Zaya Kadyrova, Co-Founder and Managing Partner at Aspire11: Unlocking Europe's pension money for tech growth

0:00Zaya Kadyrova:Hello and welcome back to Scaling Europe show. I'm Seb Johnson. Today on the show we've got Zaya Kadyrova. Zaya is from Aspire11 that has just launched its inaugural€500 million pension-backed fund, investing in both late-stage growth companies and some of the most exciting venture funds across Europe. Thank you for joining me today. How are you doing? Hi, I'm doing great. Thanks for having me. So for those who don't know about Aspire11, can you get a bit more of an overview, go a bit more in detail about what it is that you've set up and what it is that you hope to achieve? Sure. So Aspire 11 is an investment platform that's backed by European pension.

0:34We launched, as you mentioned, with our inaugural 500 million euro fund backed by a pension fund out of Czech Republic. And we're on a mission to help transform historically under allocated European pension capital into technology, venture growth and private markets in general. So we've launched with initially a dual strategy. So on the one hand, we invest in late stage, what we call long-term compounders, names such as Databricks, Revolut, Vinted, Eleven Labs, and that's the majority of the capital. So we're running a highly concentrated book where we invest anywhere up to 50 million euros into that investment.

1:15And then about 20 percent of our capital is dedicated to a fund-to-fund strategy where we back mainly early stage seed, pre-seed funds across Europe and the United States.

1:28Zaya Kadyrova:And why pension funds? Why was that important to Aspire 11? Why has that become such a central part of the story, I guess? Yeah, I think there's multiple things, I suppose, right? And we can get into a very long conversation about this. But I would say several things. I think one overall opportunity in the market is larger than ever to invest in private markets, technology, growth. As you know, a lot of companies are staying private longer. So there's incredible sort of value creation that's happening in the private markets. And these companies are delaying going public for various reasons. A lot of the technology transformation such as AI is happening in private markets as well.

2:15And you see a lot of very, very large businesses such as Revolut, such as 11 Labs being built in Europe. So you also see this whole like wave of companies being created, you know, with valuations over$100 billion. So you see this sort of like broader market dynamic. And as a result, there's a lot of demand and interest, especially from, you know, retail, from ordinary people, savers, pension savers to be part of those stories, right, to invest in those companies. And we actually see that with our pension fund, which I'm happy to get into a bit later in terms of like what impact it had on their user base.

2:51And then sort of, you know, if you see the role that pension funds, especially in the US and Canada played historically in venture and in growth, these are very significant pools of capital that are stable, that are long term, that are significant, right, in amounts. And they are currently playing a significant role in sort of boosting that innovation. And I believe it's about 40 % of the LP base of venture capital in the U.S. is actually backed by pensions and endowments, over 40%. So this capital sort of like this quiet behind-the-scenes capital is a significant catalyst to innovation in the United States.

3:34And I think this is something that people haven't realized. And again, this has been a trend over the last 40, 50, 60 years. Obviously, the U.S. and Canada has been doing this for much longer than Europe. And you have similar significant amounts of the pools of capital in Europe that have, for the most part, remained dormant in Europe, right? And you see the significant opportunity. And because they've not been active, they're sort of on the sidelines and haven't been investing. And sort of we see this as this is the best time. You know, this is now or never sort of moment. And, you know, in addition to that, we also see regulatory changes across Europe, which has enabled actually, you know, our partner, our LP in Czech Republic, but equally a lot of the partners that we speak to across Europe, you know, they're having regulatory changes that are enabling or encouraging them to invest in higher risk assets like venture and like growth.

4:28So it's sort of like multiple forces came together. And this is why we launched the Spire 11 and we're very excited.

4:36Zaya Kadyrova:And why do you think European pension funds have been so under-invested in the venture asset class? I would say it's sort of, there's multiple things, right? And it's a little bit historical reasons. And again, happy to dive into any one of these. But I would say broadly, and again, it differs country by country, right? Because it's really hard to generalize. Europe is not a homogeneous market. It's multiple countries with different environments in terms of regulation. But I would say for the most part, regulation was not the friendliest. You know, even if it wasn't banning, you know, or discouraging or like sort of banning from investing in venture, it was sort of almost like discouraging, right?

