Tina Dreimann: When we started four years ago, we were even challenging, like we wrote down riskiest assumptions for better ventures. And one was: are there enough impact startups, are there enough purpose driven angels that want to work with us? And the answer is yes. So I think we only have untapped a little little grain of the full potential that we can unleash for Europe and that we can accelerate over the next five to 10 years to make a difference.
Jingle: My name is Patrick Hypscher and this is Circularity.fm, the podcast about understanding, building and managing circular business models.
Patrick Hypscher: Welcome to VC for Circularity, the Venture Capital perspective on Circular Economy startups. In the last episode, we listened to Aly Bryan, Senior Member of the Investment team at Closed Loop Partners Venture Group. Aly talked about the rising importance of critical materials in the circular economy and how recovery systems and reverse logistics make supply chains resilient. Today's episode it's about how founders and investors can team up to create circular and impact startups that drive systemic change. But before we start, I have an offer for you. If you want to get the actionable one pager about this conversation, sign up for the Circularity.fm newsletter. You can find it at www.circularity.fm.
Patrick Hypscher: She holds a degree in International and Cultural Business Studies from University of Passau. For five years she worked as Management Consultant with Bain & Company. Afterwards, she led the Product Management team of FriendScout24. Before she joined the Kartenmacherei as Business and Agile Coach Lead. Five years ago, she started better ventures, Europe's most active network of purpose driven entrepreneurs and business angels investing in exceptional founder teams. In 2023, she has been selected as Investor of the Year in Germany. Welcome, Tina!
Tina Dreimann: Thank you Patrick, I'm happy to be here. Patrick Hypscher: Tina, you have a background in Agile and Product. What is one of your favorite agile practices that you personally follow? Tina Dreimann: I love Agile because it's not only a methodology, but also a mindset. And to me, one of the most important practices, to be customer centric, so like to really only build products that people need and love and to generate value with it.
Patrick Hypscher: That's an awesome uh, answer and probably already gives an idea about your answer for the first question, which is about why did you start better ventures?
Tina Dreimann: That goes way back. Fun fact two weeks ago we went to Costa Rica with family for the Easter vacation. And that was, like homecoming because at the age of 24, I had been working in Costa Rica as an intern and also in voluntary programs. And you can imagine a huge beach, no hotels, no houses, and little Tina walking there collecting turtle eggs, I loved it, that was the night shifts collecting them. During the day, it had been one of the hottest summers there ever was, so climate change already is going on since over 20 years, and I had to dig them out again, burned. At that time, I realized, hmm, we are breaking the world, we're destroying it. It's our base to survive, and I want to do something against that, way back, right? So why did I become a management consultant? Because one of the job description of the World Wildlife Fond said you need 10 years of work experience. and in management consulting. And like 20 years later, after like learning growth strategy, private equity consulting, building products, scaling startups, I'm so grateful that I have better ventures and that I work with entrepreneurs on solution every day.
Patrick Hypscher: So sounds like nature is your customer. Tina Dreimann: To quote my dear Engineering Lead and colleague, like we have been working also before better ventures. We were talking at a lunchtime and I told him that I want to found a startup for the planet or for animals. And then Alexey at that time told me, but Tina, humans are also animals.
Patrick Hypscher: Yeah. Yeah, we often forget that one. There are already quite a lot of companies founded with serving humans but not so much with all the other life around us. Tina Dreimann: Yeah. Patrick Hypscher: So what is better ventures then now?
Tina Dreimann: Now status quo, we are over a hundred entrepreneurial angels investing in ambitious impact teams. We've made 51 investments already, and that's just the beginning. It's a movement of entrepreneurs that really want to systematically change our economy towards impact and return. Because when you look at stats, be climate change, be planetary boundaries, or also social injustice, we realize we can't continue living like that and we need solutions. And at better ventures is our core belief that stated entrepreneurs are the driving force to build a better world, and we are here to make each other succeed. It's a completely new, innovative approach towards venture capital, which is tech and community based.
