E281 | NEUVC | Ondrej Bartos, GP at Credo Ventures on having patience while building a career in VC

0:07Welcome to the latest episode of the special series NeoVC, hosted by Freddie, an analyst at Isomer Capital and Linda, an associate at Karma Ventures. Today we have André Bartosz. André is managing partner at Credit Ventures, a well-known essentially European-focused seed fund for the back to UiPath. We spoke to André to his experiences being in venture for 20 years, what he's learned, and his experience remaining on UiPath Sport through to its meteoric rise to unicorn status. This episode is brought to you in partnership with Zero 100 Conferences, which organises networking events connecting LPs and GPs in private equity and venture capital firms across Europe.

0:45Their upcoming event, the 0100 Conference DAG, will take place on February the 28th to the 29th, 2024 at the Hotel Savoy in Vienna. Attendees will include major LPs and GPs like Atomico, AXA Venture Partners, Early Bird, Ers Group, Dawn Capital, Unica, and many other LPs and GPs. Save the date, February the 28th to the 29th, 2024 at Hotel Savoy in. Join us in Vienna.

1:19Welcome to the show, Andre. Pleasure to have you here with us and super excited to have you here. Thanks for having me, guys. Happy to be here. So let's kick it off with the basics. Who are you? Give a quick overview. And it's a super important question for us. What is your superpower and how do you use it? So hi, everyone. I'm Andre. I'm a VC. I'm currently a partner, or I can actually say a founding partner, one of the founding partners of Credo Ventures, which is an early stage tech VC based out of Prague, Czech Republic, focusing on early stage investments in central Eastern Europe. Most of what we do are seed or even pre-seed investments in Central and Eastern European startups or founders, always with the global ambition.

2:19With Credo, has the thesis always been the same? Has it changed over time? Has the fund changed over time? Or has it remained relatively the same? What works, works. Well, first of all, when we started, there was no pre-seed, right? The category did not exist. So we were a seed fund. And what we thought we would do were seed investments and Series A, because we kind of thought that was the beginning, right? I think things have changed, evolved quite dramatically. So we moved a little earlier, but ideologically, we've always been like that. So I don't see much of a change. Some people may perceive some changes over time, but I think the overall vision and positioning stays.

3:16And you very nicely avoided the superpower question as well. Yeah, I forgot. I'm sorry. I'm not sure I have superpowers. And I guess I am stronger in some things. I would not necessarily call them superpowers. And I'm definitely weak at many things. I feel like I have a good amount of empathy, especially towards founders. I love and admire founders. I basically originally started as an entrepreneur, as a founder, but I was a sloppy one. I've never made it big. So hence my respect and admiration towards founders, which means that I do feel empathy and I can relate to many things. So, you know, is it a superpower?

4:11I don't think so, but definitely it's an area where I feel I am stronger. I do have ability to sort of spot patterns, which is very important in BC. I can see the big picture. I am very bad at going deeper into stuff. That's why I've never been a good founder myself. You say you haven't been a successful founder, but you did just describe yourself as the founding partner of Credo, which one could argue has been a very successful journey. Yeah, I suppose you can say that I'm a founder of a VC firm, but I've never been a successful startup founder. On the prequel, you described yourself as an OG.

4:58You've been in venture, what, 15, 20 years? I mean, I think you had your first startup in university. I mean, how did it all come about so it was a it was a very bumpy and and lengthy path i guess i i always wanted to do stuff so you can say that i've always been like entrepreneurial and yes my first company i co-founded it still as a sophomore in college. And I founded more companies than one. But as I said, we never made anything spectacular out of it. And one of the things that I learned in the early days was that I was not too good in going deep. I was not too good in sort of creating and managing teams.

5:52So whenever the company grew to, you know, 15, 20 people, it started to feel, you know, uncomfortable. So I turned into more of a consulting. I also sort of met people behind First Tuesday, which was this networking, you know, forum back in the late 90s, early 2000s. And I, you know, founded the Czech chapter of First Tuesday. And that's how I got close to investing in tech companies, tech startups. And eventually, I just found myself, you know, investing small amounts, angel investing, you can call it. And then around 2004, I think, I started cooperation with MCI, which was a Polish VC slash BE group.

