E304 | EUVC | Carina Namih and Sten Tamkivi from Plural on getting Europe from “Old School VC” to Next Gen VC

29:21Typically, if you look at GP commits, it's actually quite amusing that people who have been in the business for 20 years in their next fund, they still take 1%, 2 % of GP commits. So we have way more skin in the game already on the fund level. But what Karina is referring to is that on top of that, like every time I want to bring a deal to Plural, I have to show that I'm willing to put my own family's money at the same terms in the same round. And only then I can pull other people's money from the fund. And if you think about it, it's like very logical. And we created some mechanism because you're right.

29:53It's like there is a low correlation between how great of an operator, how good of a plural partner somebody is versus the sizes of their exits. Like some people have had better success and larger liquidity than others. So we designed in the system that it has to be meaningful for that partner. It needs to be a certain percent of the liquid net worth. But it is meaningful. And it really changes sort of how you look at this and how you talk to the founder and how the founder actually, our founders are pretty surprised when they get the term sheet and they understand that some of that money is personal.

30:26And that's how serious that clear lead is about that mission. I think this financial and sort of whose money goes where, that shows up in other places as well. One thing that we realized, it's kind of like a silly small thing, but we realized that all of us hated when we were founders and you get the term sheet from an investor for a few million or 10 million or whatever, and somebody has made it worthwhile to put the bullet point in there saying that you will pay 50K of that back for the legal fees. Like, I'll wire your money and you pay 50K or 25K back. And we just felt it's a little bit offensive.

30:59So we decided not to do that. It's like a small thing in the bigger picture of things, but founders really notice. It's that, okay, you actually pay your own legal bills. And that surprisingly has been one of the anecdotes that we hear that when our founders do reference calls for the new ones, that's the thing that they mention. So sometimes the financial things are also very symbolic and show sort of the power play. Of course, you can if you're just on the power position of a VC, but should you do all these moves that you do? I think it's really interesting that Mollus, on the one hand, it interests him in the game, as you were saying just now.

31:35But I guess it also makes you as a team individually, as partners, also think very carefully about, like I'm leading this deal because it fits into a portfolio of deals. I'm leading because my own personal money is going places. And, you know, it doesn't matter how much I have. I'm sensitive about where my money's going, period. Right. But does it, does it, and here I'm ill-informed. So inform me first. Do you have a follow-on strategy and how does this play into that, if at all? Yeah, maybe it's interesting to talk through how we sort of make decisions as a group. So first of all, on the follow on strategy, we have a very sort of deliberate approach where we reserve half of the fund.

32:15Roughly, there's some flexibility in that. When we played out scenarios and we understand we have, you know, the different buckets and the types of checks we write, whether it's, you know, doing more than our pro rata, how many rounds we want to go into post pro rata, you know, on top of pro rata, where we just want to do pro rata and where we know that we're not going to be. writing any more money into the company. And this is something that, you know, we re-underwrite the portfolio frequently. We have a regular cadence of portfolio reviews and we talk through and think about how the companies are going and where we need to place future capital to really bring out the best in the companies.

32:56So in terms of how we make decisions, it's something that we're all very, we've designed very deliberately. So writing the first check into a company is at the sole discretion of the partner who decides to lead that investment. So this is really carefully designed to do away with a lot of the fuzzy thinking and some of the politics that you get in ICs where it's kind of a sales process. You go in there, you're convincing everyone to do this deal. Or there's some politics that, you know, if you let me do this one, I'll let you do your next one. If you're going in and you know that this decision is on me and I want to get to the best possible decision because I have to live with this for many, many years.

33:43And I'm using this group of people who I really, you know, I deeply respect, who have tons of experience and I want to get to the right answer. So I go into that, I see really, really wanting to get, you know, wanting them to kick the tires as hard as possible and help me get to the right answer. And we've seen our ICs go in all sorts of directions. We've had sessions where someone comes in excited about a deal. We have a really robust debate. They go away and think about it and they say, actually, I just, I'm really seeing something here. You guys, I'm going to do it. We've also had it go the other way.

