Eytan Herzberg and Guillaume Rostand lead Le Club Startup, a syndicate that focuses on “quality over quantity”. Its track record includes Pickme, the first collaborative delivery platform in France, Archdivisor, the Tripadvisor for the world of work, and Alpagga, a second hand catering equipment platform.
Eytan and Guillaume talk to Roundtable about the importance of kindness, searching for active co-investors and not looking for unicorns.
Founding principles and unique approach to investing
Roundtable: How did Le Club Startup come about?
Eytan: We started a little over two years ago as a group of five entrepreneurs. It was a side project at the beginning. As we started talking to more startups and investors, we decided to professionalize. And now we are investing tickets between €100,000 to €250,000 into French startups.
Guillaume: As with many clubs, it starts with the idea of gaining leverage when you're investing alongside VCs. You do your first deal. You speak to friends and to people you know about the deals; it attracts them. The more deals you do, the more deal flow you generate, and the more investors you have, so this cycle makes it more or less a full-time job.
As well as having more leverage, the second point is that we really want to work with the entrepreneurs. That means you cannot do more than four or five deals a year because otherwise, after three years, you end up with 25 or 30 companies and you are unable to give the support required.
Eytan: We saw this gap in the market. Investors often invest in early rounds because they have a feeling or because their friend is investing. And then in the later rounds, there is much more analysis on the founders, on the market, on the finances. We invest in early rounds but apply the same amount of analysis that funds are applying in Series A or Series B. This is why we take our time.
The downside of this is that we cannot invest as quickly as some people. We are going to ask the founders and the team to do several rounds with us and our communities. And maybe we can ask some experts to join as well to get a second opinion. We say to the entrepreneurs that we are like a big Business Angel, but a really annoying one. They accept it or they don't. So we don't accept, for example, startup people who come to us and say, “We are closing our investment. We need the money in two weeks.”
Investing is like Marriage: Focus on Quality, Engagement, and Finding the Right Fit
Roundtable: Is it harder to convince founders to go with you i.e. as an “annoying” angel, or to convince investors to come on board, given the focus on a smaller number of deals?
Eytan: It's not hard to convince people to invest when we show them our level of effort into finding good deals. If we present them with three deals per week, then they might not be able to trust us. Our investors go with us because they're part of the process to select the startups. We engage with most of them, and they help us assess if the startup is a good deal.
Guillaume: That’s why it’s better to have fewer investors. We have the time to build a great relationship, versus growing the club as much as we can. Of course, we have to find the right balance because not all our members are going to invest in all the deals we do.
Eytan: For founders, money is not the most important thing, because you can find money easily nowadays. But it's like marriage. We are going to be married to the founder for like five, six, seven years. And this is not about being quicker to invest than someone else. It's more about what we can provide them: the network, the competencies, the people who can help them. It's also about whether it’s a fit. Sometimes you think "it's a good company, but I don't want to be in a relationship with this person for the next five years".
Roundtable: Could you tell me a little bit more about your investment thesis? Is it quite wide?
Guillaume: We tend to go towards SaaS businesses, [online] marketplaces – we don't do deep tech or biotech. My background is in B2C and online marketing. Except we do leave space for extraordinary things. Like if we see someone who has an extraordinary vision: we may have no clue about his business, but we follow the guy.
To me, finding good companies is always the same: you have to fall in love with the team and this team has to target the right market. We always have a visual call with founders. We open up the Zoom, and as soon as we see the founder’s face and hear their first words, we know if there is a fit. Our latest investment, Alpaga, is a second-hand marketplace for restaurant equipment. It was very easy because on the first call, we saw the team, and we knew it was going to be great.
Eytan: Execution is much more important than the original idea. At the end of the day, the founders are the one who are going to execute. So as the investor, you have to say, okay, are these guys going to be able to pull this off?
Secondly, we do not only try to invest in unicorns. I know it's super sexy to say you are going to invest in the next Facebook or Airbnb. But if you want to invest in the next Airbnb, you are going invest in a hundred startups that are going to fail, and one is going to succeed. And we don't want that, because our community is not okay with losing 100 times. We are going for companies that are a little bit closer to the ground; they don't burn so much cash. If they are already profitable, that's great; if they’re not, but they're on the way, that's fine too.
And we have to see the exit strategy. If we don't see an exit, we don't want to invest in it, because these are not companies that are going to pay dividends or so on. So we need to believe in the execution and we need to see an exit, even if it’s not [massive].
Expanding the Club: Seeking Kind, Engaged Co-Investors
Roundtable: You're opening up your membership base to applications on Roundtable. How much would you want to grow it? And what can new members expect?
Eytan: We want people who are active, who not only invest but take part in the life of the startup. If the startup tells us that they struggle with certain points, then we want our community to help. So we're not going for the highest number of members, but for the most relevant people in the industry able to provide value.
Roundtable: Can you say more about your existing members and the kind of co-investors you’re looking for?
Eytan: There are different profiles in our community. We already have people that are professionals. They've invested in 30, 40, 50 startups or more. They invest a little bit with us because we provide them with the right startup at the right moment. But they don’t need us.
Then you have people that want to discover this world. Many people today want to invest in startups because they find it attractive, but don't know how it works. They don't know if and when they can get their money back. They don't know the risks. And we want to provide all these explanations. If you want to join the committee just so you can see the startup pitching, and learn, we have no problem with that.
We just want people to be kind. We've been entrepreneurs and we know it's hard to pitch to investors. The goal is not to show the entrepreneurs that we know more than them. The goal is to help them. Ultimately, even if we don't invest in most startups that we talk with, we can still make a connection. So I guess if you want to start to invest, you can join the club as long as you have this mindset.
Guillaume: The ultimate reason why you would join a club like ours is to meet good people. It's about sharing points of view and creating stories with the startups. And all the guys that we brought into the startups are happy because our process was human and personal. I want to make friends, I want to have a good time. Money is only one part of the equation.