082 - Road to profitability and AI, with Mercè Tell (Co-founder @ Encomenda Capital Partners) - Life on Mars - A podcast from MarsBased

Episode Transcript
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Àlex Rodríguez Bacardit (00:02):
Hello everyone, I'm Alex, ceo and
founder of M, and welcome toLife on Mars.
This episode we bring youMercedes del GP and co-founder
of Franco Menda Capital Partners, one VC from Barcelona that we
had hosted at Startup Grind fouryears ago, and we revisited
their ideas, their mandate,their investment thesis and how

(00:24):
they are performing in themarket in one of our latest
Startup Grind events.
In this fireside chat that weconducted with Marce, we
discussed the headwinds that theinvestment market is now facing
the down rounds, the severedecrease in the number of M&A
transactions that have beenaffecting the market, the drop

(00:45):
in valuations, the descent alsoin value of these stocks in
technology companies and whatnot.
She is one of my favorite VCs,which is a lot to say, because
she's utterly transparent andshe explains things very clearly
, with barely no filters, whichis something that I'm not used

(01:07):
to, especially when interviewingVCs.
Usually they're veryconservative, they're very
protective, they want to avoidany kind of legal issue or
affecting any of their portfoliocompanies.
Marseille is verystraightforward and she tells
things pretty clearly andwithout any kind of filters, so
that's why I love the way sheexplains things, which are very,

(01:28):
very clear, and provides foralways good conversation and a
lot of food for thought.
I'm pretty sure that you willlearn a lot from this
conversation.
I hope that, as much as I didduring the event, I we give you
the full conversation here, alsoq a, because I think there's a
couple of questions that arevery, very interesting.
A lot of questions are verygood and insightful, so bear

(01:51):
with me.
It's going to be a long episode, but towards the very end, I
think you will also find veryinteresting questions from the
audience.
So the question of the day forthis episode is what did you
want to know before going intoBC that you wish you had asked?
And, without further ado, let'sgo with Merce On your feet.

(02:13):
Everybody, this is Merc, allright, all right, yeah, that's
great.
Um, welcome, I guess we canstop that.
There'll be youtube copyrightinfringement, uh, thanks.

(02:37):
Uh, when I publish the video,always happens.
Welcome to start, ryan againthank you so much for inviting
again I was gonna ask how manytimes have you been welcome on
state on stages of rockstar?
But I think I did that alreadyone year ago, but I don't
remember the answer.
So how many times have you beenwelcome on stages?

Mercè Tell (02:55):
it was once when we were, uh, on the lockdown, yeah,
and after on the panel when youdid the university.

So only at grind grind we consider you
a rock star.
What happens outside of StartupGrind?

Outside.
I've been on stage many times.

All right, because we didn't have
time to prepare for this.
Usually this is organic, casualconversation.
I'm going to suggest a fewtopics we could be speaking
about.
Right, we haven't preparedthese, so this is first news for
her.
So my ideas right, we could betalking about trends and
forecasts in VC for 2024, whichI guess it's the easy thing to

(03:34):
do.
But we can spice it up.
And I've got other suggestions.
Like we could hype AI so thatwe can forget that we hyped
other stupid technologies a fewyears back.
Like every VC we could talkabout oh, there's no more
funding nowadays, so whathappens with startups Also?

(03:54):
Or the music stop what happenswith VCs, because eventually,
vcs will not return the fundsand also there'll be like where
are we we doing now?
Or we could be talking aboutthe music stop everybody, go
back to fucking deloitte.
Um, it makes the light.
They're not going to sponsorthis, luckily.
Um, why would anybody work forhim in 2024?

(04:17):
That's something that we canalso ask.
Or everybody says it's the besttime to invest, but they're
just playing with somebodyelse's money.
I don't know.
A few suggestions what do youwant to start with?

So you want me to try to decide which one?
I'm just kidding.
Let's go for trends andforecasts.

I'm just kidding, I always do that
kind of like an icebreaker.
But yeah, let's give a littlebit of recap.
I know you Most people know you, because otherwise they
wouldn't have paid the ticket,but we don't know the story
behind you joining Encomenda.
You used to be at Neko, a fundthat used to manage other funds.
What's the story behind that?