34:18You know what? Actually, this point and that point, I've thought about it more. I'm not going to do it. Or we've had scenarios where someone comes in, they think there's something, they're not sure, they're kind of excited. And through the conversation, we get them to take more risk, see a bigger picture, get more excited. And I think this range of outcomes where we're really pushing each other's thinking is a sign of a super healthy IC and very unusual, unlike anything I've seen. And I think a big part of it is this individual responsibility. It just sharpens your conviction and does away with a lot of the politics around the table.

34:57And that's a little counterintuitive. You know, people might think it's, oh, then, you know, you're all these kind of lone wolves. Not at all. We're really trying to help each other make the best decision. But I think having diffuse responsibility often leads to fuzzy thinking. And then just to follow on to your question, follow on strategy, we sort of flip it on its head. So, you know, when we're spending so much time with these companies, we recognize it's easy to go native, you fall in love with the founder with what they're doing. So we make sure that follow on checks are decided where the lead investors recused from that decision.

35:31You know, of course, they prepare the IC. There's tons of material. Everyone's really up to speed on the business. But they're not voting on their own company. It's up to everyone else to decide if we write that following check. And that's a really healthy immune system to have when you've got such a deep operational model. And that's the funny thing about these, how do you do VC conversations, right? Because there's arguments. Everything can be argued for and against, right? And I think that's why anyone who has looked a bit under the hood across different firms would say there's many different ways to do VC and they can all work.

36:09And here you guys are describing a model that works for you. That's why I don't counter what you say with, well, you could also look at it from this perspective, right? Because, yes, you can look at it from the opposite perspective and say, well, if you don't have the person working closely with the company, preempting rounds happening and putting that knowledge to work and instead making that person try and inform the rest of the partnership about something that's still fuzzy or whatever, you're actually making waste of your best resource. But there's just no reason to argue for or against, right?

36:50Because what works for whom? On that point, I think to be really clear, it is totally the role of the lead investor in the company to do all of that. So we preempted rounds. We're totally making use of how deep we are with the company. It's just that when it comes to the vote, it's clear that it has to be the other partners who are seeing what you're seeing. but it's on you to get them educated, get them up to speed and make sure that you're not missing these kind of insights. But your wider point, I totally agree with. There are many ways to do venture well and there are many different models and you see it in the results.

37:27There are lots of different paths and sometimes you do everything right and you also don't get lucky and that's the nature of the job. But I think the magic happens when you have a group of people with a set of skills who are all excited about this way of working together and have that chemistry and have that healthy culture. Steen, I'd love to come back to you because when I said, I saw some nodding and smiling from your side when I said, you're putting a bit of a critique on the rest of the ecosystem with the tagline that you have around only 8 % of European VCs being founders and the fact that that all the financial guys are probably maybe a bit, I think I noted down some words here, short-term, greedy, self-serving, and flaky.

38:17So I'd love to hear your take on it. What is it that you're seeing? It's not my thoughts, but it's what I hear from the founders that I talk to. The most recent company that I invested in, which hasn't been announced yet, I actually had a conversation with a founder that is an amazing repeat entrepreneur and has a lot of experience with external investors and exits and all of this stuff. And when I talk about, in our first meetings, when I talked about, okay, this is what we do at Plural, this is how we operate, he says, yeah, yeah, yeah, all the VCs have the same story, but my hope is only that they are not net negative to my business.

38:53And if that's the bar, if that's the bar that the industry has created in Europe, it's kind of irrelevant which of the exact mistakes were made. The system is in the wrong place. And so that's, maybe we are naive, maybe we're idealistic, but we feel that we have these decades as an entrepreneur on the other side of the table, that we have some sort of firsthand experience and recollections that countering things like what do our standard documents say? What is the negotiation process? What are the things that we push on? What do we say in the board meetings that we maybe have a little bit more of a tilt towards?