5:21Pensions to be investing in higher risk assets. I would say that's one. But that's changing. So that's changing across the board in Europe. That's really sort of promising to see. And we're very excited about that. But I would say, secondly, because pension funds have not been actively investing in venture and growth, as a result, they haven't built that internal muscle, right, of investing in venture and investing in funds. So sort of there's a little bit of this, you know, still lack of expertise in terms of selecting the best managers, you know, or underwriting companies directly and, you know, investing directly in companies.

5:58So this will take time. We're not saying that this is sort of, but like sort of structurally because the funds haven't been investing. There's a bit of a lack of internal expertise. I think thirdly, a little bit of sort of this prudent man approach was taken quite conservatively, right? So a little bit of this culture of preserving capital rather than investing for growth, and which led a lot of the funds to sort of mainly focus on fixed income or maybe public equities, right? But sort of stay away from taking significant risk. I think the asset class, when I say asset class, sort of the venture growth asset class, right?

6:40investing in technology has a little bit been misunderstood and equated to investing in early stage startups, right? I think there's a perception that it sort of has this risk of losing all your money. But as we know, of course, it's a spectrum, right? So we invest in these very late stage names that are significantly de-risk. They're primarily profitable, cash flow positive. So there's a whole spectrum and pension funds don't need to be directly investing in seed or pre-seed stage startups, right? So there's sort of this like overall maybe misunderstanding of the asset class. And I think the final thing is obviously fees, right?

7:19And I think ancient funds have been quite sensitive to fees, because, you know, there would be comparing sort of the public funds, right, that tend to be more cost competitive compared to investing directly in the venture or growth funds that I would say historically been perceived as expensive but obviously this needs to be put into context in terms of what kind of you know returns they deliver versus the public equities what sort of alpha do they deliver um right so i think like there's sort of historically been this like hyper focus on on fees instead of sort of thinking it overall um you know risk return like fees versus like the alpha they deliver

7:57Zaya Kadyrova:i think that the point that you made around how different and i don't want to call them like much But the late-stage technology companies are significantly de-risked to the sort of early-stage companies. And I think because, you know, to your earlier point, because they're staying private for far longer, they're sort of bucketed with all startups and all private tech companies. When you're right, I mean, Revolut, you know, generating, I think they did a billion of profit last year or something crazy, right? So it's not the same level of risk. But because they're still private, they're bucketed into that sort of risky asset class when they're probably not, which I think is really interesting.

8:29and so you've got these two extremes i don't know if you call them but like two strategies

8:34Zaya Kadyrova:running in parallel so you've got tribes and you've got eternals eternals is what you're talking about when you're talking about these uh late stage companies that are you know cash positive they're doing really well there's like next to no chance that they're going to go to zero right what about tribes can you talk a bit about tribes and why i i know that you're focused more on the eternals but why is the spy 11 running tribes in parallel and why those two strategies like wide tribes as opposed to also doing early stage investing or something like that. Why did you try to explain tribes a bit and then talk about why you felt like those two strategies worked nicely in parallel together?

9:08Sure. Well, the two strategies are complementary, right? They're meant to be synergistic. And we see tribes as sort of like a farm of like the future Eternals candidates. So it enables us an early look into, you know, this portfolio. And I think Today, we have almost 500 companies that we can, you know, start tracking already early through our tribe's portfolio of funds. And, you know, with AI today, sort of the trajectory of growth and scale happens much, much quicker. Right. So we think that actually these companies might be, you know, candidates for Eternals much, much faster than historically.

9:44So I would say that's one sort of like the farm, the future farm for Eternals. Second, I would say we're also have a little bit of a mission. And we see the venture sort of industry overall is going through a lot of change. And we see a crop of very talented, young sort of emerging managers, solo GPs all around the world, including Europe. So we're very excited to be partnering with them and to sort of helping this new crop of talent in venture and to partner with those. As you probably know, there's a lot of sort of spin outs or people leaving established platforms, setting up their own shop.

10:19we're very happy to support that new generation so yeah amazing so okay so it's a bit of supporting

10:26Zaya Kadyrova:the next generation of like emerging emerging managers but also i guess starting to fill that pipeline for potential late-stage companies down there and maybe help with access um can we talk about some of these early investments that you've done so i think you mentioned revolute 11 labs databricks can you talk about maybe maybe to maybe focus on right revolute and 11 labs is like the classic European giants. What about them gave you conviction to invest? Sure. Maybe just one more thing on tribes. I can also share that we're actually launching a new strategy soon, which will allow us to invest in more established platforms as well.

