Carles Reina: Solo GP at Baobab announcing his $15m fund!

0:00Hello and welcome back to Scaling Europe show. I'm Seb Johnson. I have got a cracker of a guest here today. Carles, you have just announced your$15 million solo fund. This is absolutely phenomenal news. For those who don't know you, you're one of the most cracked operators from across the continent. Early experience in Uber, tractable, first investor into Eleven Labs, fourth employee leading their GTMS. They scaled from zero to$200 million. This is super exciting. We love to see operator experience. experience-led VCs and emerging managers. So first of all, congratulations. Thank you so much. And it's an absolute pleasure talking to you and thank you for inviting me here.

0:41It's been a journey and I'm enjoying it. It's like going from like the operational side of like being an operator also like being an investor and also continuing to be an operator while doing investments, like for me, it's like the best of both worlds. yeah you've had a great experience being an operator but also being angel investing for a while i think you've made was it 70 or 18 18 angel investments but before we get into all of that i just want to ask like can you tell me a bit about the fund so the size the thesis what are you looking for yeah so uh 15 million dollar fund um backing precede uh founders like at least earliest possible stages.

1:23I would stick it size, 350K. And essentially, like, I love founders that are very technical, that essentially can get into the weeds of building products and essentially spend hours and hours and hours. Founders are, like, very technical but also, like, flexible. They can talk to a lot of people. I can help them, like, on the go-to-market side with intros, like coaching them on the pitch, like getting into negotiations, all of that stuff. and fundamentally backing global vision, right? Like I'm not interested in founders building for one single market. I'm interested in building like them building something that actually can be replicable, even if it's like with some adjustments in the US or in Italy or like in Germany or like in Japan or in Mexico, whatever that is, right?

2:08And fundamentally, like in three core areas, AI, robotics, and defense, 50 % of the investments are going to be in Europe 40 % in the US more or less and then the rest will be around the world where I find really amazing founders but I really like the early, early, early possible stages where like the thesis for the fund is like building companies over the past like years over the past three years has fundamentally changed 180 degrees even if you are an operator so in Europe we have this like problem there's still like there is not enough operators that actually went into the bc space so and even if you are aware of operators five years ago today the way we're building companies is like fundamentally different right like at 11 labs or entropic or open ai or like cursor like we sign contracts enterprise contracts in less than 60 days right so like it just means that like the product iteration is like extremely quick the way you review contracts the way you pitch the way you and contract like all of it is fundamentally like is completely evolved so for me the thesis of the fund was like if the market has fundamentally evolved why not to actually help the founders navigate it fundamentally because i've had the experience of like building 11 labs across all of the global markets from us to europe to japan korea middle east like um i don't know like india latam and so on so if i can actually help them with all of those intros ways of navigating the market, what is important, and all of those things, I do strongly believe that there is a good opportunity to actually reaching momentum, right?

3:46So it's like finding the actual product market fit, the momentum flywheel that essentially gets you to the next level, right? And that's fundamentally the thesis for the fund. And that's essentially what I've been doing as an angel investor for the past year. So for me, it was important to take it to the next level and essentially institutionalize it overall. and so when you talk about momentum you talk about early stage you know you were the first investor in 11 labs you actually then became one of the i think the fourth employee leading go to market you can't get more hands-on than that than actually joining a company and owning a function how hands-on are you going to be with this portfolio do you see yourself playing a very active role in kind of coaching mentoring helping them scale and hit momentum 100 percent um and You're right.

4:33I was the first investor in Lemon Labs and then ended up joining to protect my investment. And I'm just joking. But to essentially figure out how to actually launch a company and help them execute and build the entire go-to-market motion. And it's been a fantastic ride. I'm still like, I do it on a daily basis. That's not going away. But at the same time, I also want to help the next set of founders. And I go extremely deep with them. I get into their customer calls. I do interviews for like candidates that they want to bring like anything that is not a technical engineering hires. I introduce them to companies like I write posts about them.