39:27Like, what would I have wanted to hear as a founder that some other investors in the ecosystem don't? And that's kind of like it's a lot of values and culture shift rather than purely mechanics and process and tactics. I would agree. And I would also say that now we talk about it as being a European problem. I think in all honesty, venture has the problem that we have very varying returns from firm to firm. And if performance varies that much, it would be surprising if the founder experience wouldn't also vary quite considerably. So, in that sense, obviously, we have an issue, right? And I think there's many thoughts about why is it we are where we are in the ecosystem.

40:16And maybe let's not dive into those now, but I definitely think that one part is on the LP sophistication side. So I think that's a big task for all of us there in terms of making sure that we level up the accessibility of venture and the understanding of what venture really is with many of the LPs. Now let's get into our shout out section.

40:47This is the section where we ask you to give a shout out to someone who you love in the ecosystem. And Steyn, I'll ask you to go first. Yes, I would like to give a shout out to Seedcamp. I think the history or the big picture of European ecosystems development has been like one of the metrics I've been thinking about over the last decade plus. It's like, how far do you have to travel for how large of a check? And so every ecosystem becomes healthy when you have the first exit and people from that company come and they become local angels. And then all of a sudden you realize that you're in this second tier town somewhere in Europe, but you don't have to travel for a half a million pre-seed round.

41:27And that sort of boosts things. And I think the early years of Seedcamp, like back when they started, like 2007, I think was the first Seedcamp week that I was lucky to join while I was still at Skype. like they've been always the guys to bother to get out of London to understand that Europe is diverse you have to be in places you have to be local you have to develop networks you have to give back to community and and it's been just lovely to see how that in the like 10 plus 15 years now that has paid back in in consistently highly performing funds and and like a community which is full of fans, like people who take SeedCamp's money as an entrepreneur and 10 years later, they become LPs and give back to the community.

42:11And that is truly an example where an investor is so much more than a fund, but it's a movement and the community. We can only echo everything you said. Karina, you. Yeah, I wanted to shout out an angel who I've seen in a number of different scenarios and have invested with called Shrin Madhapali. he built a business called a Commable that he sold to Airbnb and he's just one of those angels who's sort of quietly on the scene working with some really great founders has great taste and first and foremost is a a really humble guy that gives fantastic advice to his to his teams I've seen him be really pragmatic in difficult situations.

43:01I've seen him have that balance of sort of pushing them, but also having real empathy. And he's also, you know, he's constantly building and experimenting. He's been playing with LLMs from sort of before they were cool. He just, he's sort of the real deal and he keeps his head down and just does great, great work as founders.

43:24I would love for us, just before we go into the quickfire round, to touch a bit on how you're building Plural. We've touched on it quite a bit. We've talked over decision making. We've talked over skin in the game and your approach of making sure that you as partners co-invest in the deals that you lead. And with that, of course, comes carry elements that are different from normal, I'm sure. But I'd love to dive a bit deeper into your platform approach. And I think I want to just pull on you, Stain, because you having spent time as an EIR at A16C can only make me think that there are some learnings there that you've drawn on.

44:09I am very highly appreciative of A16Z and Ben Horowitz at the time was the person who invited me to join them as an EIR because that gave me like a behind the scenes look of a, like basically the birth of one of the top US venture firms. I was there a decade ago. So it was still like eight GPs and joining those meetings and see how and what they think about the startups and why. And what are the things that they discuss, both how do the pitch meetings run, but also what do the partners say behind closed doors later. I learned a lot. It was interesting. I had another Silicon Valley VC at the time who framed it for me at the time that I love being a VC, but at every launch party, you're still the guest.

44:57And that sort of framing stuck with me. So that framing plus what I saw at A16Z made me very convinced that I don't have it in me to become the guest yet. And I wanted to build another company. And I did that for the next six or seven years. So that now entering plural, I feel that because of that sort of entrepreneurial background and EIR backgrounds, I actually came into this plural group with a very balanced view of what I think this industry is, what it should be, and what I hope my fulfilling role is sort of to spend my next decade on. And so this sort of a rounded, more balanced view. And also for like, we talk a lot about what's lacking in Europe today.

