E524 | Carlos Trenchs, Masia: Spain’s Emerging Fund Manager Wave & The Return of the Founder-Backer

0:00While London and Berlin grab headlines, something unexpected is happening in Barcelona. Barcelona is a talent magnet in this moment. I think this is a city where international talent decides to live. But here's the shocking reality investors are missing. Less than 1 % of them were located in Barcelona or let's say Spanish ecosystem. The timing couldn't be more perfect. The entire startup landscape is shifting. Innovation is moving from the traditional internet and software to the deep tech. Barcelona is a well-known space for top research institutions, especially in life sciences and AI. And now geopolitical forces are reshaping where the world's best talent chooses to build.

0:45I think that we are seeing a very, very interesting moment coming in Europe. So I'm very bullish and positive. This US-EU battle is a big opportunity for Europe to attract. So how do you tap into this hidden goldmine of opportunity? With Barcelona, scout locally and connect with the pan-European specialized funds. Don't miss Europe's next deep tech capital while it's still under the radar. If you join to Barcelona, please speak to me. How is a city known for beaches and gaudy quietly becoming Europe's deep tech powerhouse? Join us as we sit down with Masia VC to uncover why the smartest founders are betting their futures on Barcelona and how you can get in before the secret's out.

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3:13Tear down this wall. It's more than just an ally. This is a union of values. Let's start acting. This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Welcome back, everyone, to another episode of the UBC Podcast. As you know, we try and connect and champion the European ecosystem. And we're definitely doing the same thing today because we were talking to Carlos Trenches from Masia, or as you also might know him from Aldea. And we're going to dive into how this intersection work between Masia and Aldea actually works. And then, of course, we're going to dive very deep into Barcelona as it's becoming a much more, much stronger startup hub, both for deep tech and, of course, also other spaces.

4:04Carlos, welcome to the podcast. Thank you, Andreas. And thank you for inviting me. Let's start with the genesis of Masia. You're catalyzing the Barcelona startup scene. Tell me everything about why you think that Barcelona is the right place to be right now backing founders. First of all, a disclosure. I'm a proud Barcelonian-born and raised individual, so very proud about the city. But I would say that I've been involved with the innovation ecosystem and the investment side for 20 years. So I was lucky to become an investor with the largest financial institution in 2004. and start investing in this ecosystem when no other private capital was there.

4:49Today, 20 years after, the Barcelona ecosystem is transformed. And I think that this is the main reality. And I would say that three things makes Barcelona in this moment a very attractive city. So on one side is, as I mentioned before, the ecosystem has been maturing very, very fast. And it means that in this moment, we have around 80 to 100 individuals that were first time entrepreneurs that raised money, built well known companies, sold these companies. And these people are restarting again and rebacking the new generation of founders. So people like Oscar Pierre, the founder of Global, people like the founders of Prevalia doing other things.

5:37So I think these individuals are building new generation of companies with a global mindset, with a larger experience. This is one thing. The second thing is, parallel to that, in this moment, the innovation is moving from the traditional internet and software to the deep tech. And in this case, Barcelona is a well-known space for top research institutions, especially in life sciences and some deep tech things like AI. In Barcelona, for instance, there is the Barcelona Supercomputing Center that is one of the largest facilities for AI in this moment in South Europe. I think that these technologies today are ready to the market.

6:20And in this moment, there are a lot of experienced entrepreneurs partnering with these institutions trying to build things. And I think this is the second very interesting thing happening here in Barcelona. But the third one that for me is really, really interesting is that Barcelona is a talent magnet in this moment. And I think this is a city where international talent decides to live. And in this moment, it's attracting two different kinds of talent. On one side, young individuals eager to join startups. I would say 25 to 35 individuals joining scale-ups. But complementary to this, especially the last 18 months, what we've seen is a big amount of second-time, third-time founders that decide to relocate to the city and build totally or partially the new companies from the city.

7:12So I think that this sum of three factors, so a mature ecosystem with individuals with experience, plus the deep tech momentum in this moment, plus the international talent landing in the city is doing a movement around the city, building very interesting things. And for us, and this is mainly the reason why Masia makes sense, we're trying to be a glue about these things, try to merge and not working in silos, these different things, but try to collaborate and do things together. And I think this is the perfect exact way to also talk about then not making Eldea and Masia a silo, but actually making the two live well together.

7:55Could you talk a bit about the, if we start from the ground up where everyone, a lot in the ecosystem will know you from your journey with Aldea. So let's start there. What were the learnings inside Aldea that made you decide to take Masia out and make it its own fund? I co-founded Aldea in 2020 with my partners, Gonzalo and Alfonso, with a vision. And the vision was especially pre-seed and seed ecosystem in Europe was evolving. and there was a new generation of funds emerging in this market. Funds that were, in one sense, specialized, tried to back the best fund in certain verticals and technologies.

