Credo announces $88m Fund V: Maciek Gnutek & Jakub Krikava, Parters at Credo Ventures

0:00Jakub Krikava:Hello and welcome to the Scaling Europe show presented by Deal. This episode is sponsored by SurrealDB, the multimodal database for AI agents. Omni, the AI analytics platform trusted by growing companies like Perplexity and Cervisia and VentureComet, the platform that gives startups and scale-ups real-time equity tracking, daily business insights and automated management information. Thank you for joining me. Please like, comment and subscribe.

0:32Jakub Krikava:Hello and welcome back to Scaling Europe show presented by DL. I'm Seb Jolson. Today I have got some very interesting guests announcing some great news. You want to kick it off? You want to take it away? What's going on?

0:45Maciek Gnutek:Sure, Seb. Thanks for having us. Stoked to be here with you. So yeah, the big news is that Credo is announcing a new fund. It is our fifth fund, $88 million raised for outstanding Eastern European founders, building global companies. So yeah, that's the big news.

1:09Jakub Krikava:Amazing. Congratulations. It's phenomenal news. It's super exciting. You guys have become the leading preeminent firm of the region with some amazing successes. Can you touch on a bit about the fund itself? How are you going to be deploying it? Where are you going to be investing? so yeah it's a very similar it's a very similar strategy that we already deployed in the previous funds we specialize in free seed uh almost always the first check in the company leading and co-leading rounds and we aim to find all the best founders from the central and eastern european region and it's diaspora which is very important for us as well before they even start their companies and then be there to back them when they actually do.

1:51Jakub Krikava:So it's what we've done for the past 15 years. It's what we are best at. And that's what we're going to continue doing with this fifth month as well. Amazing. And it's the same size as Fund 4, very similar strategy. What you're seeing is you're seeing like a lot of success from the strategy and the size and now you're doubling down. I imagine you probably could have raised more given the kind of the success of Fund 4 and with 11 labs can you touch on why you decided to keep the fund size the same i can kick it off maybe much again then add a few things but look we do not generally like the the trend or the the pattern that when you have a successful fund you raise more just because you can but then you might not know how to even how to even deploy that money what we found out over the years is that we know our niche.

2:43Jakub Krikava:We know the amazing companies and amazing founders in that niche, that's a CEE niche. But also we are constrained by the niche, right? So there's a limited pool of the companies we can back. So we want to stay disciplined and only back the best founders from that niche. And for that, we found that the fund size of$88 million is ideal. we actually between fund 3 and fund 4 we even consciously and purposely downsized our fund we were at a bigger size but then we found out that we were just not happy with the opportunities or the quality of the opportunities we would have to be deploying it in so we want to stay disciplined we want to stay focused that's why we kept the size and the focus and yes we could have made it bigger but but we didn't find it to be the best strategic move.

3:37Maciek Gnutek:Amazing. So we basically believe that, look, like we are in the asset management business at the end of the day, you know, like we partner up with amazing entrepreneurs, but at the end of the day, our main job is to return money to our LPs, right? So we believe that every asset management strategy has its capacity. So we have basically done, you know, our own calculations based on the previous generations of generations of of credo funds we've done a kind of you know a big spreadsheet we've we've montecarlo simulation and and we basically realized that um that the fund size that we are raising and that we are announcing uh today is basically uh the capacity of our strategy that gives us a chance uh to to return the fund many times over and yeah so that's basically our thinking.

4:36Jakub Krikava:Interesting and do you think there is a general trend of VCs just raising more money because they can? Oh yeah I would say so. On the other hand I have some level of understanding because the rounds are getting bigger, there is more FOMO on the market, there's more competition so there is a temptation to raise a bigger fund that allows you to lead any round you want in the early stage, right? It's just that the maths behind it is difficult. When you have a 200 million fund, it completely changes, right? Suddenly, you're not okay with just leading one pre-seed round of a three,$5 billion company anymore.

5:14Jakub Krikava:It doesn't grant you a 5-10x fund anymore. So you need to be very conscious of that maths and be sure that when you raise that bigger fund, you can guarantee the same returns and what what is important for us is that we are trying to make every fund outstanding so we are not aiming for you know three four x funds which are already amazing that's already like the top decile perhaps uh we are trying to make sure that if we hit one of those outliers coming from the region like 11 labs like uipath we can make this into 10 15 20 plus x fund And for that, you also need to keep the fund size fairly limited and small.