And what is even a company that manages other
people's funds?
So the story started with Neko.
That's eight years ago.
I created the company toinherit the funds of the
managing company that I wasworking for that the partners
decided to retire and there wassomeone that had to inherit
those funds.
So that was what made me decideto become an entrepreneur in my

(05:24):
sector.
So, starting to create my ownVC, I looked for financing for
someone to help me, because it'spretty expensive to create a
venture capital managing company.
That was the first lesson, andafter that I inherited those
funds.
So I started divesting, whichis one of the toughest parts, I
would say, on VC.

(05:44):
After that I came back ondeciding okay, now let's raise a
fund that's the second hardestthing, I would say and we did
pretty good.
I had two partners that joinedme at that moment and we raised
40 million euros fund, which wasgreat, but we'd never
considered some legal thingsthat happened afterwards and we

(06:06):
were unable to create that fund.
That's where Encomenda comes onboard.
With that, we ended up havingtwo small funds which weren't
paying for the party.
So that's why we decided tojoin forces with the Encomenda
team previous team Mario whichwas a startup some days ago, I
guess, and Carlos, and decidedto create with them the second

(06:30):
fund, the Encomenda tool.
That's why we changed the nameof the company and they joined
on our shareholding.

How do you sell this kind of company?
What kind of assets is itvalued by?
Is it just I get the portfolio?
What?

is the valued by?
Is it just I get the portfolioor what is the transaction like
At the end?
We consider the license beingable to commercialize funds.
That's one thing, and it was upand running with all the
regular and the compliance thing.
That it's kind of, we'll say,very tough to have everything up
and running.
And we had two funds inportfolio, two funds that were
managed with the portfolio ofcompanies.
So that brings you some feesand that means having some to
have everything up and running.
And we had two funds inportfolio, two funds that were
managed with the portfolio ofcompanies, so that brings you

(07:07):
some fees and that means havingsome LPs which you can tackle
for the next funds.

So you have these two funds under
management and this third fundthat you are actually have to
complete the reports by tonight.
So after this event she has togo back home and work on filing
reports and shit and do someserious stuff.

As I said, the two first funds.
They gave so much fees to havea great team.
My team has joined in January.
They've been struggling withthe reporting but at the end I
have to check it tonight.

Let's talk about each one of the funds
so that we can give context tothe audience, so they know for
which fund they can pitch youafterwards in the networking
right.

So I have a fund that is kind of a corporate VC.
We run the investments forPalladium Group.
It's a travel hotel line inSpain.
They have only two hotels,palladium for sure, so many
brands and also the discothequesin Ibiza.
So they have Ushuaia HarrahHotel.
So it's great and we look forthem.

(08:09):
Seed stage companies mainlyworking on travel, tech and
leisure, anything that they canbe working with the group.
Then we have a second fund thatinvests in everything that
comes out from a venture builderthat is called Nucleo.
So actually in that case youcannot apply except that you go
through Nucleo If you areinterested in joining a venture
builder.
They also are now adoptingcompanies coming from abroad on

(08:32):
kind of a co-led co-founder.
And then we have Encomenda.
Encomenda mainly invests onpre-seed and seed.
Our initial ticket goes up tohalf a million and we are
agnostic in terms of verticals,more focused probably on B2B
than on B2BC.
But we do less deep tech orless hardware things, more

(08:54):
digital focused probably.

What is the so in terms of you know
this new fund that you'reopening.
So the Encomenda one.
Let's focus for a minute onthis one.
You mentioned a couple of thehard.
No's right so deep tech, or youdidn't mention biotech, I think
, but like, probably biotech isanother.
What is the hard?
No's, not only in sector, butalso in types of businesses Like

(09:18):
what is something that you saylike this is absolutely a no,
like solo founder or you knowit's not actually.

If it's a solo founder and it's got the idea of
complementing the team, that'sgreat for us.
So nothing to say if it's agreat founder.
So again, the main thing thatwe validate and where we spend
the most time is to validate thefounding team.
It may be a solo founder andmay complement in the future.
I would say big no's are peoplethat are not committed.

(09:45):
So if you are not full-time onthe project, just forget about
pitching to us, because we arenot going to be bringing any
skill to the board.
It's actually we look for ateam that is committed to the
project.

Okay.
So I really wanted to talkabout this one because in the
last years where there was anexcess of funds, all of them
seem to be going from laterseries to earlier and earlier in
the process, and pretty muchevery other fund went to
pre-seed super early, actuallybefore product, before revenue,

(10:19):
and all of that which seemsillogical.
That which seems illogical,right, but maybe now that there
will be a scarcity of startups,because it's rougher times, it's
headwinds, there's the economicdownturn and all of that, what
is your prediction?
Are funds going to go back tolater stages or are you going to
stick to these thesis?