8:36If you are very specialized, you typically have a broader scope. So you are not focused on a certain geography. You are trying to have a European approach. And at the third time, these people have most of the time a background as a previous investor or operator that can help a lot, the new generation of founders. So when we launched Aldea, we saw that these new fans were emerging managers. And as emerging managers, they have a difficult time sometimes fundraising because they have a lack of track record, small fans and other things. So what we decided is try to build an institutional layer that is backing the boot fund managers or second-time fund managers building the new generation of GPs.

9:27So with our first fund in Aldera, we were lucky to back 23 GPs around the ecosystem. And one year and a half ago, we decided to start the second generation. One thing that we saw in that moment is that this is the right way to have a total exposure about pre-seed and seed market. So 2020, we didn't know if the AI was the next wave or it was blockchain or it was energy or it was robotics. So for us, it made all the sense to try to find who were the individuals that have a vision to build a portfolio of companies in those verticals and try to pack them. So thanks to Aldea, we built, I would say, deep relations with these individuals.

10:17So we are LPs, but also we have been helping some others to find other investors and to do this. So this gave us, I would say, a deep understanding about Europe as a pan-European space where collaboration makes all the sense. And if you look at these micro-researches, what you realize is that most of the investments are made in those ecosystems that are more mature, that are most of the time where these individuals are located. So the triangle between London, Oxford, Cambridge, Paris, Berlin, Munich, a little bit of the north. So if you look at the indirect portfolio of these 23 GPs, 1 ,000 year, 1 ,000 companies, what you realize is that less than 1 % of them were located in Barcelona or let's say Spanish ecosystem.

11:17And when we ask them, no, so why, why you are not backing these, these, these companies, no, there were two, two main reasons. Now the first one said, look, we are in a small team. Sometimes solo GPs, other times two or three individuals. So our focus on our network are in those ecosystems where there is a critical mass. And beyond these ecosystems, we arrive to deals thanks to, I would say, strong connections with other local co-investors that we trust and we can co-invest. So they can signal these deals and we try to collaborate. So this is the thing that ignites the idea of Masia. As we have our deep roots in the Barcelona ecosystem, and we know a lot about what is happening here, we thought, okay, let's think about if we can scout what is happening at pre-seed level in the city and try to connect with the best pre-seed investors in Europe.

12:18And if these pre-seed investors that have a pan-European approach decide to invest, we can co-invest with them. So it's doing, I will say, this. call. And we started doing this eight months ago. We built a small warehouse, tried to validate if this thesis is working. And once we were doing this and we did the first deal and the second deal, one thing happened in the contrary sense. That was that this micro-BCs called me and said, look, Carlos, I'm planning to invest in a London-based company, but there is one of the founders that is Barcelona based or is thinking to move to Barcelona, can you help him to better connect with the local ecosystem, with some institution, with hiring some individuals?

13:08And for me, it was quite obvious to say, okay, yes, but I can co-invest also with you. So I can participate on this. So I think this is the main idea behind Masia. Try to build small funds that co-invest with the European pre-seed and seed ecosystem with an angle to Barcelona in two directions. Scout locally and connect with the pan-European specialized funds or help to land in the city to those founders or to those companies that are planning to build partially the new company from the city. What drives, just to fully understand that, what drives the motivation of a founder to move to Barcelona when it's only one of the founding team?

14:01talking to them I think that there are three main things for me that are very relevant the first is obviously quality of life and I think that Barcelona is an ecosystem that is very easy to live for especially second time, third time founders it's a city with the ideal size airport it's 20 minutes driving from the city centre, very easy to join, good weather, good food good prices, so I think that there is many things about living if you are planning to build a family is a fantastic place to do. This is one thing. For me, the second thing is the brand of Barcelona attracting talent. So let me put you an example.

14:41There is one of the founders that we support is Pedro Coelho. He's the founder of Biorz. Biorz is an AI company for life science and for pharma and discovery. He is a serial entrepreneur. He previously had a CRO. He sold the company. He's a Portuguese base. So he decided to move to Barcelona and create the company here in Barcelona. Two main reasons. One, Barcelona has two of the largest hospitals with top research institutions. So it was a clear sense that the product connect with that. But on the other thing, he wanted to build the best team possible in Europe doing this. And he was hiring people from everywhere in the world and attracting these people to them.

