Unicorn Investor: Why Venture Capital Is Broken And What Happens Next I Ondrej Bartos

0:00Founders very often come to us and they ask for benchmarks or milestones. And I'm like, you know, dudes, like, do you care? Like, should you care? Like, fuck that, no? Like, do you have a big problem to solve? Do you, like, genuinely believe that you can solve the problem? Go fucking do it. That is Ondrej Bartos, co-founder of Credo Ventures. Ondrej was one of the first people I reached out to when I started the podcast. And the reason for it was that André is the opposite of the stereotypical venture capitalist you might imagine. And at the same time, André is probably the most important figure in developing the venture ecosystem in Central and Eastern Europe.

0:42He put both regions on the map with huge breakout successes like UiPath and 11Labs. I feel like venture has become too mainstream and too big and too popular and too flashy and too, you know, attractive for so many people to jump in. In this episode, we go beyond the superficialities of the usual VC conversations. Okay, okay, this is deeper than I thought. And we'll discuss how the venture model will evolve. If there's a space where it's possible to build a unicorn without venture capital, the founders definitely should do it. This is the Venture Lab podcast and I'm your host, Luis. Ladies and gentlemen, by way of introduction...

1:27Andre, when we look at your life through the different ventures that you went through and also the massive shifts in technology, entrepreneurship and investing that are happening today, what is the most important thing that you think we should talk about? Hi. Thanks for having me.

1:52I'm not sure really important things to talk about. We can talk about loads of things. We can talk about what's happening in tech. We can talk about current states of venture. We can talk about what we believe the future will bring. But importance is very relative. And so it's hard for me to say what the important things are. And what do you think will affect the industry of VC the strongest? You were talking, for instance, about the developments in technology and AI that then will affect the industry of venture. So I think they are like very closely correlated, those developments. So what do you think?

2:42Which direction is this heading? Well, I mean, those things are correlated because in order for having, you know, successful venture capital industry and successful venture capitalists, You also have to have the opportunities to invest, right? And what I think is going to happen, well, first of all, I think the whole industry will be going through changes. I personally do feel that there's probably too much of venture capital these days, too many venture firms, too many venture capitalist investors. So I think I am not the biggest fan of the sort of industrialization that's been happening in the past, say, five, seven years.

3:47I feel like venture has become too mainstream and too big and too popular and too flashy and too, you know, attractive for so many people to sort of jump in. And I admit, and it may be the old school talking, or I'm just being a Grinch, but I admit I still view venture as a very niche discipline, as a very niche subset of the alternative investment. space. And I feel in my mind, it makes sense that venture would be going back in that direction. And why do you think this has happened over the last years that venture became more mainstream, much more popular, and that more people are pursuing that path?

5:04Because I think before, it was mostly something that people like somehow got into not knowing what it was and how they got into it and right now it's like people like graduate and they say okay i want to get into venture capital where do you think how did this happen this transition i i i think it's a function of the the growing success of venture-backed companies i think uh sort of the cloud era and And, you know, the huge wave of, you know, SaaS and cloud startups had produced an unprecedented opportunity for outsized returns. And, you know, the rise of unicorns, you know, up until a point in which we had, what, 1500 unicorns around the world.

6:00that just, that means that a lot of people made a lot of money out of, you know, venture investments in those startups. And, you know, success is very tempting and attractive. So that started sort of dragging people to venture, either joining existing firms or even more starting their own firms and then, you know, joining existing firms and then leaving to start their new venture firms. And, you know, boom, we have a huge industry now, which gets covered in mainstream media and Uber drivers know all about venture. I am pretty positive that it's gotten a little out of hand and it has to go back to basics more.

7:09And why do you think it has to go back besides your impersonification of the Grinch? But why do you think it would be good for the industry of venture to become more niche, very concentrated again? I think the whole design of venture is, it's supposed to be a niche category. It is, you know, venture, the whole point is looking for outliers. And an outlier, by definition, is someone exceptional, something that doesn't happen a lot. So there are not too many outliers. And that means that, you know, there shouldn't be too many venture capitalists. Yeah, makes sense. Especially now when there are also many other ways to fund your business.

8:07I mean, many like, for instance, seed strapping or like bootstrapping in general, which is, I think, increasing in popularity as well. And then if we look at the beginning of your career, like you studied business. and I was wondering why did you choose business? Like what was your earliest fascination that led you to pursue that path? Yeah, I mean, that goes way back, Luis. I'm not even sure I remember well. But like you have to understand that I went to college in the early 90s. It was really just a short time after socialism fell in Eastern Europe. And so we did not have the optionality that today's kids have.

