well, but I need you know, I need securities. I can't go in in something like that. So you are really that no one can do it. You have to combine forces and because it's so new, we will need some type of guarantees. So for the very big projects, there are guarantees by the EIB, but for the mid-size project, there is nothing. So we really need to find a way of...

Julien (nonoise.club): European fund but more public fund.

Isabelle (GETfund): Perhaps it will be at European level, perhaps it would be at national level, I don't know, but we need something to step in for taking this risk. Otherwise we will be stuck without financing these projects because no one can do it. These are not the type of... They are too strange for each actor. That's not that the people don't want, but they can't. I cannot go in there if I know in 10 years I will not be able to exit. So I can do that. So perhaps you need a type of more evergreen fund. But there are very few. It's very difficult to raise money. these are more the people able to finance these things are corporates, family offices. But they cannot do it alone. So they need more.

Julien (nonoise.club): Family offices mostly invest at growth stage and we speak about early stage projects.

Isabelle (GETfund): Yeah, and then you have some difficult example like Northwalt. Many of them were involved in that and took the risk and the reward was not good. So that doesn't help the discussion.

Julien (nonoise.club): Okay, but still there is a place for small hardware, I would say, but you like the hybrid model as you say between software and how we're having algorithm helping headset, microphone,

Isabelle (GETfund): IoT or a lot of course is AI because we get a lot of data and we analyze it and we can do some recommendations about how change the hardware, to manage the plans for instance better. a lot of analytics and predictive maintenance. So all these type of things, they are all included in what we look at. And perhaps, may I just mention something? Because you said in the corporates, it's some minutes ago, you said in the corporates, you see very seldom that this holistic view on the product is included in.

Julien (nonoise.club): Unfortunately, there is.

Isabelle (GETfund): No, that's very interesting because... most of the time sustainability is still outside the real business. It started to be at the accounting or it is sometimes in the marketing, sometimes it's very different places. But one of our LP has the sustainability in the strategy. So the chief sustainability officer is chief strategy officer. that's the main change. So if you and that's what we do with our startups. So what they do at the group level is exactly what we do at the level of our startups. And this is the change you need if you really look holistically and you believe that, and it's not a wrong belief because you know that being more energy efficient, more resource efficient, And of course, taking care of some social and human rights issues is for the middle and long term better than not doing that. So out of this conviction, then you can set up really sustainable business models. And so there are changes, but it's very complicated because the sustainability approach is for the time being very, very much regulatory driven. and reporting driven. And that is a bit of a side aspect of the topic. And so my fight is to bring it within the business and not to have to concentrate so much on all the regulatory aspects. what our job is really to translate this regulatory in what does it mean for my business. And then you do the right thing.

Julien (nonoise.club): What's your point of view on CSRD because it's changing a lot according to in which week we look back. We do record this mid of March, this episode. But what do you think about the CSRD changes?

Isabelle (GETfund): In principle, we need more transparency. I think there is no way of changing things if we don't have more transparency and actually transparency towards your stakeholders, towards your employees, towards your customers, towards your investors. So I think that should be normal. Especially if you say this is a part of the business as the financial reporting is part of the business. So that is the basic. So normally you should say, well...

Julien (nonoise.club): People should be scared, but that should be normal.

Isabelle (GETfund): Like everything, we make things so complicated that we concentrate on non really relevant aspects instead of concentrating on what do we really want to give as an information. Who will read all this thing? No one. if it is just an accumulation of data that will just be put, you know, that makes no sense. And that's why I think it's good that we rethink about the way we want to approach sustainability. But of course, the way it works to say, you know, the US get rid of this. And that's why we get rid of a lot of this. This is not this is not true. The omnibus regulation is a. You can sell it as a as a red tape cut. But. Materially, they haven't changed a lot. The only thing which is a pity is that what I heard, at least for the German companies, there were around 11,000 companies that should have reported. After CSRG, it would have been more than 50,000. And now it's about 10. So that's... That's what they have done. Let's see. Probably we need a few more iterations until we have something which makes sense. But I fully agree that these long lists of things that nobody cares are not the way of approaching sustainability. So it's good that we rethink that. We need a stable framework. And I would like people to rethink what do we really need.

Julien (nonoise.club): And like we need startups surviving to have impact. We need a regulation which is really used to have impact or it will be a bullshit and not having any impact. Isabelle, you have a meeting coming. Thanks a lot for being here. Isabelle Canu, you're the founder, co-founder of GETFund, green European tech fund from Berlin. And Munich. And Munich. And you are from France, from Paris and Niza. So you're a great European. That's great to you on air. Thanks a lot for your time today and I hope you'll get a lot of insight out of this discussion. Thanks for being here and I wish you well in the loud crowd out there.

Isabelle (GETfund): Thank you, Julian.