15:27He told me, look, I'm based in Norskian. I don't know if you have been in the Norsk space in Barcelona, just in front of the sea. So for me, I need to attract somebody from London, from Berlin, no, from the Nordics, from Singapore, no, to come to the company. Moving to Barcelona, no, to work in this company is something that is easy, no, if you need to. And the third point are obviously costs. If you think about hiring an engineer here, here there are excellent engineers, no? And still the cost is, for instance, half of the cost in London and probably one third of the cost of the U.S. You do have this origin out of Aldea.

16:11So there might be some people that will remember that Aldea used to do both LP tickets, but also do co-invests. And what you've then done with Macias, you've kind of spun it out and put it into its own vehicle. Could you just reflect a bit for those that care about the structuring of firms? Why have you chosen this model? Is it an internal thing? Is it an LP interest thing? Because I can't imagine that there are some that just, they want the fund-to-fund exposure and the exposure to the ecosystem. And then there are some that say, I'm very much here because I want to support the Spanish ecosystem.

16:49Totally. So I think that you are in the right way, no? In direction. So I think that is one thing that for me is very clear. I think venture capital is a collaborative space. And I think that, especially my background, I've been a direct VC investor for many years. So investing in first-time funds, it was quite obvious, because for me, they are entrepreneurs, in this case, raising their first fund. So trying to collaborate and trying to co-invest, it was something that was quite obvious for my side. Our first fund, we tried to build what is called an hybrid fund. So try to raise money and try to allocate half of the money in the fund side, in the fund side, half of the money in the direct investment side.

17:31And these have two challenges. The first challenge is if you're trying to fund raise from institutionals, they need to compare with some pockets. So they have pockets for fund fund practice and they have pockets for direct investment practice. If you are in the eBrit space, it's a very difficult conversation, because you never know how to compare, how to do this. And for, I would say, large institutions, this is a big problem. So coming from these big institutions, they clearly recommend, okay, why you are not doing the two different. The other was our first idea about co-investments was more on the, I would say, growth stage.

18:14Try to back a small VCs, try to follow them, and when they have winners in their portfolio, try to participate when these companies raise Series A. And here two things happen. The first one is it's not 100 % clear that you are the risking investment, sometimes investing at Series A. Some companies start other kinds of risks. And I think you are building a product that have, I will say, a very clear risk profile with the fan of fan practice. So introducing direct investment is introducing a higher risk. Second is a question of timing. So the companies that you are backing, you are arriving from the fan-of-fan practice have no time to mature, to become, so you say, in the same vintage that you are having.

19:06So when we think about, okay, second generation of fans, we clearly saw, okay, Aldea needs to be a fan-of-fans. This is something that we did really well. I think that the group of VCs that Aldea backed is amazing. And I think that we are very, very, I would say, proud of a partner with them. And when we thought about, okay, try to think on the co-investment, we clearly saw this angle, not co-invest on the growth, but co-invest where we can add value. And where we can add value is try to be the partner in South Europe, and the partner to help them to invest in an ecosystem that is undervalued, But that will be important.

19:51And this is the role. And finally, for Masia itself. Masia is backed mainly by serial entrepreneurs, successful operators, some GPs. So the idea for Masia is having a collaborative approach. If we want to act as a prestige space in Barcelona and we want to help some international founders landing in the city, I think that if we are doing a collective work among the LPs that are in Masia, it's something that is much more valuable. If I were to put you on the spot here and ask you to draw out some of the core learnings for the VCs that are listening and that want to nail collaborating best with their LPs around co-investing, what would you say are the top things to remember?

20:47First of all, it's difficult to invest. I think that one of the, I would say, big learnings is on paper, everything is very clear. So, okay, micro-VCs have a portfolio and some of these companies will raise money, you know, sometimes you are focused only on precedency. These companies are raising CSA, CSA, you have a percentage to allocate. You try to open to your LPs. And this, Carlos, just to add some context, the reason why I, of course, ask is because on the one hand, as a VC, you can maybe argue, well, if the code masks don't end up happening, I'm probably okay. I'll be okay. It's not my law, so to say.

21:29But you took in the LPs because the LPs wanted that. And in the end, the LPs, it's at their discretion whether they want to bag you for the next fund. And if they don't get something fulfilled that they had thought they would, even though, and I think this is perfectly fair, oftentimes it is on the LP that they end up not co-investing. But the question is then, how does a VC try and solve this to get ahead of it? One of the very difficult things is try to not having a common right for all the LPs to co-invest. And I think, and I know that this is difficult to implement, but imagine that you have LPs that have some experience in certain industry or other that have a more financial approach and others that have another approach on certain industries.