9:00And I feel like, you know, my decision to go study business or economics, to be more exact, was not a very sophisticated one. Like I had always excelled in technical subjects, especially like maths, but not to the extent that I would go study maths, which leads to some sort of application of maths. And that brought me onto the economics, finances and accounting. And that's what I studied. And you mentioned like the fall of socialism. Like what was the earliest context of you growing up? Because I personally believe that the earliest context probably affects a person like strongest and has an impact also on the further trajectory of life.

10:04So I'm curious, like, were there any experiences that you think still had an impact on who you are today? I mean, the whole growing up and the whole childhood and youth had for sure been impactful. If you're asking about the first sort of exposure to business. No, also in more general, like, for instance, some people have, like, if you have, like, siblings or, you know, like you have for instance parents that like went a certain direction or that inspired you to be ambitious or you know just like in a very broad scale like what kind of defined or impacted you at an early age okay okay this is deeper than than I thought so so my parents were not business people.

10:58And like back during communism, it was also not really an option. So my dad was an actor and theater director and my mom was a teacher. And I think so, you know, I didn't have any exposure to, you know, business per se, what they tried doing with me, and I was the only child, I feel what I got from them was, you know, sort of the understanding and passion for freedom in terms of like personal freedom, not doing what others tell us to do, but but always trying to find ways to, you know, be free in our decision making, which sounds funny because in communism, nobody's really fully free. And what they also taught me early on was the importance of looking at the world as opposed to just our town, city, community or country.

12:18And they just pushed me to learn languages very early. So, you know, my dad was teaching me German. They put me into school where there was early English. You know, the school didn't teach me English very well. But it was more like this mindset that those things are important. I think that's very impressive that they taught you or gave this on your way because it was a very different time. I mean, I know it from my parents as well. So we can now continue the conversation in German.

13:00No, but when you were answering, this quote from Steve Jobs came to my head where you were saying, you can only connect the dots looking backwards. And I think it really made me think of it because you were saying that you got taught to think maybe differently or also contrarian or to just not follow the herd mentality. And I think that's something that is very important for venture as well, right? For sure, for sure. And then, so after you had started a consulting business, you moved on to investing. And how did you get into it? like what fascinated you about the investment side? Because I can imagine that it was very niche at the time.

13:39It was niche back then to the extent that it was pretty much inexistent, right? So the way I got into venture was that the company we had back in the 90s was like a small, low-key consulting business, which also started to present itself as a market research. You know, one of the products that we started promoting, although we had no experience, was market research. And we get an inquiry from someone in the U.S. to do a market research on venture capital. and like the first thing we did was you know search what venture capital meant yeah so we you know at school I did study economics and business but we never heard that word there and so that was that was the first I I heard about it and um and it sounded interesting So what happened was actually we then later that year, we decided to organize a conference on venture capital in the Czech Republic and in Central Western Europe.

15:04And we started bringing in people for this conference. And we ended up doing, I think, three additions. so for three years we did the first venture capital conference here. And that was 98, 99. So it was pretty early on. And I think by coincidence, we discovered venture at a time when it started to be really sexy in the US and in the UK and in Western Europe. So we started reading about, you know, everything that was happening in the dot-com bubble. And that was fascinating and exciting. And it almost went against many of the things we learned at school, right? Like, remember, you probably don't remember.

16:05Back then, people used to call it new economy. They were saying that different rules apply to this new economy. This is not old economy. This was new economy. So I think it started really, that was the first wave of interest in venture capital. and because it was so fascinating we you know we kept reading about it and we were interacting with people that were closer to the action because they came from the UK or yeah from France and even from the US yeah and and so that was when the interest was sparked but I actually got into venture a lot later um so it was it was like a very yeah slow process i think it's interesting that you got into venture like through organizing events because now i feel like events are all over the place so like networking events fire sets whatever it is large tech conferences do you think we have too many of them or what do you think about their formats like in succession to what you were organizing back then and the quality of it?

17:28Because I'm sometimes thinking that, especially those large tech conferences, that they kind of dismiss the point because at some point it gets to a scale that it gets, it's not personal anymore, while the very first intention of in-person events is to create those personal relationships. What do you think about it? I agree. I agree. In general, everything is interesting up until the point when there's too much of it, right? Like that does not apply only to events. It applies to venture capital, as we discussed at the beginning, right? Like it is interesting. It is highly relevant up until the point when there's just too many.

18:15So I agree. There's too many events and there's too many networking events and there's too many conferences and there's too many trade shows these days and there's too much venture capital and there's too many, you know, tech media and... Too many podcasts. Too many podcasts, for sure. To make this list full. 100%. So, and when you started Credo, you were one of the, like, it was different back then, you were one of the first VCs in Central and Eastern Europe that with big ambitions for like real startup investing. And as we talked about, this has changed. So there's much more competition with like large local VCs, but also European big funds coming over.