45:46I talk about that pretty confidently because I've spent 10 % of my life in Silicon Valley. And so has Carina. And all of us have raised money from US VCs before. And so you need to go around the block and see this life from both sides a little bit in order to know what you actually like and what you believe that holds true. So we're not modeling plural in any way against any other firm. We're designing our own path and going after the first principles wherever we can. As I think Karina mentioned earlier as well, the US has a way longer culture and the early A16Z similarly. When they had eight partners, all of them were former CEOs.

46:24And so there are similarities like that. There are parts of the model that we share some beliefs in. Karina, you spoke about it before in terms of offloading time or offloading tasks. So you could make sure that you give that GP time to the founders. David asked the question earlier, how do you guys think about scaling? And I'm pretty sure that the platform team plays into this. So I'd love to ask you to chart a bit out, how's your platform team built? What are the functions that you found super important there? Why? And all these deliberations that you have around the platform team? So the first and foremost principle for us is we bring in really experienced folks on the platform side who we know we can trust and rely on to run their they're part of the picture.

47:14So we've got a fantastic team across legal, finance, marketing, operations, product. And these are people who we can totally rely on to have great judgment, to have seen a number of situations, to have a ton of experience and to get us through that. We also have a really experienced head of IR who's been enormously helpful navigating a big and complex fundraise. And we make sure that they also have the resources and the people that they need to get their job done. We've learned from our experience building companies that it pays to get those really experienced leaders into the business early. Besides the staffing and having the right people in the seats, again, that's where our operator backgrounds kick in a little bit is that we always talk about systems and software and what should we build, what should we integrate, all of that.

48:13We're not going crazy with it, but there's always like humming in the back of the mind is that there is there something mundane that we could take off even the plates of the platform team in order to go even faster and focus much more time and attention to the founders. Probably more of those effects today are on the LP side, but keeping an eye out for innovating where we can. I have one question, and this is a feisty one. It always is. We spoke about incentives just before, and now you said, we really try to build a very senior platform team. Oftentimes you see maybe a bit more junior people on the platform teams, And thus, you can use the junior or the seniority argument to say, well, there's not that much care to come for.

49:01But the more senior, the more you kind of want to make sure that you give them what they're worth. So I'd love to ask you, how have you built the incentives for the platform team? How do you think about that? And how do you see that impacting everything? So we have a number of things. We don't talk about every detail of how we structure our carry, but sharing some principles. Like it's, we have a carry system, again, went to first principles thinking, what do we want to motivate? And on the investing side, we do have a mixed carry between your individual performance and the fund performance. So there's a little bit of a, like you don't want a place where rock stars want to perform well and reap the benefits if they find the company that returns the fund.

49:46But at the same time, there is a component that very clearly aligns everybody to help each other and each other's companies as well. and also everybody on the platform team has carry and that we feel is very important for incentive alignment so that again everybody is fighting for the success of the companies as this is the main output metric. One thing I wanted to add about the seniority of the team is that I think many venture funds in Europe, especially but around the world, look very much like a boutique law firm or an ad agency. You're a junior person, enter from the ground floor, you move some papers around and do the jobs that nobody else wants to do.

50:28And then you hope that you get promoted to the next level. And one day you will become GP. And plural is different in that sense that if you've never founded a company before, if you've never been a CEO, you would never become a GP. So we don't have that career path. And so I think that also clarifies sort of the role definitions, but also the commitment for the people that if somebody comes to lead our finance or somebody comes to work with us on comms and marketing, they know that that's their job and they have to sort of come to a conclusion that that is their life's calling and to change the European GDP in that role.