So those funds that you mean that went down to the
early stages, most of them.
They are now struggling withtheir portfolio companies.
So it's been tough time for thelast two years for those
companies that were in cities Aand B, so they are coming back
to late stage.
Basically and there's probablythat's what we identified that
there's a few funds doing prettypre-seed and seed stage.

(11:04):
At the end you can, it'sdifferent dynamics.
I think what they realize isdifferent dynamics that run on
the early stage.
What runs on growth.
I'm not able to help companieson later stage.
Nothing to do.
I'm on a board not knowing howto help the companies.
Same things applies from theother background.

(11:25):
So companies and VCs thatinvest in late stage, they are
not the partner for early stagecompanies.

And how about?
Because you know I've beeninvesting right now for about
eight years as a business angel,right, and whereas before we
wouldn't see any VC in apre-seed round.
And you know, in a round oflike I'm raising 300 grand and
now there are VCs who are likeI'm going to take, I'm going to
lead the round 200 in and leadthe round.

(11:54):
This is kind of funny becauseyou get like all of these
business angels and then kind oflike the liquidation preference
starts too early.
And how are you battling this?
Because you're also in thosetrenches.

That's what I'm saying that the conditions and
even legal terms is quitedifferent when you invest in
late stage than early stage.
That's the first thing, andmost of them, it depends.
Every house has its own rules,but actually most of those that

(12:32):
have gone down is because theyare trying to diversify their
portfolio with different type ofassets which, at the end, for
us, any startup portfolio is anasset and, at the end, trying to
diversify with companies thatmay have bigger returns, because
that's true, that seed stagegives the best returns to the
investors.
That's the reason.
Actually, I think it's going tobe coming back to everyone
getting it specialized ondifferent stages.

Okay, yeah.

At the end, if you get more seed funds investing
with the conditions typicalconditions of seed funds then
it's more funder friendly at theend.
So in terms of the legal terms,we never put any liquidation
preference or any type of thinglike those ones, because we know
we are limiting the company onthe future fundraising as well.
So at the end the founderdecides who joins the company

(13:15):
and they are going to be movedaway.

I would say but in terms of signaling,
for instance, probably I'mgetting too specific, too
technical, but let me know if itis like that.
Like, for instance, if I see astartup that, on pre-seed,
manages to complete the roundonly with business angels,
that's a good signal for me.
If there's a VC that joins tocomplete the round in pre-seed,
for me it's like these guyscouldn't make it only with

(13:37):
business angels.
For me it's a bad signal.
How do you see it from theperspective of VC?
Probably good.

From my side, probably good, depending on
legal terms.
I don't know if everyone'sfamiliar on liquidation
preference and this type ofthings, but actually it's
something you can explain basics.
Yeah, exactly, A campaign ofbasics is someone that comes
after a business deal, forinstance, and puts a liquidation
preference means that they'reon the waterfall.
When actually exiting thecompany they're going to be
receiving first and after theother ones.
That means that founders andearly investors receive money

(14:10):
after them.
That's something that we neverput and that we never accept at
that stage or seed stage,Something that has to come when
there's a risk or even whenthere's a down round, but not on
these early stages.

However , a lot of VCs still play the
liquidation thing.
Okay, and how about like?
I guess that that's that's partof the vision.
The other is like in reality, alot of companies, a lot of
founders, only make moneythrough secondary that's true In
every round, not by the timethey're exiting.
And also seed funds.
Also seed funds.

(14:45):
Okay, can you explain that?

We have to exit the company in a period of time, so
at the end we invest.
Time at seed stage is longer,so I've invested in the past in
Series A.
Then you get out Series B, c,whatever, and it's three, four
years time.
In our case, seed stage is fiveto six, seven years to get out

(15:07):
of a company and normally it'sin a secondary.
So actually it's with adiscount, with someone is
joining the company in a laterround.

And how about the lifecycle of
companies, right?
One thing I noticed comparingbetween Silicon Valley and here
is that companies tend tolanguish longer.
Here they die a longer deathright, because probably in
Silicon Valley they're like twoyears.
This doesn't work.
Fuck it.
Shut down the company.
Fire everyone If you still havegot somebody.