5:13I help them like division, like any interest to other VCs, anything that actually will help them like deliver like the next phase of growth. I'm all in and I always like say the same thing like which is like in every single company that I invest I would happily drop everything and then join them for a period of time to actually like go and build right if I don't believe that I could do that then I don't think there is value in me investing fundamentally because like I'm not passionate enough about them right and about about essentially the company that I'm gonna be backing of course that's not practical but it's like that type of mindset that is like it like for me it's like i am building my own company but in this case i'm putting money and on top of that i'm putting quite quite a lot of time for them yeah it's a level of conviction i guess it's you know if you are willing to join them as an employee you know it's probably worth the investment did you ever consider joining a fund as opposed to raising your own yeah 100 so i actually tried it a few years back so after leaving uber like one of my core ideas was essentially like to go into the venture space and I was kind of rejected by everyone.

6:23I was like, they kept telling me like, no, no, no, you don't have any experience. Like you've done a bunch of investments, but like angel investing is not like a, like venture investing in general. And you don't have like the pedigree here. Like shit, like this is like actually quite bad. So what essentially, like thinking back, it was really good because then I get to actually do 74 investments before raising my funds, showing that like, hey, it doesn't really matter. It's my own money. If I lose my own money, it's okay, but it's actually my money, right? And the returns that I've had over the past eight years have been pretty spectacular at a personal level.

7:00So when then I was thinking, and I kept going, I kept going on the operational side of the business, like building startups, multiple of them. And so when it came to the time of like raising my own fund, I actually did it in three months. It's fundamental because like, well, if you're actually like your thesis that you're going to be helping founders actually reach momentum, they're going to be very interactive with them, like very hands-on, then if you can prove that you've already been doing it for the past years and these are the results that you've been getting, there might be something specific in there, right?

7:33So when it actually takes more than 12 months to raise a fund, I was able to actually do it in three, massively overserved crime, but I actually wanted to keep it like relatively small at$15 million. So I think like all of those factors ended up helping and giving me more convictions like, well, you might be rejected from BCs back in the day, but they just keep driving your own path. And at some point, maybe it's actually like that you end up building your own fund. Amazing, yeah. Raising that round in such a short space of time is absolutely phenomenal. And it must speak to the quality of the portfolio that you've got.

8:05Can we touch a bit on that portfolio? Is there anything that you can share about the returns that you're generating, some of the best companies, and of course, 11 Labs, but can we touch on a few of the others? maybe talk about what excited you about those top performing companies? Yeah. Usually the way I've done it is like I've been investing based on thesis in general, right? Like, how do I see the world evolving over the next few years? And the first ever thesis that I had is I was a very powerful user for Revolo back in the early days. I actually, to the point that I actually stopped going to my bank, I was actually in the UK, I was actually using Netwest, still using Netwest, right?

8:46And the experience was absolutely awful all the time and I hated it, absolutely hated it. So I started using like Revolut, realized like this is like a brand new way of building like banks. And for me, it was like, like if they keep going at this level, it just changes the entire experience for customers. It changes the way that we buy products. It changes the way that like fundamentally we interact with our own money, right? And my thesis was fundamentally like if you could go much deeper on it, like there was a way for them to actually grow extremely quickly and get some level of like virality, specifically on the younger audience, then you'll be able to actually have like a brand new platform to build banking on top of it.

9:26Right. So that like I like I saw that that they were raising like a very small round on a crowdfunding campaign back in the early days and that investing a bunch of like thousands of pounds. And that became the first investment, like very, very simple. And it was very interesting because like then essentially that triggered all of the other ones. I felt like, well, actually, what if I kept thinking about like thesis and what if I actually keep thinking about like what the future is going to look like? and essentially that ended up taking over the years like a number of theses. That's essentially how I did it as well with 11labs.

10:02I had the thesis fundamentally like like voice was a new infrastructure, a new UI for interacting with the rest of the world and creating applications. And when I met Patty and Peter, I was already coming from voice AI segment in the previous company that we ended up selling to Spotify. But for me, it was fundamentally like I had the thesis met Matty and Peter. We talked quite a lot about contextual awareness with dubbing, content creation, all of those pieces. And for me, it was actually very clear that it fed really well in these pieces where voices becoming a new infrastructure layer. So I ended up committing very quickly and ended up introducing them to a bunch of funds.