5:54Maciek Gnutek:And there's no fairness what we've delivered already. So, you know, at Credo, we already have two 10 plus X funds. And basically being constrained on the fund size gives us the best shot at returning that stand. And we know how difficult it is. It takes one company breaking out from the region that we hopefully are backers of. And that's basically the math that needs to math at the end of the day.

6:29Jakub Krikava:And since, especially like 11 labs, and there's been a lot of talk about Poland specifically as this amazing country, amazing economic growth. Have you seen the region get a lot more competitive? Are you seeing more bigger, either European or American VCs paying a lot more attention to the region than before?

6:49Maciek Gnutek:Not so much at pre-seed per se. Like the definitely Eastern European diaspora, you know, is competitive. You know, these founders belong to not only to Eastern European ecosystem, but also to like London, New York or San Francisco ecosystem. Right. So so that's different. But like a real true pre-seed, for sure competition has increased over the last 15 years. Like, you know, ever since we started Credo, when we started Credo, when Jan and Andrzej started Credo, we are, Jakub and I are no founders. You know, Credo is one of the first OG investors here in the region. And Jan and Andrzej started the firm to provide high-risk, early-stage capital, you know, the Silicon Valley style kind of venture capital for regional Eastern European founders.

7:46Maciek Gnutek:Fast forward to today, certainly the competitive landscape has evolved and there's more both very local funds operating on local markets as well as kind of pan Eastern European funds kind of covering this part of the world. like certainly there is more and more interest coming from western europe or the us um but but from our experience it is it is more kind of seed series a um than like real true pre-seed um yeah

8:22Jakub Krikava:yeah but the ecosystem is evolving or like the ecosystems because ce is not one unified region It's a set of many countries with somewhat similar cultures and languages, but very separate startup ecosystems. So you need to make distinctions between them. And some of them are evolving very fast, mostly the Czech Republic and Poland. That's where we see the most momentum. And yes, they are very likely going to become more and more competitive. You see what's going on in Sweden and some other smaller European countries where even the pre-seeds are now dominated by multi-stage US funds. So might happen, hasn't happened yet in pre-seeds.

9:03Jakub Krikava:So for us, that's still the sweet spot where we face mostly regional and local competition. And do you worry about them moving earlier or do you think that your role is quite safe? you know because i guess one of the the roles that you play is like backing them at pre-seed and then almost like helping them and introducing them to some of those bigger firms at the seed in

9:22Maciek Gnutek:series a level it is it is so so as jakub said um look eastern europe eastern europe is a um is a cluster of uh of countries right and if you if you drill deeper dig deeper into into it it's it's different cultures it's different languages it's uh it's completely different backgrounds uh of the founders um it is not that easy to be honest uh to to kind of like and and by the way like what is pre-seed investing pre-seed investing is all about backing people backing entrepreneur backing kind of you know um entrepreneurs and you know for for this what is important like reference checking and and like you know what what helped us kind of assess and win um um kind of deals many times as as they having cultural affinity and and cultural understanding uh and being able to to tell you know um if if a given founder went to to high school in warsaw krakow Prague, you know, is it a signal, you know, or is it not?

10:36Maciek Gnutek:And those are the signals that are, you know, oftentimes misread or overlooked by American or Western European investors. And that is basically what we excel in. Having that cultural, local background, being able to reference check the founders with, you know, high school friends sometimes. you know to like look for greatness early on. That is something that is very difficult to replicate. That is something that is like this network is very difficult to build from ground up. So yeah.

11:18Jakub Krikava:So you're feeling very confident in your ability to I guess like maintain your presence and almost like a monopoly at that level. Like you guys are seen as the fund of CEE. oh no we are actually we are extremely paranoid i think you need to be you should be we are always you know one one breakout story from the region away from our competitors somewhat catching up right so you i don't think we can be comfortable with that position and there's a lot of pressure both from the region then as we mentioned the ecosystem maturing from outside of the region there are more investors looking closely spending time so we are definitely not comfortable with the position and and uh i think we we would consider

11:57Maciek Gnutek:it our own failure if we became too comfortable and there's and there's also you know other great investors in the region um you know to to give them credit it's it's not that we are the only dominant force you know like it is it is a competitive market still uh there's very smart investors investing like fishing in the same pond as we do and and sometimes having access we don't