6:53And that's when we can say I started doing venture. I learned a lot at MCI. And in 2009, I left to basically start Credo. and and what was the cvc ecosystem like back you know early 2000s i mean there was not really an ecosystem back then there were a couple of people calling them vcs but they were more of like small private equity players trying to buy cheap get as much equity as possible you know most of them local regional players so you know i i don't think you could have talked about an ecosystem so i mean credo was certainly not the first vc firm in the region but i feel like we were one of the first ones that really wanted to do venture who wanted to do founder-centric investing who wanted to focus on sort of global visions that the the true innovation that was not existent in the region before us what do you think changed because you know when you look at now a lot of these international large funds you know funds with long history and great track records are now more than ever coming to the region and finding great opportunities here and making investments.

8:38So what changed and when changed? I think the region just needed some time. When we started Credo, the region certainly already had a lot of tech talent and the people were hustlers and they were innovative. You know, they were inventing stuff. What the region lacked was the experience with company building. It lacked experience in like getting products out to the market and actually creating products full stop. Like people were creative and they loved doing stuff, but, you know, packaging them into products and then selling them to customers, you know, nobody really had experience with that. And so I feel like that the region just needed time.

9:33I remember in the 2000s talking to, you know, the few successful startup founders coming out of the region, and I was convincing them to give more speeches in the region and sort of more evangelizing in the region. And like one of them, Roman Stanek, founder of a couple of startups, most recently Good Data, but before that, Sistinet and NetBeans, he once told me, there are no shortcuts. Just, you know, just accept that. And I was a bit angry at him back then, but in the hindsight, he was damn right. Like, I don't see shortcuts. What every ecosystem needs is, you know, the first small success stories and then a bit larger success stories and then probably like one Skype-like huge success story.

10:40And that sort of accelerates the progress of the ecosystem. Trying to do it from the outside, artificially, it just doesn't work. So I think the main thing that changed was that, you know, time passed. And when you now kind of look at the UK and US ecosystem and how they're doing, So do you think that that's still all we need in the CEE to kind of get to their level with regards to, I guess, the breadth of things that are happening and the amount of capital? So is it just that we need a few more success stories, a bit more experience and the rest will take care of itself? Well, I think we certainly need more success stories and more, you know, successful founders and more successful VC funds in order for the region and ecosystem to grow and progress more.

11:35I don't think like, quite frankly, I love big ambitions, but I don't think, you know, CEE should aspire to become, you know, a Silicon Valley because it never will. Like, I mean, even if CEE grows, you know, I don't think Silicon Valley, you know, stays idle. We should definitely aspire to be as vibrant, as interesting, as fast moving, as innovative as possible. But I don't think we'll ever, you know, become the US or even like the UK. Boy, I should be more ambitious. That's interesting. is that is that just you think you know in terms of the way you're spinning in terms you just won't ever catch up to that kind of scale yeah if you're both on a linear path of growth it's just not gonna catch up yeah one of the things that we've been discussing a lot is this idea of you know no longer needing boots on the ground to do your dd to do your deal sourcing but when you think about you know the western western europe so quite large geographies to play in whereas you see is a number of smaller countries how you know the analyst associates deal sourcing engine that most companies have what what advice would you give to the new vc as to finding great great deal flow out in central eastern europe well i mean to go back to the beginning of of the question I think the presence still helps a lot.

13:24I am fully aware that during the COVID time, we've all been saying, you know, Zoom's great and, you know, Zoom investing, we're open for business and everything. But I, like in the hindsight, I think it was kind of a, you know, kind of a bullshit a little bit. But like, I mean, yes, Zoom helps. And there's a lot of stuff that you can do remotely like this podcast. But like foot on the ground is still super useful. Going to conferences and meeting people face to face, you know, meeting founders face to face, spending some time with them, you know, getting a dinner, getting drinks, it all is very, very useful and helpful in like forming relationships.

14:24And this is a this is a relationships building and you can never build, you know, as high quality relationships via Zoom as you can in person. So I usually try not to give too much advice. I can tell you my opinion and my opinion is, you know, I would go out there, meet people, network, have drinks with them and try to build meaningful relationships. I suppose that also plays a lot into your superpower, not superpower strength, whatever you want to call it. But the ability to have empathy with founders only really works face to face. There's limits that you can have on Zoom. You can do something via Zoom as well.