Patrick Hypscher: And, how does it look like? Do all the more than 100 people invest together or just a selection?
Tina Dreimann: Our secret sauce is that we enable them to make their own decisions. So based on the interest and also their experience and expertise, they pick their own startups. And by now, given the brand and our strong network um, we get 200 applications per month. It's our job to shovel away everything which isn't ambitiously impactful, doesn't have a business model. And, we're focusing on the best teams, so our team does the initial calls to really bundle the work that otherwise every angel would do by themselves and just steal the founder's time. So it's our job to really curate the best teams, and then we introduce 10 to 15 great startups every month towards our investment community. And the cool thing about this, it's not transactional, but it's always about the people. Like, do we want to work with each other? And given the fact that we have an active community, we always also have the insights to make great decisions together. So the core belief is that together we are smarter, we're stronger, and also we have more fun.
Patrick Hypscher: Okay. Sounds wonderful. Can you, give us an idea about the angels in your network?
Tina Dreimann: Absolutely. I'm very much looking forward to next week because we have our yearly angel offsite, where we are focusing on building the meaningful relationships, the trust between each other. And they are all entrepreneurs, so they've built their own companies or ran companies, sometimes even billion dollar global leaders. Very like-minded, but at the same time extremely diverse which enables them to diversify with each other. And you have the classical, I would say, digital founders like Felix Jahn, Christoph Behn, but also the huge leaders from, for example, medtech industries or from the mobility industry, family enterprises, and it's amazing, how they work with you, work with each other, and also with the startups.
Patrick Hypscher: You mentioned it's about people and already talked a bit about your angel network. What are the benefits for founders working with better ventures or submitting their application to better ventures?
Tina Dreimann: It was like actually very lean startup and agile, how we set that up, so we eat our own dog food. To develop the approach we are taking now, we talked to over 60 founder teams just listening and asking, what are your biggest challenges? And on number one, it was access to the first investments because you have to talk to everyone individually. So like without even having access as a new founder, you can approach us and thereby you're automatically, in a process with over a hundred people that don't only bring capital, but also active knowledge to the table. We just taped a video with multiple founders for the summit, and they love it because A. the angels work with them on eye level. So they've done that, been there, feel the pain, know the pressure and they love the unlimited access to not only the experienced founders, but also the peers who are all in an impact track and building ambitiously big solutions with each other. So that, and we actually asked them better ventures in one word, and they were answers like, connection, empathy, and also LFG. I didn't know the abbreviation before, it means let's fucking go. So it's a, it's mixture of ambition, and also like-mindedness and understanding of each other.
Patrick Hypscher: Okay. I can already feel the spirit of the community and especially for someone like you to curate um, this community, and be exposed to people all having this mindset, so it must be really energizing. You mentioned, all of them are on a, on a impact track. What's your understanding of impact there?
Tina Dreimann: We adopted it from pioneering impact funds in Europe. There's the Global Impact Investment Network, then there's Norrsken in the Nordics, we have BonVenture in Germany. And the most important part is that the startup solves a problem at the root cause. And then we also of course, have to go to multiple criteria: are there any negative side effects? How long does it take until there is an impact? But when we talk about impact, we also always mean return because if you don't manage to build a viable business model, then it's also not sustainable in the long run. And just to give you a couple examples, because they are we are very industry agnostics. We started everdrop, they're promoting sustainable consumption, and clean water with plastic free cleaning products. And they scaled from a pre-money valuation of 3.5 to now series B in no time, saving millions of plastic bottles. Then there are crazy deep tech things like Oxyle that is a water filter, removing toxic micro pollutants, also really scaling fast and that they're really carcinogenic PFAS in our waters and microplastics, and they managed to invent a solution that with little, uh, investment taps into the existing ecosystems and can then filter these out. And then there's green cement from ecoLocked, and bioplastic from BIOWORKS and carbon binding technology, GCT. So like, I really love my job, you can tell that.