10:46And we all ended up doing the pre-seed round in a moment that it was extremely challenging. right so it's all about like that like uh thesis themes uh that like how you see the world sometimes the world pans out like as you see it sometimes it actually doesn't happen and that's okay but i specifically like like unsexy industries right back in the day like on those two companies like it wasn't that sexy there wasn't that many bcs looking to the spaces so for me like that's what i feel like you get a really good deal and i love deals because i go i do go to market anyway but you get a really good deal because like all of the businesses are like distracted like looking at all the fancy shiny stuff and they just don't think about like what the future might look like so by the time they start looking into it I've already put my money in I'm very happy now I can actually move on to the next industry or the next like thesis that is going to be evolving and how does that fit into or how is that kind of that way of thinking about investments shaped your kind of investment thesis now you You're looking at robotics, defense, AI.

11:51You've already made some investments out of the fund. Can you talk a bit about your vision of the world, your thesis of the world, and where maybe one or two of those companies fit into that? Yeah, completely. I think the world has evolved a lot, right? So I was backing my back like strawberry browser like over a year ago when no one was talking about authentic browsers, for instance. And that was a portion of my thesis as well of like agents becoming part of like your day-to-day and your day-to-day most of the days like it's actually on the browser side. Today, one of the theses that I have is like agents, AI agents are pretty dumb, right?

12:31Everyone thinks they're magical, it's great, collections, customer support, all of this stuff, like they're pretty silly, right, in general. Like if you truly want to make the technology mainstream, you need to have like the agents that are able to interact with the real world. And the real world means that I go to take the tube or the subway and I need to top up my travel card if I don't use my contactless card, right? Or I might essentially have to put a washing machine or I open the fridge and I need to actually know if there's any food in there. So there's a number of things that happen in my day-to-day life that agents are not connected to it.

13:10So like what I call like AI agent to real world, right? So there is a new infrastructure, a new layer that needs to be built around it. There's a new layer of foundational models, which is another thesis that is specifically defined, you know, like specifically built for like very difficult industries, very niche that requires a very high level of reliability. So there is a number of like pieces that are right now, like I'm playing with that essentially like how I see the world evolving over the coming months. And one of those ones was essentially a strawberry browser. It's not part of the fund, but it's like something that is a year ago.

13:45I've backed Omnia, for instance, that is like doing generative engine optimizations because a very large volume of the traffic is going towards like the AI engines. I backed Tekker, for instance, through the fund that is essentially doing robotics. And they have like the best robots across the entire market for industrial applications. really really amazing and amazing technology and there's a number of them about like a company that is doing agentic email that it's going to be announcing like in due time and a number of other companies as well so it's like thesis driven of how like the the market is going to be evolving very very quickly yeah it makes sense and some of those businesses you know yeah omnia strawberry amazing businesses that are now uh getting a lot of hype um one of the one of the interesting things about your background or experience is that you are part of this operator wave of current ai companies right this is you weren't building well you were but as in you know when you look at someone like uber in your old experience that was a much older company part of a previous wave you spent a number of years at 11 labs 11 labs is one of the fastest growing companies across europe and from the world absolutely exploded you've got experience growing and scaling one of the fastest growing companies there is what advantage do you think that gives you compared to more traditional VCs?

15:06I think it's the fact that, like, you know what the reality is on the ground, right? Like, building companies is extremely challenging. Like, extremely challenging. Like, the rollercoaster, emotional rollercoaster that, like, you go through when you're building a company, it is extremely tough. It's, like, it's very easy to see from the outside and try to, like, help founders navigate it and just, like, giving them, like, some feedback and telling them, like, you need to grow quicker. okay, you need to do this, you need to do that. But it's a completely different game when you're actually building it.

15:36And because I've been going through all of the pains that they're going, all of the ups, all of the downs, the success, the failures, all of those pieces, I think there is an element that they empathize, like I can empathize a lot more with them, be there in the bad moments, in the good moments and celebrate exactly both of them, right? So how do you take a bad moment because you lost the deal or because your competitor beat you to launching the product or because things were not panning out as you were expecting. And turn it into a positive thing that you're learning and essentially you keep going, right?

16:10For me, that's the value added that you have. One of the also key components, like founders these days want to be backed by other founders or by people that actually have been very successful and have domain expertise, right? Money today is a commodity. Anyone can raise a million dollars and start a company and appreciate it. Anyone, absolutely anyone, because there's so much cash running around that literally you can raise a million dollars. The problem is not raising a million dollars. The problem is like you want to be raising a million dollars, but also you want to be having help, true, real help, so that you can execute and you can find your key item that is going to differentiate you versus like another hundred competitors.