12:20Jakub Krikava:in some communities, right? We are not perfect at everything. So, yeah. Yeah, he's got to stay hungry, I guess. And you mentioned Poland, you mentioned Czech Republic. Are there any other countries in the region that you think, okay, this is a hotspot, this is going to be the next breakout region? Well, it's, we don't, at least I don't think, I think we agree on this, that there is one as strong as these two. There are some early signals from some. So we had high hopes for Romania after the UiPath story. Unfortunately, it seems to have not materialized fully. There hasn't been a massive wave of ex-UiPath people building amazing companies out of Romania.

13:03Jakub Krikava:It's still a decent ecosystem, but the Skype effect didn't materialize. But still, Romania is still very solid. We have high hopes for Bulgaria these days because there's some amazing mathematical and AI talent. Other than that, there are interesting individual stories and anecdotes. Maybe not one country or ecosystem on fire that we would see.

13:30Maciek Gnutek:Yeah, amazing. To be honest, look, it is a cliche expression, but you truly can build a next great company from anywhere we have. And look, as Jakub said, there's there's anecdotes you know of amazing entrepreneurs coming from Serbia from Hungary from Croatia you know so it is you know it is a very kind of again distributed ecosystem of many kind of smaller ecosystems that kind of don't talk to each other to be to be to be fair um so so yeah like our job is to roam around the region be very close to the ecosystem be very close to to the next generation of founders we we cannot really bet on uh on on one region or like one country over uh over another um you know like back in the day nobody expected uipuff you know to emerge from Romania.

14:36Maciek Gnutek:Like it was such a small ecosystem and all of a sudden it happened, you know. So, you know, like now we can be overlooking country X and yo, like we're going to meet in two years from now and everyone's going to be talking about that one company from that country, you know, from that ecosystem emerging. So again, like in the spirit of staying paranoid and staying kind of, you know, top of the game and on top of our toes. Like, you know, we need to be kind of constantly on the hunt.

15:13Jakub Krikava:Yeah, and cover the diaspora as well. That's a very important part of the deal flow. And how do you cover that diaspora then? As founders become more global and move, how do you manage to retain that network and that connection when they have moved to London or New York? It's tough. It's not easy. So as we look at this for ourselves, in Europe, we want to have perfect coverage of diaspora founders from CE. And we require it from ourselves to see all these deals and have a chance at winning them. And that is doable because we know all the investors. We know all the ecosystem players and the main hubs in Europe, so in London, in Zurich, in Munich.

15:58Jakub Krikava:there are obviously always some from some more niche ecosystems that we will miss but but we want to cover everything and in europe it seems it is doable it's more difficult in the u.s because many of the founders have been there for 20 years they lost many ties to to the regions also it's such a such a huge set of ecosystems both you know not just the bay area but others as well that you just cannot cover everything. So there we are much more opportunistic. So we are trying to use our networks to get to interesting people from the diaspora communities. The cultural affinity helps a lot so we can get to them, we can talk to them.

16:38Jakub Krikava:They usually want to spend time with us because we get along on a personal level, but we just cannot cover all of them. But what we found out and what I think, at least for me, is surprising to the level it works, is that the networks between CE as a region and the diaspora communities overlap quite well. So through the people from the region, you can get access to interesting people in the diaspora communities very well, and they know each other. There's always some overlap. There's always some context to get the intro through, and there's always the cultural argument of why you want to spend time together and why they want to work with us as well.

17:20Jakub Krikava:and let's talk about 11000 because i guess that's a good case in point where was he in with the team in poland at the time where they had they already moved

17:32Maciek Gnutek:so um so so the founders were based in london uh during during during fundraise the pre-see fundraise and then they moved back to to orso for a couple of uh weeks months uh and uh and then they go back to to london again to to to scare the company um but yeah like you know the um this basically the whole story started with uh with me going to london uh for for years to be honest um you know to to meet other founders investors and and build network and you know i would have that uh a very mundane pitch that you know many listeners like hello friends like you would probably remember uh that you know the next time you meet a founder an early stage founder from poland czech republic slovakia hungary romania serbia bulgaria you know and i would actually kind of mention all the countries for the reason to like make it stick and and and to to to kind of uh uh stay top of mind you know like we want to be the first investor for for these founders So if it's not a fit for you, if it's too early or you don't understand, you know, you don't vibe with the founder necessarily, like we want to be the first check for those founders from the region.