Patrick Hypscher: As you said, you're industry agnostic. So how do you assess the impact? Then when you don't have a focus?
Tina Dreimann: It's important to be measurable. We have a whole methodology along our value chain from sourcing like where do we find them, towards screening, closing like making sure the contracts are right, all the way towards how do we work with the startups on impact reportings, and then, the exit will also be interesting. What's most important in that case is the team: team, team, team. So we are really thoroughly, thoroughly drilling the team on their personal connection to the problem, on the true mission and how they want to make a difference. Because in the end, once invested, if a team pivots to somewhere else, you can't do anything about it. Like everyone could tell us, yeah, you're greenwashing, but then okay. Of course there are also opportunities legally to bind them to certain fields, but that also has downsides, particularly in the early stage that we are investing in.
Patrick Hypscher: And on the impact side, I understand you already connect the impact dimension with personal motivation and the values of the founders. And then when it comes to the product and the business model, how do you assess the impact of that?
Tina Dreimann: Even in the very front of our application funnel, if you go onto our webpage into the startup funnel, like those are ones of the first questions we ask, like, which sustainable development goal do you pay into? So to really categorize and field they want to play, and then asking them for their quantitative vision. Like where do they want to stand? How much carbon do they want to bind over the next five years? What is their ambition? So that we get the numbers and also the potential impact early. And of course then we have to challenge it and luckily give them our huge crowd intelligence. There's always someone, for example, Marko Bogt from the energy industry, who will then thoroughly challenge the team. Like, do you think these assumptions are realistic? How do you want to get there to pressure test their hypothesis.
Patrick Hypscher: Mm-hmm. Okay, cool. We already discussed that, it has to go in hand with commercial success. I already had a few conversations with VCs investing in circular economy startups, and to me it seems as though everyone is looking for some kind of correlation that every additional euro or dollar in revenue also increases the impact. Is this the model to go for? Is there any alternative or is it that what I have to make sure as an impact driven founder?
Tina Dreimann: For better ventures, absolutely. Yes, yes, yes. You can also call it integral investing, so that the business model KPIs are entwined with every sold unit, you have a positive impact, be it on society or the planet. I can recommend a book from Dr. Mariana Bozesan, she's part of the Club of Rome, and wrote a great guide on how to do integral investing. And why is this so important? Because of course there are many, startups telling you I'm doing impact, like I'm selling a product and then I am donating 1% here. But you can imagine that under stress or when new investors are coming in, this margin often is becoming important. And it has happened frequently that in these business models, then you have to give up that positive side effect. Of course that's also very honorable, to act like that as an entrepreneur. And I support that, that's rather a way of like building something and then donating, we need that too. But it's more risky to invest in these startups. And we need to transform the economy, we need to replace existing business models that are damaging society and the world with new ones that solve the biggest problems of our times.
Patrick Hypscher: Mm-hmm. When you mentioned this example, I immediately think about a few companies and concepts that have been let's say early adopters in the modern impact funding business. So let's take for example, Tom's shoes. Or also in Germany, uh, Share, they used this buy one, give one concept, and I feel also in the digital sphere, a company like Ecosia uh, the search engine planting trees, adopts a similar approach more in the digital field, but, uh, creating impact in the real world. In what way would you say that these kind of business models are a bit on the edge? Because I mean, you could improve your search performance, you could sell more water bottles and chocolate bars or shoes and improve profitability by pivoting to buy one and give only a half or something like that.