51:01It's not like a jumping block to the next sort of level. And should we have some more junior people join in some roles in the future, like our very clear and transparent ask for them is that, okay, do spend these years with us doing what you do, go out, found a company, come back when you've been a founder and we're happy to discuss if you want to become an investor. But there is less of this sort of elbowing towards the narrower and narrower top, plural. And that, I think, changes a little bit of the culture and dynamics of how different roles and different jobs are valued in the overall picture.

51:33I think there's just something very interesting about having such a clear... So to me, having only former founders and executives be able to become GPs and become investors is, well, it makes sense from an LP positioning perspective, makes sense from a marketing perspective, but there's great people out there that come from a different path that become great investors. And I get why you would, you know, would communicate what you do, right? Because you want to have that as your positioning, But fuck, it would suck if you had a great person building a way in there in the platform team and just, you know, is getting in there with the founders and helping out, you know, and then that person builds the knack for also wanting to invest.

52:26And then you're there, well, we can't do that. Are you so hell bent on the model that that will never happen? Or, you know, between the four of us, what would happen? or what if you run into someone who, well, the dude comes from McKinsey, but he's a pretty cool guy anyway. I think it's important when you're defining yourself and defining what you are and who you are as a group is to also be clear that about what you're not, you know, and I think that's fine. Like this person sounds awesome and we would do everything in our power to get them a fantastic role as an investor in a fund where that's the model.

53:07I just, I think part of having real conviction is also saying no sometimes to things that might be great. I love that as a way to wrap up, having conviction is being able to say no to great stuff sometimes. It's time for the quickfire round where I will ask you three quick answer questions. And now, the quickfire.

53:38Karina, let's start with you. What advice would you give your 10-year younger self? So, yeah, I would say to myself, you know, it feels really tough seeing some of your peers building, you know, quick wins in, you know, e-commerce and apps and easy software stuff back in the day. it's tough seeing them getting those quick wins while you're slogging away on the sort of crazy sci-fi biotech vision but it was it's worth it so keep at it and then the other thing I'd say to myself is always stick to the highest possible standards of the people you work with you know don't make excuses for people working with A players is always worth it and sticking up putting up with a toxic culture is never worth it and just you know don't stand it for a minute longer than you have to steen same question for you advice to your 10 year younger self my first point would be that yes the early stage investing is about founders and the humans building it but but like spend some time more thinking about what their mission actually is.

54:50So kind of adjacent to Karina is that if the most talented people you are able to find are making e-commerce a little bit better, was it actually worth their time and your time and leaving the enough dent of the universe? And secondly, I think there is the edgier you are, the more frontier you are in tech, sometimes the sort of small technical hassles are worth overcoming. If you have a dinner planned on the Ethereum ICO night and you are struggling with getting the wallet done in time, maybe don't go to that dinner.

55:26Steele, let's follow up with you. What are your top tips for emerging VCs across Europe who are now fundraising? In this day and age where money has value again or has like real price to raise money. So I think if you're raising today, you have to be super differentiated and you need to be blatantly, unfairly, near illegally advantaged about something. Like it's this sort of era that, hey, I just was thinking I would become a generalist and do all kinds of deals like that. That story would probably not get your fun one. And so I would think, what's your secret? What do you know? Who do you know?

56:02What can you help with? Why would companies come to you and be able to really articulate that for yourself, first and foremost, but also your LPs and your founders? and I think this first-time generalism is a very hard game. Karina, same question. Tips for emerging VCs across Europe? A lot of emerging managers don't think carefully enough about the interplay of their positioning, their strategy, their fund size and the types of LPs that they're going to be speaking to and their incentives and the size of checks that they want to write. And so really being logical and building a fund model and analyzing where you're going to fit into the picture and if all of those pieces hang together into a coherent plan.

56:48I'd really encourage emerging managers to take that side of things seriously. And then secondly, it really takes time to build these LP relationships. They're committing to you for a long period of time and they really want to know who they're partnering with and they all talk to each other. So your reputation is absolutely critical. and in that sense having done great work with founders in the past is really going to be in your favor. Karina final question for you what's the most counterintuitive thing you've learned in venture? Yeah I used to wonder if I was extroverted enough for this gig you know people are out there they're on stages they're shaking hands it's it's a very extroverted job but actually over the years I've learned that you don't have to go to every event and, you know, shake everyone's hand.