And plenty of zombies out there.

Yeah, exactly In Spain I see more like
companies are like yeah, you're10.
Still, we maybe break even.
We fired everybody.
It's no wonder we make breakeven if it's only you, but
they're like yeah, I foundanother grand, another, and
people are voting.

People are voting and exploding.

How do you see, like, what's your
prediction for the next twoyears, Like how long this
downturn is going to affect thecompany life cycle?

It's been tough.
Actually, I think the lower M&Aactivity is not helping as well
.

Okay, yeah we're going to go into that
.

That's something that really affects on companies
because at the end exits comealso because of getting booked
by someone.
So that's one thing and at theend it's difficult to estimate
for us if there's no activity inM&A.
That's difficult to estimatehow to invest and which is the
value or the multiple that we'regoing to get on companies.
We expect that to come back toa bit more activity in terms of

(16:41):
actually in M&A, which at theend triggers the rest of
investment, triggers the guys onlater stage and also triggers
the early stage.

Good, it's good that you mentioned M&A
, because I was going to go intothat, so traditionally.
So, first off, in terms ofstatistics and this is something
that you can provide with theintelligent numbers and insights
I'm just asking the dumbquestions here, but I know for a
fact that last year was verylow.

It was like a minimum record of VC investment,
vc money being deployed in themarket Scarcity at all Was that
there was a scarcity in terms ofinvestment, correct?

But also in terms of M&A, which is a
sector I might know a littlebit more of.
I know that there have been alot of operations in the private
equity market, not so much inlike strategic acquisitions and
whatnot.
That means corporates are notbuying fucking startups for
whatever reason.
From the VC perspective, whathave you seen in your portfolios

(17:42):
?
There's been more like PE orcorporates or bigger startups.

In our case there's been strategic acquisitions, but
in exchange of shares, so inpaper.

Like Global Delivery Hero and stuff
like that, like that yeah.

So companies getting in exchange shares of the
bigger company acquiring andlet's see what happens with earn
out in the future.
So I'm going to be payingdepending on the synergies that
we see.
Because that's basicallybecause it's difficult to
predict which is the synergythat I'm getting from this
acquisition.
So if in normal marketconditions, you know if you buy

(18:19):
a company, then you'll know howmuch you're going to be
generating and which is the timethat you're going to be
recovering the amount thatyou've paid for that.
Now last year, for sure, it waspretty difficult to make
predictions in that sense.
So that's why companies try topostpone the payment.
So try to give an error now,depending on which are the

(18:39):
synergies that I'm getting withthis acquisition.

But from your perspective, from a VC
, you want to make an exit right.
You want to make an exit right.
You want to make a multiplieron your investment.
Say, you invested in global,which is not the case, I think
but like if you had anacquisition whereby you get the
shares of the acquiring company.
What is your role there?
Can you veto that, can you not?
How can you it?

depends on which type of shares they've quoted.
Probably we can do somethingand we can even liquidate the
fund, because it's somethingthat happens at the end.
You have a queue of the fundwith some portfolio companies
with some expected earnouts orsome payments in the future,
something that you may beliquidating in two years, and at
the end you distribute that toyour LPs and you finish with the

(19:21):
fund.

I don't know if we're getting too
technical we're going to go backto predictions but I'm really
interested in this becausenormally I use these events to
learn stuff, right, I'm thatkind of lazy person.
I just invite people here sothat I can ask questions to them
.
No, just kidding, but like so,from your perspective as a VC,
trends that we should be awareof One year ago we would have

(19:44):
said AI.
Of course, we all know that.
What have you seen?
Because VCs traditionally seestuff like not so early as VAs,
right.
So what have you seen in thelast, say, three months?

Lots of sustainability, I would say
everything is becoming greener,so that's probably things with
more impact.
That's pretty much the trend.
Ai for sure as well, andprobably more B2B, because
there's this scarcity in termsof anything going to B2C.
You need a lot of money toinvest in marketing and probably

(20:18):
there's not so much companiesstarting At least we're not
seeing so much.

Okay, so two things.
So sustainability, so greentech're not seeing so much.
Okay, so two things.
So sustainability, so greentech impact on all of that.
That's something thattraditionally VCs were like fuck
that shit, we don't believe inthis.
This doesn't make money, andwe've seen in the last 10 years
that actually made significant,significantly better returns
than other types of money.
Right, and so everybody jumpedon the bandwagon or the cool

(20:44):
wagon of saying like, oh yeah,cleantech, we always invested in
that.
But AI, I'm really interestedin that, not because it's AI,
it's cool, but because there's alot of companies that are just
a lot of fluff.
Right, launch get a lot ofusers, lots of spend in B2C, but
the churn is enormous.
They don't make it past theirsecond week as a company.