15:10You can try and read the people a little bit, but it's nowhere close to in-person. I guess talking about finding great deals in CEE, how does one go about finding a UI path? Yeah, it's not easy. I'm not going to lie. I've been trying to find another one for the past couple of years. I don't know. Like, I mean, to be quite honest here, I did not find UiPath. Dan Lupu from early birth did. I was just lucky enough that I built a relationship with Dan Lupu from early birth. So I was one of the people that he shared this deal with. And I was the one who wanted over the others. I feel like I did form a meaningful connection with Daniel, the founder or one of the co-founders of UiPath.

16:10And I jumped on the opportunity where some of the others passed or did not succeed in building the relationship with Daniel. So I guess that's the fair answer. But I had known Dan Lupu for probably close to 10 years before we jointly invested in UiPath. And we looked at deals together before. And I suppose we formed a sort of a bond that then led to this joint investment. Going back to your earlier comment, you said, you know, you need a bit of success. You need a great company to start to lead the way for a region. When you have something like a UI path, does it redefine what great looks like for startups in what they look up to?

17:03And do you think that has changed the way that you think about who you invest in? Yeah, for sure. And like, again, the whole VC is a lot about experience. It's like without years of experience of investing, I don't think someone can be a good VC. So, you know, you learn with every investment, with every board seat, with every portfolio company, with every exit, with every shutdown, failure, you learn. You try to sort of navigate what exactly it was that worked, what exactly it was that did not. And that means that I, sure, I learned a lot from UiPath as well as from all the others. There are certainly things that I did not look for as much or did not pay as much attention before UiPath, which I changed, like ability to hire fast and fire fast, which worked really well at UiPath.

18:26Before UiPath, I think I underestimated the power of clarity of thinking. So I'm not a techie myself, right? And I think in my early days in VC, I sometimes sort of failed to try to really understand what the startup is doing, what the product is, what the tech underneath is. Because I was like, well, it sounds complicated enough. I don't understand, but it's probably like, you know, the founders say it's great. So it's probably great. But I feel like Daniel was one of the people that showed me that even complicated things can be explained in a super clear way. and clarity of thinking in founders is something that I really, really like.

19:27Like that's what I want to have. What else? Ability to learn. But I mean, we all kind of want to see that. But again, the pace of the learning that I saw at UiPath and both of the co-founders was great. So certainly I had learned a lot. Do you think listening to you and kind of seeing that, you know, not every investor immediately knew that this was going to be the winner? Yeah, you kind of said that there were already investors who had passed on it. Last week, I was listening to Marcus Willig from Bolt, you know, very similar story. Not everybody thought that it was going to be a winner. I've heard similar things from the founders of Bolt.

20:15and you know you start getting they're all from kind of a similar region and and and similar types of profiles as investors we try to look for patterns right we try to see like what was it that you know this company had or that company had and none of these people had this like extensive background of building these great companies before which tends to be the case more maybe in US or UK. But I guess the question is, how can you know in these kind of cases that this is the right investment? Or is it that you can't know that these kind of people are the ones who can build it? And ultimately, it's a number of things that they need to get right.

21:01Well, are there any conclusions we can make out of this? i don't know i think you can never know like i think we have already told the story of you know so we we invested we did the seed round at ui path but then the year after we had to bridge the company and we had to bridge it you know because nobody wanted to do a series a yet right Right. And like, I think I think I remember I was super bullish and I knew I wanted to put more money in UiPath. But was I really? I'm not sure I remember it well. And I guess my point is, you can never be sure. Like people who think that VCs who invest in Series A or beyond, that they invest in like done deals, like, you know, there's no risk anymore.

22:08That's bullshit. Like there's always risk because those like startups are still like super risky, bad super risky enterprises. And things can go bad. I do believe there's a number of parallel universes where UiPath failed. Because that's what happens. Startups do fail. Was I sure UiPath was going to be a success? No. I was very bullish. I was very optimistic. You can know what's up, right? That's why you invest. We always hope, and we kind of hope with every investment, and still most of them fail. So, you know, there are two possible explanations for that. Either we're stupid, and I don't think we are, or at least not completely, or, you know, these things just happen, you know.