Tina Dreimann: First of all, I love these entrepreneurs too because they've already discovered that they need to do good, right? So, and if that little seed is in your head, you will always try to do more, in the sense of what can I do for my employees? How can I adopt to the market? How can I make my products even better? For example, with sustainable materials. They already have that sense of responsibility and that's great. To quote Michelle Obama from the Bits and Pretzels, she said, "we need more leaders, responsible leaders that know enoughness." And just because people buy a product doesn't mean we have to sell it. I love that there is a movement of responsible leaders also from big enterprises who are rethinking, what they do. Like Walmart stating that they want to sell less calories because obesity is a problem and it has a major impact also on climate, the food we consume in our planet. Our economy is the backbone of our education, of the great society we're living in. So I love also to work, for example, with family enterprises from Germany because they think long term also in how they can transform their businesses, and it's a symbiosis for me. So you have the startups because they're independent, they're fast, they're creative, if you tell them it's not doable, they've already done it. And then you have the big enterprises, which of course have the major footprint, but also the power, like once they start to tap into that, working with startups, it helps them to transform and innovate the whole value chain and products. This is something that we are really pushing with better ventures, not only investments from entrepreneurs to entrepreneurs, but also every single value-add that we have in the community for the startups to make them even faster. And there of course, the big enterprises, for example, as first customers are essential and vice versa. The big enterprises investing early have huge opportunities to have the first foot in the door to then later adopt the startups to their ecosystem, to their product line, to their tool set.
Patrick Hypscher: Yeah, yeah, definitely. I want to come back a bit to the circular economy and also the business models. As you see 200 applications a month and you already done more than 50 investments. Congratulations. Tina Dreimann: Still restless. There's more, we want to get to 500.
Patrick Hypscher: Yeah, please do so. Let's come back to, business models, you mentioned the integral approach that you're following and already gave a few examples. I'm interested in the types of circular economy business models, be it product as a service, be it recycling, advanced materials, digital platforms, whatever it is, where you see they stand out a bit in terms of impact potential. So they rather make it past the first and second selection stage by design. Is there something like that or is it not possible to spot a pattern and it's on a case by case basis?
Tina Dreimann: It is possible to spot patterns, and that's where we also use our group intelligence. Like for every vertical we invest in, in terms of, for example, food and agriculture circularity, we bring together the expert entrepreneurs and discuss with them what are the challenges we have to solve and what are the attractive investments here. Like, where are the business models that we need to support to have a maximum impact? So, so, yes, it's key to approach that strategically and not just spread money, even though like diversifying of course also helps in early stage. We also see that in every space there are outliers. What are outliers? I would say especially strong teams. So like, impact is a barrier, but the bigger barrier with better ventures is the team assessment. We have a very thorough multi-step process to talk to the founders, to understand their drive. They need to have skin in the game they need to enhance each other. So diversity is key. Doesn't mean women and men, but from personality profile experience. I like to call it the Christian Vollman Model because, in his green chemicals company, he's the very experienced entrepreneur who's scaled multiple businesses and he works with scientists who have the product knowhow this is exactly where the strength of Germany lies, because like in the universities, we have the tech, we have knowhow. We only have to learn how to spin out more in combination with the entrepreneurial drivers, who really want to make a business model out of that.
Patrick Hypscher: Yeah, definitely. Tina Dreimann: Fun fact, to enhance it, we also do personality profiling with our founder teams. My co-founder Dr. Cedric likes to call it the couples therapy, really to understand how do their strengths enhance each other? How do they work with each other? But how have they ever overcome difficulties in the past? And how do they make decisions as a team? 'cause those are the skill sets you need to build an enterprise.
Patrick Hypscher: Yeah. Do, do you have a similar selection process for your business angels?
Tina Dreimann: Yes we do. Fun fact, it's uh, like we are really great at curation, I would say curation and recruiting. For the business angels, to be honest, it's rather the cultural fit. So we only grow via referrals and working with experienced entrepreneurs that don't only wanna pass on capital, but also their experience and knowledge and um, have a lot of fun doing that. So it's really the cultural fit match. But we are also going into profiling the angels to check out how they enhance each other. And, I once talked to a specialist who diagnoses investment teams, and I asked her like, what are the best investment teams? And she said, like the ones that enhance each other. So you want to have this fast decision maker and at the same time someone very careful analytically diving into the depth and to combine them in the process is amazing.