19:05I'm wondering how has your value proposition with Credo evolved over the time to until now where it's a much more crowded market? well it it's evolved for sure when we started credo it was an eccentric experiment you know it was building something that never was at least you know in the central eastern European context. And also before we started, we went to a bunch of people who were experienced like in Western Europe or in the US and we were sort of consulting with them. And most of them were telling us, don't do it. That's crazy. It's not going to work. It's way too niche. there are no there's no deal flow there are no opportunities some were advising us to do small private equity instead doing majorities searching for companies in trouble but we had this thesis we had this passion we believed in the region we saw the initial success stories and there was just a handful But there were some.

20:33And we just believed that it was possible. So that's when we put together basically high net worth individuals' money and put them into the first small fund. And we tried managing everybody's expectations in a way that, you know, guys, this will probably not work. Yeah. But like, do you want us to try? You know, we want to try. And so the value proposition was very different because we didn't have much money, but we have some money. We had some money and nobody else had money for startups. Yeah. Nobody wanted to fund anything that didn't have revenue or didn't have Burdick market fit or couldn't show, you know, five years of track record.

21:31So I think it was money. Pretty early on, we realized, as well as the founders in the market, realized that it's not just money, that it might be something else that matters and that is the real support and the real help. But I think we did start with money. Today, money is everywhere. And, you know, so many people have money that they want to put into innovative, you know, startups, you know, and be a part of the, you know, flashy world. So the proposition today has to be different. Because, yeah, talking about this, like what makes it different, like beyond capital, I think one thing that really stood out for me with Credo was your people focused approach.

22:26And I wanted to ask, how does this belief of like human first translate into your investment strategy? It is very important in our investment strategy. It's one of the centerpieces. pieces. It's one of the most important parts of the investment strategy. And it's something that we have focused on since the very beginning. Like during Fund One, we always talked about, you know, founder centricity and the importance of, you know, the people in the business, the team founders first. But I think over time, our conviction in this approach has only grown. We ultimately believe that people are what matters.

23:26It is not only people. We are aware of examples of projects, startups, companies where excellent teams just don't have the right timing or they miss a window or they make several wrong decisions, although they're a great team and they just miss the boat. but the people are still the most important part and that's written in our investment strategy I think the difference is to actually act on it right because like the founder centric people focused approach you read it everywhere but I know that you are very much interested in the reason why people or founders are building their companies so not only in what they're building and in the first conversations that you have with the founder, do you have a go-to question that you're asking that proved to be most revealing in that regard?

24:32No. No. Every founder conversation is different. We do not have checklists. We do not have scorecards or stuff. But my approach, like when meeting a founder for the first time, I just liked chatting you know i just chat i ask about silly things like what like like anything like he comes in black jeans i ask him if if if he or she likes black jeans or you know ever wears blue jeans or you know or did they buy the jeans i you know i don't know silly things but because well what I'm trying to do there is two things. First, sort of build relationship, like get close to the person. And then second is sort of serve towards, you know, values, beliefs, you know, motivations, like, you know, feelings, opinions.

25:44And those are all things that matter because I believe venture is such a personal thing and people are the most important part. I want to try to understand them as well as I can. And that also happens by silly question. Of course, I then ask them about the business and what the product is and why they believe it should work and how they put it in the hands of the customers. But I do often start with silly questions. Yeah, I can imagine that in the end they are probably most revealing because everyone will tell you that their business idea is great and that the startup is going to perform well.

26:30They're not going to say the opposite. And you have worked with many exceptional founders, like for instance, Daniel Dines from UiPath and Hubert Pallon from ProductBot. What is your best self-improvement advice that you would give to a young person, like having worked with those people and also having experienced how people can develop over a rather short period of time? I generally don't like giving advice too much. And even at board meetings or on the boards where I'm a member or an observer, I don't like giving advice. I like asking questions. I like giving my opinions or positions. Yeah. I don't like giving advice because like everything is so sort of individual and different from anything else that you know that I don't feel like I'm actually, I'm a bit envious.

27:47some people put you know mentor on their LinkedIn or I advise startups like I'm always like ooh those guys must be really smart because like I wouldn't I don't feel like I can mentor people or give them advice I'm happy to offer my opinion I would not give advice that's fair when speaking to you i get the sense that there's not much that can throw you off you know that you're very grounded yourself is this something that you developed uh like over years or was it always like this i think it was always like so it's not the adventure made you that way because you have seen like things go wrong things going great and at the end like you just realize that, you know, in the end, it only partially matters.

28:45I think it could also be the other way around. Like I survived in venture because I am grounded like that, you know, because I also feel like, you know, most people should not do venture because it's such a complex and difficult job, actually. And I want to talk a bit with you also about the European ecosystem in general, because you have massively contributed to building the ecosystem in Central and Eastern Europe. And I looked up some numbers. So from 2012 to 2022, it grew more than tenfold. So from 80 million to 820 million in investment and then now to 2.8 billion in 2024. And I was curious, what do you think are the most important factors that contributed to this growth and investments?