11:00So just something that we're working on and also very exciting.

11:04Zaya Kadyrova:Would that be like a more classic European venture brand that we might all know and love already? Yep, that's right. That's right. And someone that we could partner with. And again, sort of more of the A, Bs and Cs type of investors and someone we can partner with on the internal sides as well, longer term. Again, the internal sort of focus on like very, very late stage for the most part. Interesting. So at that point, you'll sort of have the full stack. You know, you'll have emerging managers at the seed level, maybe more established brands, A, B and C. And then, you know, you'll be running Eternals in that late stage yourselves.

11:40Yep. That's right. That's right. And this actually sort of, that's how we think of it, this giving pension funds that we work with access to the entire spectrum of stages of technology development. Obviously designing it so that it's de-risked in terms of where the capital is concentrated, sort of more in the later stage, but giving still access into like early seed per seed as well as, you know, in the middle.

12:07Zaya Kadyrova:Got it. Okay, that makes sense. and so yeah talk to me about Revolut 11 as you did Vinted as well you know when you were looking at the late stage ecosystem what about those companies made you feel like okay we need to you know these are going to be good good investments yeah I mean all three we're extremely proud of to partner with and I would say they all share certain common characteristics And I would say one is a phenomenal product that people love and use and are excited about, as well as this culture of incredible innovation, you know, whether it's Revolut that continues to launch new products, similar with Eleven Labs and, you know, Vinted that has very AI driven sort of product approach, you know, when they do the recommendations or the algorithm.

12:57them. So these are extremely innovative and like sort of unprecedented level of, you know, like launching new products, continuing to innovate. Obviously, these businesses, all three have reached a certain scale, especially, you know, when we talk about Revolut and Vinted, where they have a significant established user base that's stable, that's sticky, people are continuing to use more they're sort of continuing to to increase their spend um and you know people love this product um and so as a result you know it translates in the in the financial attraction right so these are as you said like significant scale we're talking about you know several billion of revenue growing at you know 40 50 60 you know in the case of 11 laps higher percent um for the most part, profitable, cash flow positive, sort of very clear winners in their category, very clearly are here to stay, have established moats or network effects that will be difficult to disrupt, very likely IPO candidates, likely standalone large public names in the future.

14:06So like really sort of what we define like Eternals to be, right? And multiple pillars of growth, right? In the case of Revolut, it's continuous geographic expansion, you know, they've entered the United States recently, continuous product expansion, you know, continuing to double down into credit, eventually becoming sort of this, you know, becoming the primary bank for their users, right? In the case of Vinted is expanding categories, expanding geographies. In the case of Eleven Labs, you know, moving up the stack from the model layer to the application layer where they're, you know, making significant inroads in customer support and creating agents for enterprises in-house.

14:49So I guess it's like sort of significant sort of pillars for growth and significant tailwinds as well, right? So like AI, obviously, for 11 Labs, Vinted, sort of the secular trend into sort of a circular economy and Revolut, right? I think it's sort of this fintech that everybody loves. And I think significant tailwinds there as well.

15:14Zaya Kadyrova:Yeah, amazing. And talk a bit about Databricks, I guess, because you've raised European pension fund money based here in Europe, but you're also investing in US companies. What was the rationale behind that? Yeah, so I would say we're very, obviously we're based in Europe, right? So we will naturally have a European bias. That's a lot of our pipeline is, a lot of our friends are based here, right? So this is where a lot of our activity will be based. But sort of from the returns point of view and from the fiduciary obligation point of view, you can't sort of not invest in the United States as well or globally because you have these Eternals-like companies.

15:52And there's quite a few of them, right? And Databricks is a very, very, very good example. It's an incredible business that's having this sort of reacceleration because of AI. it's built this platform that is sticky and they just keep adding products, keep sort of expanding into adjacencies like security, customer data for marketing. There's obviously this, you know, AI tailwind where they're entering more into like AI agents, sort of becoming this platform of choice for enterprises for all things AI. And you really sort of see this in their customer base. And you see it in the numbers, right?