16:53Right. And I think that's the value added that from Baobab actually bring to like some of the PCs that are only focused on the capital side. are completely missing. And it's in a world where from a VC perspective, we keep telling founders, what's your moat? And we keep asking them, oh, you need to build your defensibility, you need to build your moat. Tell me about that, how you think about it in the long term. I actually think about it exactly the same way from a VC perspective. If your only moat is deploying money and introductions to other BCs, then you're probably dead as a VC, right? Because you're going to be scratching the top, like the bottom of the barrel for companies to actually invest when the smartest founders are going to be the ones that are actually saying, hey, I can actually get a million from you, but I also can get a million dollars from all of these other people.

17:49Who's going to help me the most, right? And they say, I will go with the one that actually helps me the most. So I think that's the differentiation and that's how the market has evolved very quickly. and I think we've entered a new phase where like you actually need to provide something else on top of it and I think like my thesis like Baobab can do that yeah and that makes sense and where do you think that leaves the bigger more established firms you know I think a lot of VCs rely on their brand essentially like it's an amazing thing to get a tier one VC I guess like in many ways that's their mode how defensively do you think that is just just having a track record and being one of the oldest and most established firms or do you think that's under threat as well I think that sounds right as well I think like you can still play that card like you're probably going to be able to play that card for the next 12 months or something like that but at some point like it's just not going to be enough right and it's again it's like the money is like a commodity so like you just need to be helpful helpful, friendly also tough right and if you're not able to do that then it's going to be extremely, extremely challenging to survive in general because there's a new wave And that new wave of like solo GPs that like do smaller checks, but also like become extremely, extremely like intertwined with the firms that they're backing.

19:05It's just essentially happening. But don't get me wrong. Like I think in practice, what will end up happening or my thesis is like what will happen is like there's going to be quite a lot of consolidation. There's like VCs that are going to be going under at some point. And as such, like you will end up having a consolidated like component of all of this happening in the industry. So big firms will continue to be big. The question is whether they're going to continue to have access to the top deals, or they're going to be scrambling to actually pick up the pieces from somewhere else. Or they will essentially come late because in the early days, you might not want their brand.

19:40But of course, later on, if they give you a crazy term sheet, then you will be taking it. So there's always going to be space in the market. But I think the market is evolving, and firms need to be evolving with it. And even like Baobab was starting today or like we started like three months ago, like doing the first checks and all of that stuff. But like the reality is like I do believe like the fund needs to reinvent itself every couple of years. If we're not reinventing ourselves, even in the middle of cohorts of like deploying capital in the same fund, then we're probably going to be falling behind.

20:14Right. And it's like a thesis that I brought, like a concept that I brought from like my go to market teams. what I've always said, like, if we're not reshuffling the entire team every six months and allocating new responsibilities, like changing the way we operate and all of that stuff, then we're essentially going to fall behind because, like, the wave is going to take us over instead of actually us riding the wave. On the VC side, we've been too complacent over the past, like, over the past years. Now, like, for me and the VC is like, hey, like, let's reinvent everything. and until you don't execute like iterate on it multiple times and and and experiment like um and do it on a constant basis um then at some point like you are gonna fall behind and there's some bcs that are doing it super well like i think about like a16z i think about iconic like they're absolutely fantastic funds where like they're constantly reinventing themselves about like how they help their portfolio companies what sort of funds do they raise how do they structure the teams like how do they build go-to-market capabilities like those are the type of mentality that actually built a generational fund that actually goes and it becomes the one of the best ones in the world right that is the type of mentality that we were actually missing on the VC side that we've been forcing startups to do it for like forever because it was the way for them to survive and become big companies we need to bring that on the VC side as well.

21:36And was that particularly compelling for the LPs that invested into your fund and how compelling was that thesis of being you know a high conviction value add investor versus having an amazing track record you know how did lps think about that i mean i've been lucky enough to have the best of these like i mean i only have like wonderful world for them like sindana capital like ended up anchoring my fund i have isomer i have like the partners at predo ventures i have like a bunch of partners from concept ventures um i have like uh like cyber cyber fund have like a really good network of of uh of investors that have believed in in the vision and the thesis since day one and they were all in and uh to the point that like i had to like chop like uh cut the catalogations and tell some of them like sorry like the fun is fully oversubscribed like we we went into like uh like 23.5, something like that million, like of commitments.