Patrick Hypscher: Yeah. And then I guess it's also the impact ambition, right? So otherwise they wouldn't reach out to you and wouldn't be interested in.
Tina Dreimann: It is 80% I would say, we also have angels and investors who do everything still and who see the financial potential in the impact field as well. And then there we are the go-to club for them. And of course, we don't mind if people invest outside of better ventures. It's our job to bring them the best startups to scale really fast. Patrick Hypscher: Okay. Let's stick to that topic of financial and impact. Do you see that there are enough, impact investors and angels out there?
Tina Dreimann: I don't even know if I wanna call it impact investor because impact is often misunderstood for philanthropic endeavors. I would rather call them responsible leaders that are investing in solutions for the future. There are plenty of them out there, and that's fantastic. And they have also increased over time, when we started four years ago, we were even challenging, like we wrote down riskiest assumptions for better ventures. And one was: are there enough impact startups, are there enough purpose driven angels that want to work with us? And the answer is yes. So I think we only have untapped a little little grain of the full potential that we can unleash for Europe and that we can accelerate over the next five to 10 years to make a difference.
Patrick Hypscher: And to narrow that even further down, since we also have this circularity perspective, I get from quite a few startups that they have the feeling there not many angels out there that are able and willing to invest in circular solutions. Is this something you see as well, or where you say no.
Tina Dreimann: Cool news is we are again co-working with the Circular Republic from the UnternehmerTUM Network. They're doing a report on a yearly basis and we are co-creating it again this year I invite you to look into it because there are a lot of statistics, how has the investment field evolved. To them, the circularity is where the internet was in the year 2000. We are just getting started on circularity, but that you see on all dimensions an increase, and why is that? You have to talk to the enterprises, like for example, to the experts who are sourcing and they are aware of the fact that resources will become more scarce and therefore more expensive. Like any material that you're using, be it oil, be it trees, we are running into a huge scarcity. Also energy, the cost of energy, those are all factors that are threatening their core business. So they have to act, and the smart ones and the leaders, they already look into the solutions now.
Patrick Hypscher: So I'll for sure add the link to the report, in the show notes. Tina Dreimann: Just to give you an additional insight, it's really a market mapping also along the whole circle, a donut, I would call it. Different business models from sharing services, product as a service, product lifetime extensions, resource recovery, and circular inputs like bioplastic, mycelium based packaging. It's a thriving and strong field that's evolving and urgently needed.
Patrick Hypscher: If I listen to you, it sounds as if the interest in collaborating with circular startups and also the interest in investing in them is coming a bit from companies, be it corporates, but also be it SMEs, middle-sized companies that realize that this is necessary to secure competitiveness and create innovation. Would you agree on that one?
Tina Dreimann: I see a mix. So resilience is no longer an option, we are in multi-crisis, many large enterprises are under huge transformational pressure, not only on sustainability, but also on digital topics with a huge use of KI (AI). And startups are already working on it, so it's the best symbiosis. However, often many companies don't know yet how to tap into that. They want to invest, they want to collaborate, but they might not have the capabilities in the team and burn themselves because they stumble into it and try something out and think, okay, no, that's dangerous, I'm backing off. So if you're listening and one of the leaders from that space, make sure that you have a strategy, like you need to know why you're doing it and what your company needs. Like which problems do you have? Where would you have the greatest value-add to change something to be working with a startup. And also get the right setup to be fast, because to get into the best team and to work with the best teams you need to understand startups. To also have someone in the company to build that cultural bridge so that your company can learn from that and profit from them and vice versa, also the startup from your professional processes, production capabilities. We work with great companies who've mastered that, like Fiege Mobility, WEPA, biggest toilet paper provider. And they took already five years back this decision that they need to transform and that startups are one lever for them to do that, and they mastered it. The ones who know how to do it are out there and also the ones helping you to do it are out there. Be it Circular Republic or better ventures for investments, and just make sure that you get that right to be successful.