23:14One of the things that UiPath showed me dearly was how important the element of timing is. Like, you know, timing and sort of stars alignment, perfect storm kind of a situation was super important for this success. And I think for most big successes actually out there, could have things gone wrong? Hell yeah. So many things. But they didn't, you know, we were lucky there. I think that's a big word, isn't it? Luck, you know, there is just a such amount of luck, along with all the other qualities. I agree, I agree. And, you know, you can say that, you know, Rafa Nadal or Novak Djokovic have a lot of luck.

24:08But it's also hard work and good judgments and a certain talent that together with the luck then form the champions. So I'm not suggesting it's all luck. It cannot all be luck. But luck plays a role. And we have to accept that. And, you know, if we accept that, we can work with it, right? Let's not get too philosophical here. So we touched on this a little bit earlier in terms of how can, you know, the analysts and associates get into Central East and Europe to sort of deal source. But what are you telling your junior team members when they're deal sourcing in terms of how to spot the outlier?

24:47I try for them to sort of understand that the best approach is to try to enter every conversation with a startup with as little bias as possible. Almost like, you know, trying to act like we don't know anything about the space the startup's in so that they have the open mind that's needed. so that they don't dismiss sort of brave new approaches to stuff or, you know, innovative ways to, you know, serve the market. I certainly try for them to have the respect and admiration to the founders because they are the sort of creative ones, right? I am telling them to try to create those meaningful relationships.

25:51And that includes founders we end up not investing in, right? So like what I really would love for the associates or analysts to be like is that they should be giving feedback. They should be getting back to all founders, even the ones we don't invest in. Because I believe that long term, this can pay out. They can start another startup. You know, they can refer another founder. They can share good things about us. So I'd say those are the things. I can't think of anything else. No more like pieces of wisdom. just those general approach stuff you said you weren't going to drop any golden nuggets i think we just had three oh there you go oh great you were gold i gave them out for free oh as i said straight to the editing room and and so on the flip side i mean we've touched on the argument but you know what are the ones that you've missed what would you Would you stick behind that decision today?

27:06Were there clear reasons why you didn't? Or was it sort of for one of the three reasons that you just mentioned that you didn't have at the time? Yeah, good question. So we've missed many. We saw a very young startup called Muse out of the Czech Republic twice, and we passed twice pretty much based on the fact that we did not like the space too much. We thought there's not much space for innovation. Also, you know, this was a space, hospitality, hotels and stuff. This was a space where the potential customers were not really used to buying software, which is sometimes very tough to overcome. And we felt like it was really difficult to differentiate from the legacy players and you know build a sustainable usb so we passed and and we thought the founders were great and we we liked the product we just didn't get the conviction around the market and and and usb and boom you know the founders proved that they were great and and they executed very well on it.

28:26And, you know, Muse is probably one of the future unicorns coming out of the Czech Republic. So this is a funny one. So we passed on a startup called Wallmine. We were very close to one of the co-founders because he was VP engineering at one of our previous portfolio company, represent.com. And so we were one of the first ones he went to. And we listened to the story and we decided we didn't like the space much and we didn't like the product. And it was a consumer play and we're not great at consumer plays. So we passed. We were like, the founder's great. We've known him for years. We highly respect him, but we're going to pass.

29:21And what happened was that the founder realized that the market was not great and the proposition didn't quite work. So he pivoted and he pivoted into something that's called BetterStack, which we like a lot. And so we invested at Series A into BetterStack, but we could have been there from seed or actually pre-seed. So I guess, you know, our entry valuation in that one could have been a lot lower if only we trusted Yurai more at the very beginning. So I guess the lesson there is what all of us are saying all the time. It's the founder that matters. Great founders can pivot or change shape. So they're a lot more important than the product or the market that they're focused on right now.

30:29I don't know if based on this piece of experience, I would now invest in Wallmine. I don't know that. But it certainly is something to think about. But the relationship you held that you could get into the Series A. Yeah, I mean, because we, so, you know, coming back to what we always say to everybody at Credo. You know, you have to be respectful, you have to be honest, you have to be open. So from the very beginning, it was not a bad pass. It was not like, you know, we never called him again. We did explain. He did raise his, whatever it was, pre-seed round. And yeah, we kept the relationship so we could invest later.