22:39And I had to kind of dive everyone down to like 15 million. So all of those pieces. And I ended up taking a very large chunk of the fund as well. So, but it's great. Like they understood it. They were like very supportive. And I keep getting messages all day. Well, if you can expand it a little bit, I can put a little bit more tickets. And for me, like it's fantastic to see, but I have the best LPs that anyone can have. I'm very grateful for that. That's amazing. Being oversubscribed, your first fund, is absolutely phenomenal. You're a solo GP at the moment. You've raised$50 million. You're going to be deploying into a lot of deals, I think like 30, 40 deals.

23:20Are you going to be expanding the team? Are you going to be looking to hire another partner, associates? How are you going to structure the team to deploy the capital? No. No more hires myself. Keep it simple, keep it lean. I don't believe in any of that stuff as of now. I think if you're starting, keep it as a startup. Keep it simple. Don't overcomplicate it. Of course, as you keep adding more deals, then essentially there is a bigger admin portion that happens that you need to complete. But the more complex you make it, the more time you spend like managing the admin side and people the less time you actually end up spending with founders and finding the right companies that are going to give you an extra an extra advantage right so absolutely not like extremely simple for now dedicate all of the money to like investing um and then paying like a small portion of the the admin fees that uh that like the fund has or the admin cost the fund has but like even on the management fees like most of it is actually being recycled to actually back founders right and that is like fundamentally like what I believe like let's deploy as much as I can towards like the founder community because that's what the actual returns are for my LPs but also like for the community.

24:45That's amazing how do you see that changing over time you know you given you've had a massively oversubscribed first fund is the vision to deploy this, get some good metrics, and then think about a bigger fund two or a later stage, maybe look at series A, series B, or maybe larger tickets at the pre-seed, seed level. How can you see that evolving over time? Yeah, I mean, fund two for sure at the right time, whenever that happens. I feel like for me, I'm trying to build a generational fund where it's like putting the right pieces and the right foundations for a fund that will last for longer, right?

25:23I think pre-seed is the sweet spot that I like. Believing in founders, believing in them, their personalities, and what their beliefs are, what their visions are, their technical skill set, their distribution skill set, all of that stuff. That's the sweet spot, right? And I think if we focus on that as a fund, I think we're going to do really well because it is where the returns are. And you can see like the entire segment, like BCs that were much more on the growth side, they're coming on the early rounds because that's where essentially they end up finding the returns, right? Like I do it on the pre-seed side.

26:02There is absolutely no need to do. Of course, we will end up doing like follow-on checks for companies that are doing extremely well and everything. But at a practical level, it's the pre-seed. Let's keep building. We'll see about like Funchu in the future, whether it's bigger, the same size. Keep it small. Keep it simple. no complexities happy and you see like the returns like the bigger a fund gets the smaller the returns that they make right so it becomes a completely different unit economics and dynamics very small funds or like small funds are the ones that are performing usually the best right so if like i'm able to keep it that way then you might end up raising more funds potentially but but you are actually delivering for your lps makes everyone happy in general but we'll see like dynamics change i don't know what's going to happen in in a few years time i always think that dynamic is really interesting like the the vcs kind of there's a natural tendency to get bigger and to raise bigger and bigger funds but there is always a question at which point the fund size has kind of reached its maximum based on you know what kind of company do you have to find what level do you have to invest to return a half a billion dollar fund or a billion dollar fund um well look carlos we'll have time i'm sorry go ahead or how lucky do you need to get right because like and it's like i think like the the like the topic that no one talks about in the industry right which is like we're in a power law scenario and in many ways like a bunch of companies that like funds have invested like just being pure luck right like um and i think like you talk to founders like you believe in their stories like you believe like what they're doing how they're doing it um and essentially you end up like backing them after doing quite a lot of diligence or like the details that you can do right but there is an element of like timing in the market there is an element of like them being able to execute having the teams run that surrounds them in the right team like having the partners that like help them like being the right partner so there is a lot of these components that as a bc you don't actually manage but also bcs we love to actually say yeah we we did it and we backed the right company well it's there is a lot more that actually comes into the equation in general yeah yeah there's so much outside of your control about you know if the deal comes your way and if all the other things line up but um carl is absolutely amazing news like i'm really happy for you this is like a super interesting fund um i think you're going to smash it and so thank you for joining me and again congratulations thank you so much it was a pleasure