22:20So what should make sense is to only introduce this growth opportunity, this co-investment opportunity, to the right LP. That LP that understands the industry, is willing to invest and is able to move fast to do that. The problem is that when you are building a fund and you are signing letters and these kind of things, and there are some people that are asking the same rights and other ones. This is something that is very, very difficult to manage. But at the end, what really happens is only a few, few, few deals receive the kind of co-investment that people take. And one of the big examples is the IEF.

23:07So IEF, if any fund have IEF, most of the time they have the right to co-invest. How many deals IEF did with this co-investment right? And I think these are these kind of challenging things. For this reason, I find much more interesting to co-invest, in this case, with Massey at Presidency, because we are in the same line. So we identify deals or we co-invest deals in the same momentum. We are 100 % aligned because we co-invest with the same valuation, with the same strategy. And also both we can add value, in this case, to the company. So here we see a more aligned things than more of a financial, I would say perspective that you can have investing after.

23:57Can I ask you a question about structuring? Oftentimes you'll see small VCs build a model where they kind of have the pre-seed VC focused on doing, so to say, the batching of risk assets. And then as you do the follow-ons, you offer SPV solutions in different ways to your investors. From an LP angle, what has been your thoughts on that? How often did you see it? When did you see it done well? When did you see some people say, well, you don't get anything on that vehicle because you took the risk, you're already getting the management fee. Maybe you can get a small carry. I've even heard some people not even getting carry.

24:41What's your take on this? It's a very different business to pick companies at Preciseit and help them moving from Preciseit to Seed and maybe to Series A to decide to invest in Series A. And I think this is a, not every GP understands. This is the first point. The second point is, and as I mentioned before, people tend to think that if you are a VC that are inside the company, you have insider information. Most of the micro-VCs have not a board seat in these companies. So obviously they have some vision about how the company is advancing, but sometimes they have this collaborative approach. So they have a call every quarter or every six months with the founder.

25:35So there is not a clear, I would say, advantage to have insider information about what is really, really, really happening inside the company. And the third point is what typically is called the adverse selection. That is, I'm not sure that those deals offered to co-investments are the best deals that are in the portfolio because maybe they are totally oversubscribed. And sometimes even the seed investor have no pro-rata right to address. So I have to say that it's a very, very difficult business. When I see that these SPVs are working quite well, I see this in those funds that are built in a more collective way.

26:25So where they have LPs that try to be involved in following the companies that the seed investor is doing. There is a small fund in the US that I know very well that is called Transcend. They are focused on EdTech. They raised a concept fund. It was a$1 million,$1 million and a half. And they had mainly individuals and people from the education space as LPs. So they scout opportunities. They invest from the fund. And they try always not to put one, two, three, or four of these LPs trying to help these companies. And when this company raised the following round, they created the SPB. And the people that invest in this SPV most of the time were those individuals that were involved in this company.

27:16So I think that SPVs, if you are able to connect before the event with the LPs, maybe work. Other than that, it needs time. It needs an analysis. It's not an obvious way to do it. I want to ask you before we close, and I, of course, also want to let you tell me if there's anything that you feel that we should cover more. But I'd love to ask you, from having done all the work at Aldea, looking at all the funds and so on, where do you see the ecosystem moving when you look at all of Europe? I think that we are seeing a very, very interesting momentum in Europe. So I'm very bullish and positive now.

28:00And I see here two, three trends that are very relevant now. The first one I would say is that this US-EU battle today is a big opportunity for Europe to attract talent moving back to the continent. And this, I would say, can apply to both founders, individuals, but also investors. Last week we had Aldea stay in Barcelona. No, no, no. We back First Commit, no? First Commit is a blockchain fund in Estonia. And the founder was an Estonian guy building all the career in the U.S., no? And he decided two years ago to move back to Europe, no? With all the network in the U.S., with all the experience in the U.S., no?

28:53To back the European founders and connect them. So one of the things that we realize today is there is a big movement of global entrepreneurs. building things from Europe. And on the busy side, I see some GPs building, building, building these things. And I think this is very, very interesting. This is one thing. For me, the second thing is this dual approach in Europe. This combination between in the city space, between solo GPs, collaborative approach, acting as an institutional angel, helping this new generation. And these people collaborating with, I would say, well-known seed investors, no?

29:40With enough money to back companies. With some multi-stage, no? Fans, no? So the ecosystem is becoming more complex, but at the same time, more complementary on these things. So trying to have exposure to the different pieces is something very interesting. And the third is, there is not a, I would say, obviously AI is attracting most of the attention, no? But I think that technology is moving in parallel in different areas, no? So quantum computing is very interesting to invest, no? New kinds of energy is very interesting to invest, no? Robotics is something that is happening today. So I'm seeing very, I would say, excellent people backing in these certain verticals, the next generation.