18:56Maciek Gnutek:And that's how 11 Labs came about, you know, like it was basically a fruit of years of constant travel, hustle and like kind of staying top of mind of the local ecosystem. um and uh and one of my my friends uh namat um uh who is uh namat bakram who is you know starting his his own venture firm um you know like he recommended um this team to us you know it was um it was too early for uh for the firm he was with at the time uh series a series b uh kind of kind of venture firm but the pitch the Eastern European pitch actually resonated you know it stayed with him and when the deck of 11 laps got on his desk he was like hey mate there's a brilliant Polish team building building in voice I think you should talk to them and I was like absolutely let's do that and the rest is the history

20:01Jakub Krikava:Amazing and it's a phenomenal story It must have been transformational It's going to have been a transformational milestone In both Kronos history and I imagine your own Before we wrap up I also want to talk about The sort of like As part of this new fund There's also a sort of like transition of leadership And yeah I guess like A handing over of some of the Leadership of the fund Because as you mentioned it was Jan and Andre who kind of Founded it a long time ago now they're still sticking around to be investing but my understanding is that the leadership of the fund is going to be sitting with you two and a couple of others is that right yeah i i can give you uh our thinking about this so successions in general are extremely difficult for vc crap and they largely fail and they take a long time if you want to nail them so we were spending a lot of time thinking about what this should look like to give it a shot at succeeding and for also for us to be sure we want to give it a shot because we believe in uh in the in the next generations of credo funds uh and we converge at a structure where we believe it it it does make sense and it does that does give us a shot so we were trying to do everything in our power to make the structure work and make this transition and succession as smooth and successful in the next two funds as we can.

21:25Jakub Krikava:So it's an endeavor for the next 10 years. As you mentioned, Jan and Andrzej, the founders of Credo, they're still full-time, fully involved. But in all aspects of the decision-making at the firm and in the institutional structure, in the carry structure, in the operational decisions, we were trying to design it in a way that gives the young gen and the upcoming gen as much ownership as possible. So, you know, we feel that ownership and agency and we feel that in many, many VC firms, this is the single point of failure that, you know, that old gen is reluctant about making this move. And like massive kudos to Jana and Andrzej here because this is extremely rare that they had zero ego and wanted to make this as efficient as possible and enable us to succeed, right?

22:20Jakub Krikava:So really grateful to them that they bathed in this way because it really is an exception. And whenever we talk about that with our VC friends, they're puzzled and surprised that this is the way it worked with the guys. Amazing. Do you think that's one of the issues is that generally the older partners are reluctant to give on power? Because you're right. I mean, the transition is so tough and so many firms get it wrong. And I'm just curious, is that why you think others get it wrong?

22:44Maciek Gnutek:Either power or economics, you know? it's uh um you know the venture ecosystem in general i wanted to say european but like it's it's the same in the u.s to be honest um you know it's full of stories um um of founding partners willing to um to kind of give over give responsibility to that to the new uh to the new generation but then they see it in like you know 60 70 percent of carry and and you know like it never works and and like how would it you know like it's just a stupid assumption in our opinion um and um and and you know like the the generation that takes all the risk all the responsibility like the hard work needs to be compensated well as well um it needs to be a coherent team uh that that ideally is equal i know that this setup like the the benchmark style kind of equal partnership is very difficult to pull off.

23:44Maciek Gnutek:But that is something, you know, like sometimes you just need to make a leap of faith. And that is what Jan and Andrzej trusted us with. You know, we have an equal partnership. We've, you know, the new generation is going to be Jakub, Max, our partner, Mathieu, and I. So we will lead Credo into the future. hopefully successfully. But yeah, we all know how difficult this work is. So yeah, keep fingers crossed for us.

24:20Jakub Krikava:Amazing. Well, look, you guys have been doing an amazing job so far. So I have no doubt you're going to carry on being successful. But thank you both so much for your time. Congratulations on the amazing announcement. It's really exciting. And it's going to be amazing to watch you deploy this capital into great founders from across the region. So thank you both.

24:38Maciek Gnutek:Thank you, Seb. Thanks for having us. Thanks, Seb. It's amazing.