(21:06):
Now that you've been probablyinvesting a year in the sector
of AI, how do you see this kindof companies and how do you
separate the grain from thechaff?

We separate it by being really something applied
and solving a real pain or not.
So that's basically what makesthe difference.
So we see a lot of them tryingto find a.
So I believe for many things,but actually that it's applied
and it's useful for someone andsomeone is willing to pay for
that, that's probably what wesee less.

Is there any example of company you
have invested in that you canshare?

We've invested in AI .
I actually applied to robotics,for instance, so software that
helps on adapting hardware,robots actually for picking in
warehouses.
So that's one of theapplications we validated.
Actually, at the moment that wereceived the company, they had

(22:05):
no customers, they had just anmvp, an idea of what they were
doing.
We contacted the main ume-commerce in spain and
validated with them if there wasa need for that.
Actually, the founder of thisbig e-commerce co-invested with
us, so actually there's a needon on for that project okay, so
america don't.
I invested in them yeah, youknow the name.

(22:27):
I didn't, but it's easy toguess.

Um no, no, actually that that's really
interesting because, um so howmany people here are raising
funds right now?
Raise your hand.
If you're not, so many, like Iwould say, like two years ago
we'd have like 50 people uh,raising, raising funds.
Probably it's because it takesmore guts now to create a
company with this economicdownturn and everything.
But okay, so what would be youradvice?

(22:50):
To raise funds now, notspecifically with you, we're
going to go into that later butwith any VC now in this down
market, in this bear market.

For the last semester, I would say that
everyone was looking forefficiency.
So being pretty efficient andjustifying everything what
you're going to be getting andbeing really strict on what
you're going to be spending,which is the milestones that you
want to achieve.
I think actually it continues abit the same.

(23:22):
That cleans a bit people thathas no idea has not validated a
lot what they are expecting andvalidated on the market, their
go-to-market strategy, their fitwith the market and with
customer.
So that's probably looking forefficiency, being clear on on

(23:46):
the amount that you raise andwhat that you're going to be
using that for yeah, I've seensomething in the last 12 to 18
months more slides of road toprofitability.

Yeah, that I had never seen before,
because everybody was likereinvest everything in growth
and then you know you have likebuddy and stuff like that right
shit going out in smoke.
But and then, specifically foryou to raise funds from your,
your company, from your firm,what do we have to take into
account, like who to contact?
I guess you, but any of us infact.

In fact, myself, I'm the worst person right now in
terms because I'm still raisingthe fund.
So if it's difficult to raisefor startups, it's also
difficult for us to raise funds.
I started six months ago.
We've just reached our firstclosing.
That means that we really startto invest with the fund and

(24:40):
then it's going to be open for ayear and a year and a half,
going to be open for a year anda year and a half.
So I'm still combinatingpitching to investors with
finding and scoutingopportunities, which does my
team.
So actually, our emails areactually our namelastname at
Encomenda for everyone in theteam.
Look for someone that works onthe deal flow side.

(25:01):
So investment director analystand we validated all the
companies we received.
We tried to check all projectsthat we received, even from our
site, even from LinkedIn calledOutreach, called from LinkedIn.
We tried to give an answer toeveryone, because we find it
ourselves when pitching toinvestors that it's pretty cool

(25:24):
when you get an answer, even ifit's a no, with a reasoning of
why not.
And then after that we haveMonday meetings.
Every Monday we receive theprevious week and it goes to
partners, so I receive itafterwards, those ones that are
kind of screened by my team.

And how about?
Is there like?
Sometimes people coming toSarprent they approach me to ask
for advice for what slides,what kind of deck can I use to
approach VCs?
What structure?
You know it used to be the YC.
There's the YC template outthere, but is there any specific
pattern or structure to thepitch deck that you want to see,

(26:04):
like some slides that if theyare not there, you're like I'm
not going to invest?

There are kind of basic slides like what's the
pain that you are solving, howbig is your market Kind of the
addressable market and if it'sreally a big solution or
something that's going to behaving an impact.
And then the team.
So for me it's the three thingsthat we validate.