31:25I think we've covered a lot and talked a lot about founder relationship, trust, and kind of longevity and kind of the length of relationships you need to hold in this industry. And maybe one of the best examples is you sitting on the board of your iPath for way longer than usually seed investors do. So why do you think that happened? Or do you know why you were chosen? Because I guess you were chosen to be there for that long. Well, but the thing is, I don't think I've been chosen. When we did the seed round at the very beginning, we just put a certain corporate governance structure. and I guess the true answer to a question, why was I on the board for so long is nobody kicked me out or they forgot to kick me out or something.

32:24I just, we did not sell our shares and as long as we had a certain number of shares, I was allowed to stay And like, boy, did I want to stay like I learned so much on that board. Although, you know, in the like post series B or series C, I don't think I said a word in in those board meetings. I just listened because it was all new for me. So it was great learning for me beyond, you know, Series C. I believe I was close to a zero value, but I was just trying to learn as much as possible. And I tried staying close to the company and to the founders. I tried sort of discussing because similarly to me, the founders, you know, were learning as well.

33:32So I feel like those discussions were interesting, hopefully for both sides. But what were the learnings? I mean, I was in the boardroom when they were discussing how to build and scale teams beyond 3 ,000 employees, something I had never heard. I mean, I've never seen before, right? I saw, you know, strategizing discussions around like go to market motions and and sort of the modifications or changes on the way. I pretty much saw the company from zero ARR all the way until... So I left the board shortly before the IPO in order not to be an insider after the IPO. So the company was probably around, what, 600, 700 million ARR.

34:35And that's what I've seen. It was amazing. In the later stages, the board was actually joined by very experienced, seasoned founders and executives. So I was having a blast. I always just took my popcorn and I sat in the front row and I was just listening. Do you think that there was a certain value in this continuity, at least for the founders, to have someone listening in and there who's been there from the beginning besides them? Because obviously you have great people with great experience, but there's a certain collective memory in having at least one person in the room who's been there for a while.

35:21So I believe so. So, I mean, there's no doubt there had been value for me. Like it was definitely valuable for me. If it was valuable for Daniel, you would have to check with him. I hope so. There were definitely discussions between him and I one-on-one, which reflected some of what had been discussed in the boardroom or during the sort of later round Series C and D and E. And I was always telling him what I thought, but I was always telling him, like, I've never seen this before, but this is what I think, right? If it brought any value, I really don't know. Yeah, I certainly enjoyed the discussions.

36:17You know, at some point, young pups get given a little bit of responsibility after investment and go and sit on board seats. what's your advice to analysts associates or even principals as they get those sort of first positions? Again I generally don't like giving advice but my view is that I believe people especially when they start serving on boards or even like observing on boards I would definitely try to listen more, more listening than talking and not trying to talk at any time. Like I feel like sometimes I feel like people in the boardrooms are sort of pressured to always say something when somebody else says something, but not necessarily it adds much value.

37:22I'm a sucker for value. If you don't, if what you're trying to say does not have much value, then don't say it or think about it some more. So that would be one thought. personally i am not a very prescriptive investor or board member i hardly ever tell founders what they should do i am happy to share with them my opinion on what should be done but then again going back to the early days of UiPath, you know, a couple of times I told Daniel during the early board meetings or outside board meetings that I believe he should not do what he wanted to do. And he still went ahead and he was damn right.

38:21But that's probably also the reason for me not being as prescriptive. It should be the founders to make the call and the best founders make the right call. Or at least don't make a wrong call because, you know, what's right, what's wrong, you know, what should have been. But it's their company, right? It's their company, it's their vision, it's their way. So I always share opinions openly and honestly, but I'm hardly ever directing them to something. So if that's an advice, I don't think it's an advice because people are different. And I've seen very prescriptive board members who were super experienced in the space.

39:17and their prescriptions or directions were correct. And I very much appreciate that. And it can help, again, you know, it can help the founders to sort of shortcut, to bypass some of the mistakes. So that's fine. But I'm not that kind of a board member. So maybe an advice might be, you know, find your way. you know who do you think you are as a board member or observer i guess coming from an executive search background kind of my thinking it goes into know what your skills are and use the one that are actually useful because it's always you qualify the person who's giving you advice is this person the person i should be listening to and this is kind of the question you should probably as a board member then ask yourself you know if it's about follow-on investments if it's about a certain investor that you know, probably you're fairly safe to give advice and talk versus if there are topics about go-to-market strategies or which country we should open next.