57:40And sometimes actually keeping your own counsel can be a superpower because there's less noise and you see things that other people are not talking about. And so I guess it kind of comes back to your, you know, advice I'd give to my younger self. It's okay to take a bit of a different path from the crowd. And sometimes it means you pick up on really interesting things that others are not seeing in same question counterintuitive learning two things came to mind uh one is that ownership matters more than price um when you're an angel and your ownership percentage is a zero point something something and and what matters is that did you pay ten thousand or twenty thousand and what was the valuation and all that like if you actually do the math and and understand that how much it matters that if you hit that one company that really makes a difference to the world.

58:29Like there would be a huge difference if you own five or 15 % of that to the overall math of a fund or whatnot. And the other thing which took me years as a young founder was that actually this fixed round letters are a bit of a charade. It's like an externally imposed structure that has very little to do with how the world actually works. Like The best founders just make sure that they have the capital they need to fulfill their mission and their plans. And it doesn't matter what the letter is or how gradually they raise it or some notes here, some extension there. Like there's like constant fundraising and constant capital planning happening with the best companies.

59:09So nobody's really moving by, okay, in 18 months, we'll start the conversation for the next letter. So don't waste too many cycles of worrying about that.

59:24Now, before we wrap everything up today, I want to just ask both of you to share with us an uncommon belief that you hold, but most people around you do not agree with. I have a different framing for European technology scene. Many people, when they hear about Europe needing to have more tech companies, think about isolationism, nationalism, closing up, like not using American products and Chinese products and very inward facing sort of things. I think of it in the completely opposite direction. I think the world needs European techno-humanism. It's like in this other world where you have very market and large company-driven US public market-driven technology and very centralized authoritarian Chinese way of building technology under the rule of communist party.

1:00:11I think there is this gap in there, which is about what is a citizen-owned, citizen privacy-accepting, distributed way of building technology that helps humans, that is not necessary for just humans, not just Europeans, but everybody on the planet. And I think that is the massive opening for Europe is that we're building European values based tech. Very, very interesting. I just received a WhatsApp from David saying this would make great long form content, by the way. That's a very interesting thesis, Steyn, and I think something that would be interesting to dive deeper on on another day. Karina, do you want to go on this one?

1:00:50We think about that plural a lot, so very happy to do. Yeah, that would be cool. It's a sort of plural view that we hold very closely that we've talked about a lot. So it's a core value for us. Thank you everyone for tuning in. Thank you Steyn and Karina for joining us today on The Pod. If all of you out there enjoyed this episode, please do drop us a review, follow the part and subscribe at EU.BC. Here's a few words from our beloved sponsor. Welcome to a special episode of our podcast, proudly brought to you by Zero 100 Conferences. Join us for a unique networking opportunity like no other at the Zero 100 Conference CEE.

1:01:28This exciting event is set to unfold in the historic city of Prague from May 14th to May 16th at the luxurious Hotel NH Collection Prague, Carlo IV. Connect with leading names in private equity and venture capital, including Schroder's Capital, EIC Fund, EIF, EBRD, PFR Ventures, Early Bird, 500 Global and World Fund, amongst many others. Whether you're a limited partner or general partner, this conference is the perfect platform to forge valuable relationships and explore new frontiers in investment. Don't miss out on this premier gathering of industry leaders in Europe. mark your calendars for May 14th to May 16th and experience the power of connection at the 0100 Conference SEE in Prague it's more than a conference it's where the future of finance takes shape save the date and join us in Prague to learn more and register visit our website linked in the episode description see you there this was their final tear down this wall it's more than just an alliance This is a union of values.

1:02:37United and determined we can serve as a model for other regions of the world. The nature of a problem requires a European response. Europe is a story of new beginnings. New beginnings. Let's start acting.