Funny, because Capietes doesn't want to
see stuff that's on Wikipedia,right, it's like I know how many
people live in China, butthey'll exercise.
And how about, like you getthree different funds, how do
you ensure there's no conflictof interest between the three of
them?
Because I assume you haveinvested in a fair amount of
companies and well, we'll getinto like pivots later on, but

(26:49):
like initially, how do youseparate which one gets which?

it's pretty easy because we've been forced, even
we have, so we're regulated andthe regulator comes into, down
into it, into it.
Uh, so actually for thepalladium fund it's a good pPC.
It's only travel, even if it'ssix states, and we can co-invest
with the other funds.
But with the other ones there'sone that invests in everything
that comes out from Nucleo andthe other one anything that is

(27:15):
out of Nucleo.
So we can not co-invest betweenthe two later funds.
Okay, yeah, okay so, but,however, if, like, there was
some company that but we have toinvest in the same state, same
moment, same financing round.
So if there's a company that'sbeen invested already in a fund,
I cannot come afterwards onboard, except if there's someone

(27:36):
that is leading.
That is not me.

Okay, what happens if, like a company
that's not on the travel sector,for instance pivots, and now
there's travel, and then itwould probably like how do I
invest here, Like from the fundthat is already invested in, or
I can invest from Palladium aswell?

That's easy because Palladium actually is a
corporate VC, so we look forfitting with the corporate
Anything that comes on travel.
We first validate if they maybe doing something with the
corporate.

If they are not interested in that,
then it comes to the elephantand circling back to M&A,
because it's something thatshould be in everybody's heads
right now, because otherwiseyou're not going to make any
fucking money.
If you create a startup, it'slike sell the company, right?
So are you operational on thecompanies that you have invested
in?
How do you help them?
Is there any sort of likeservices that you offer to the

(28:28):
companies?

I said I started divesting.
So actually I inherited aportfolio of 10 companies and I
had a mandate from the LPssaying you have to divest.
So you have to go and work withthe founders because some of
them were really accommodated.
It wasn't a great portfolio.
There were good companies butthere was a bunch of very
difficult companies to exit Anyparticularly good.

(28:54):
Good, there was Smatics which isan ad tech, it was pretty good.
But then I had companies onbiotech, which I don't know too
much, and there were companiesthat were kind of the zombies,
so companies that were with nicerevenues, nothing exciting for
someone to even.

Now that you like that, because we
know it.
It's kind of like an unspokentruth about VCs, which is, you
know, initially they're alltreated equally.
You invest in all of them, butyou see, the best performing
ones are like fuck it, we'regoing to double down on these
ones.
The other ones, no one sayspublicly, we'll let them fall,
but this is what happens.

And everyone's got different strategies.
So don't take it for grantedthat the whole sector works as
we work.
There's people that decide okay, those ones that are not going
to be giving more, I'm going tobe spending too much time for a
very low return.
They just leave it at them downthere.

(29:57):
Or even we have a put option togive our shares to the founder
by one euro.
So this type of things happen alot.
That's through the differentstrategies that when you see
that you may be recovering atleast what you invested, then
you have to consider if it'sworthy to help on the company to
exit and struggle on findingsolutions.
And I'll put you an example,because I'm of this type of
investor that works and tries toexit any single company, Doing

(30:22):
things like working with thefounders, identifying if their
technology is applicable toanother sector or another
vertical, creating a secondcompany or a spin-off of the
company, selling that asset,let's say, getting liquidity in
the company and being thefounders in the same company,
being able to repurchase ourshares.

(30:43):
So these type of things, thatmeans the VC working with you to
create a path to the exit.

But what kind of people do you have
in the fund to be able toexecute on this?
Because you need to have, likesome, you know, founding
experience.
Not being purely an analystcoming out of BCG or McKinsey
and stuff like that, but havinglike some real founder or
banking, even banking strategy.