16:31I think they've just announced that they're, you know, raising again at a much higher price compared to six months ago. And that's reflected in the growth trajectory that they've had. And again, they've also surpassed sort of their direct competitors like Snowflake in terms of adoption, in terms of winning against their, you know, against with their customers. So phenomenal business, still very much founder lag, incredible, you know, rate of innovation, new product velocity. Like I said, so similar to what I've described for Evolut and Eleven Labs, this is just, I think, a really, really unique asset in the private markets out there.

17:11And we are, and this is, you know, I think people, the ordinary pensioners, I think, would definitely benefit from having exposure to assets like this.

17:20Zaya Kadyrova:You know, and I could not agree more. Something that I'm so passionate about is actually so much of the value is captured at the LP level. and so even if you've got great european companies you know if they're backed by usbcs uslps so much of that value is then taken to you know to your point us pension funds and endowments and actually keeping that value here by investing european companies is amazing but actually if you can get even more upside by taking some of that value back from the us and phenomenal us companies i think that's absolutely what we should be doing what we should be doing way more of and especially you know And I think Databricks has a European co-founder, but like OpenAI, Amtropic, all these phenomenal companies actually have European co-founders.

18:01Zaya Kadyrova:And so I do think we should be thinking much more along the lines of how can we invest in Europeans all around the world to deliver the very best returns for our pensioners to make sure that we capture and keep that value here. So I think that's amazing. And actually, Databricks has an R &D center in Serbia, actually, like a pretty, pretty sizable one. So they have the teams on the ground, like an R &D team in Europe. And I would say I would add one more thing in terms of sort of, you know, the demand from retail, right, like so from like ordinary savers is significant. And we actually see that with our LP, right, in Czech Republic.

18:33After they've launched this alternative fund, of which we are the largest portion, they saw an overall increase of 30 percent of their end subscriber base. and after that 70 % were aged. There was a 70 % increase in the 20 to 29-year-old cohort. So particularly young people were really excited to subscribe to private assets because they're really excited. They know these names. They know Revolut. They know Vinted. They know 11 Labs. They use it every day and they really want to be part of that story. So it actually benefits a lot, But especially pension funds that have that similar sort of, you know, like self-elected type of product.

19:19It really drives sort of their end user demand.

19:22Zaya Kadyrova:That's so interesting. I mean, it makes perfect sense, especially these very consumer focused brands that are growing so quickly. Everybody knows the brands. And, you know, it's a shame that the public is generally unable to get access to that upside. But can we talk about access? You know, you're investing in some of the hottest brands and the fastest growing companies. How hard is it to get access and win access to those deals? And how are you able to do it? Yep, sure. You know, it's actually, I think like one thing that people maybe don't realize, but everybody wants a pension fund in their cap table or as their LP.

19:58That's like a little secret. Because this is stable, long-term patient capital that's here to stay, that's likely going to support you through your entire life cycle, right? Whether you're a fund or a company, right? Especially a growth company. So, and this is why, like I said, like there's 40 % of the LP base in the United States are pension funds and endowments, right? This is like this behind the scenes, quiet capital that supports the innovation economy in the US. So I would say it resonates a lot, you know, when we say we are that capital, we are, we represent pension capital, we're long-term holders, we can support you through IPO.

20:36And, you know, sort of the returns benefit regular people, you know, like whether they're teachers or firefighters, or just, you know, young people that are saving for their pensions. So for a lot of founders, that that mission sort of resonates a lot. And the fact that we're long term as well. And I think in terms of sort of, that's one, right? So and then second, a lot of these names, you know, we've been in the industry for a long time. Like I've, you know, I've been doing this for a long time as well. So it's a lot of it sort of relationship driven, building relationships with management. You know, we tend to start early, sort of start tracking some of the more exciting names early, try to build relationships early.

21:19By the time sort of we're ready to make that investment, we know them, we know the companies, so we don't come in cold. So very important sort of having these founder management relationships. And then I would say the third part is we're quite flexible in terms of like building the stake. So let's say we really want, you know, company X. North Star would be direct primary, direct secondary. But there are other ways to get into the name, right? So you could do something called GP-led, co-invest, for instance. You could buy out some LP stakes. So there's like sort of more innovative, creative ways of building the stakes.

21:59but we do that with the names that we already know and we already have high conviction on.