29:37I think it was, as I'd say already, it was a growing number of success stories, including, you know, coming out of CEE, coming out of region, which has dragged sort of more people into the industry and more money. And then, you know, COVID was one of the factors. Like, you know, 2021 was a boom of people's perception of technology. You know, it was driven by, you know, e-commerce among other things. And I feel like that's when many parts of tech really became like a mainstream topic. And also, you know, capital was really cheap. So those are, yeah, those are probably some of the reasons. Yeah.

30:43And for the venture landscape in general, like we are seeing that with the technological advancement, companies are reaching profitability much earlier. So I was curious, what do you think? How far are we from a single person unicorn? I don't know if it's going to happen this year, but I wouldn't be surprised. Yeah. And what is the role of an investor in this world of a single person unicorn? Because we were talking about network teams, like everything that you provide beyond capital and then it's not needed anymore. I think we will see a one person unicorn or a bunch of people unicorn with no need for external investment.

31:26And that's fine. But you cannot... We cannot, this does not scale. Like it's not possible to build unicorns in every corner of the market. It's possible usually in very sort of niche, first mover, advantageous situations. It's not possible for everybody. So I still believe there's going to be space for venture. I still believe that in most parts of innovation or technology, there will be adventurous, risk-taking capital needed. And if there's a space where it's possible to build a unicorn without venture capital, the founders definitely should do it. I would not push myself onto them if they don't need me.

32:33Yeah. And I mean, with the landscape changing so quickly, I think also like things that might have been true five years ago are not anymore. So I'm wondering on the founder side, what do you think is the best or a great, a good way to build a startup today than in comparison to maybe five to 10 years ago? I think there's one fundamental thing about founders or building companies or building startups, which does not change. And that is, I fundamentally believe that the best way to build an amazing company is to follow a passion coming out of sort of deep belief that I can solve an existing problem.

33:32and then just go out and try to execute the best you can. And like founders very often come to us and they ask for, you know, benchmarks or milestones or, you know, definitions and comparisons. And I'm like, you know, dudes, like, do you care? Like, should you care? Like, fuck that, no? Like, do you have a big problem to solve? Do you like genuinely believe that you can solve the problem? Just go fucking do it. And if you do it as a byproduct, you're going to have a, you know, valuable company or, you know, if what you need for it is venture capital, go raise it. If you don't need it for it, then don't.

34:32Like, it's, I think very often, and I blame the industrialization of venture, people should go back to like first principles and like ask the really simple questions, you know. A couple of days ago, I had the story from the founder of Lovable, Anton Ossica, that when they were supposed to raise or when they were raising money and they they missed the data room because they were just focused on building the product and then the vcs they were basically panicking they were like oh they're talking to other people and then in the end it turned out they were just like oh i didn't know that's actually important like okay like we can do it next time like we were focusing on shipping so yeah it's probably what you're referring to exactly right how many meetings or how long does it usually take you to understand like if the founder or the company or the idea is worth investing in for you?

35:33That's a difficult question because, you know, sometimes I feel like sometimes I just know after, you know, a couple of minutes or one meeting. But if I say that, I would seem dumb or superficial or shallow. So I'll start by saying that we always aim to have several, probably, I don't know, as many as six or eight meetings. We always aim for in-person. I think we, after the two or three years of COVID, we pretty much set it as mandatory to actually meet in person because it's an order of magnitude better experience and it's more indicative. so we we always try doing these things but that being said i you know sometimes i just knew after a couple of minutes i i knew i wanted to work with the person and i knew i i loved the spark in the eye or whatever it is highly individual yeah andre i always like to think of life in different phases so i'm curious like which phase are you currently in and what uh would you say is next for you personally and for Credo?

37:07Next for me is vacation with my kids next week. So that's what's next. Next for Credo, we're currently investing out of our fund four. So I assume next for Credo is fund five.

37:28you know everything else you know the saying that god is laughing when we make plans I don't I don't know what's next credo I feel like we have built healthy foundations and And I do like where we've gotten with Credo. It is really hard to keep up. And you are absolutely right that the competition has been tightening. But we're doing the best we can to keep up. So we'll keep doing that. and I'll yeah I guess I will be focusing on staying relevant although you know I I've been around for a while I turned 50 this year and you still have years I mean who knows right who knows so yeah I think it's very cool and then the last thing Andre we have a closing tradition on this podcast, which is called the open letter.

38:47And you can address a one sentence open letter to a specific person or to a group of people, like, for instance, to your younger self or to entrepreneurs or to your competitors, for instance, who would it be and what would you say?