Patrick Hypscher: Yeah. Yeah, definitely. A quick call out here also, Tina, you mentioned WEPA, Carl-Luis Rieger from WEPA, was on circularity as well. Uh, so check out one of the previous episodes I added to the show notes and also Circular Republic will be covered on the podcast. Tina Dreimann: Thank you that you dive into that topic.
Patrick Hypscher: It's amazing and a pleasure and always fun. Maybe a spontaneous question on, uh, let's say the funding strategy from a founder perspective. I mean the traditional route is that you start with angels, you add VCs and ultimately you have to work towards some kind of exit event. And now with circularity being a bit more long term, sometimes also much more asset heavy much more local. There are great growth rates but there are also cases where growth is limited and from a regenerative point of view we would say that's also fine, yeah. When you have companies at your stage, angel stage, is there still the option to say, I'm not going for an exit event, I'm going for profitability?
Tina Dreimann: No, luckily with us, that's totally fine and we love it like, because imagine, a company, and we have them in our portfolio going to a multimillion revenue in their first year, angels have roughly 10% of the company, no more investor needs to get in. That's really attractive. And to add to that that's why we innovated VC because it's not always founder friendly, and there are also great entrepreneurs who want to build a new family enterprise, exactly what we need. So better ventures profits not only from exits, but also from dividends and future successes to make that possible.
Patrick Hypscher: Tina, I can't wait to see the innovations coming from better ventures in the next, months and years. I feel like, there's a lot more to come. I wanna wrap it up here and I have three generic questions. The first one is coming back to the founder perspective. So what's your tip to circular founders applying for funding these days?
Tina Dreimann: Build the right team, right? I think to get funding, you have to be very mindful of what does your business idea need to become successful in the future. And that's number one: team, team, team. And number two validate early: agile, lean, customer centric. Like you might even not need money in the beginning, you can do customer interviews without money by yourself on the side. So that the idea is already well validated before you ask money, and that you take your first steps and can tell a bigger story by really knowing what you will be building. And lastly, know your mission and where you want to go, which kind of company you want to build, because there is not only one type of investor. Equal to the startup world, it's so diverse in terms of values, approaches solutions.
Patrick Hypscher: The second question is about circularity again. What kind of trends do you see in circular business in the next three years?
Tina Dreimann: Um, collaboration with big enterprises, that is a trend. So we, we see more momentum in space. Um, enterprises is also approaching better ventures, wanting to get active in the field, that's definitely a trend. And then new materials, replacing them, and extending the lifetime of products, so that's already been going on for over 10 years with fashion, with use products, with product sharing, like you would call it the shared economy. And then in the end, of course, what do we do with the materials that we throw away?
Patrick Hypscher: True. Yeah. And last but not least, the podcast is about sharing knowledge and connecting people. So what kind of people should reach out to you these days?
Tina Dreimann: Founders first. If you are on the journey to creating an ambitious impact startup for return, then always come to us. We have curated group of angels who really want to support you, number one. And of course the entrepreneurs wanting to give back, and make money while doing it, be it angel, larger enterprises, uh, that we can adopt into our movement to build the leading alliance in Europe for impact entrepreneurs.
Patrick Hypscher: Wonderful, Tina. Thanks for sharing your experience and perspectives! Tina Dreimann: Thank you for the great questions there still so much more I would love to tell you. It's like we just got started, and I really appreciate that you put the spotlights on solutions. Thank you. Patrick Hypscher: Thank you, Tina!
Patrick Hypscher: This was Tina Dreimann, founder of better ventures. In our series VC for circularity, if you want to get the actionable one pager about this conversation sign up for the Circularity.fm newsletter, you can find it at www.circularity.fm. Let's drive a profitable circular economy. And please don't forget, the most abundant renewable resource is your imagination.
Jingle: My name is Patrick Hypscher And this is Circularity.fm, the podcast about understanding, building and managing circular business models.