That's kind of the profiles that we combine, so
having banking profiles or M&Aactivity profiles with people.
That is basically entrepreneurswe have.
Apart from the fourentrepreneurs that we are
leading the company, there's abunch of venture partners, that
it's people that actually helpson following up the companies.
Just for instance, in thisEncomenda 2 fund, we are

(31:34):
planning to have 40 companies inportfolio For the three of us.
That's a lot of companies thatwe should be following up from
different verticals anddifferent technologies.
What we've done is creating anetwork of people that helps us
and then even does that thefollow-up of the companies, or
is the board member thatrepresents the fund?

and how about in terms of the
competition that sotraditionally?
We all know the?
We all know the story that umvisas.
In Spain, they used to be likereally traditional, conservative
, old-fashioned, if you will,just recycled bankers.
But with the coming ofinternational VCs, you know so

(32:17):
Atomico, while they didn't havethey've never had an office in
Spain, they had some people onthe ground, in Madrid, for
instance.
So Target Global has had anoffice in Barcelona.
Briga right now has an officein Barcelona.
So if these internationalplayers start coming here
investing Creandum, what's theother ones?
Indico, probably A bunch ofothers, like from Typeform,

(32:40):
travelberg, all of thesecompanies created by or
co-founded by an expert.
They brought internationalinvestment, so they reshaped the
rules of VC in Spain.
How do you see this competitionfrom your perspective of being
a local?

We actually love it Okay, we love to coinvest.

It's more expensive for you, though,
right.

It's more expensive.
But we love to co-invest withpartners from other countries.
That brings a lot of value,having kind of the national
player with the investor fromanother, because we can help the
companies here.
Being realistic, we can behelpful, opening doors and
introducing a customer,introducing someone to hire here

(33:24):
in Spain but not abroad.
So having another fundco-investing with them, that's
great.
And actually the ones youmentioned we try to share with
them and we share a lot of dealflow opportunities.
So that's really on the otherside.
So, and we try to foster thatactually ourselves, we create
investor meetups and we go todifferent countries in Europe to

(33:46):
have meetups with other VCs,actually to try to force that we
co-invest a bit more.

Yeah, because some funds are maybe not
used, but they collaboratereally closely with bigger funds
as sort of like sourcing funds.

Right, we're kind of the sourcing for them.
Again, we are here on theground, let's say so.
We know and we may have somelink to entrepreneurs, we may
have some references from theentrepreneurs that they may not.
And we actually, when we investactually out of Spain, we do
the same.
We invest mainly in Portugaland south of France as well, and

(34:23):
actually when we do that, wealso try to find someone that
leads in the country.
So we are kind of this sourcingfor them.

So when you really want to get into a
company and the company is sohot and you want to get into it,
do you actually use thereference like oh, we actually
source for this, like Sequoia,for instance.
Or you don't do that, you don'tdrop names, we don't do it
Sequoia, for instance or youdon't do that you don't drop
names.

We don't do it.
It's actually it comes, it'scase by case.
It's quite tailor-made.
It depends on the on thecompany we try to.
What we struggle is to identifywhich is the best partner on a
company If.
If we are leading, then we tryto to have someone joining I
know who with who I want toco-invest.
It's 20 years in the sector, soactually I know and I've been

(35:08):
co-investing with many people,and there's someone that I know
it's difficult or it's tougherto be on the board with than
otherwise.
So actually we are the onesdeciding and trying to make for
each of the cases which is thebest partner and trying to bring
different expertise, becausefor having someone that does sit
in Spain exactly as ourselvesand probably has the same

(35:28):
network, doesn't make anydifference to the company.

Yeah right, one of the things that I
really noticed that kind of likechanged the rules is
traditionally in Spain all VCshad never operated a company or
they were really small companies.
There was never a VC in Spainwith a really big exit.
Probably the only one up untilrelatively recently was All Ivan
right Because they sold tickets.
Yeah, actually Antemipata whichwas a Navidad.

Roja ice cream.

Yeah, exactly A little bit later.
But compared to other countries, when you see, like
traditionally I don't know, it'skind of like maybe it's in the
dna of the us some founderscreate three, four companies,
sell them, become vcs themselvesand they kind of like want to
give back, whereas here's like Imake good money, I sell the
fucking company and I retire andI just invest in real estate.
That's something much morespanish.

(36:16):
How do you convince people withbig exits to join a vc?

actually that was what happened.
We have uh with in fund I have.
So it's great to have Javier deRiva, which is the CEO of
UserZoom.
Actually, it was the case.
He actually sold the companytwo years ago and he was mainly
investing in real estate untilhe said okay, I'm getting bored,

(36:40):
I want to do something, but Idon't want to come back to
having the whole pressure ofbeing an entrepreneur.
So I think VC is a good pathfor them.
It's not actually that we haveto convince them.
It's something that comes quitenaturally for successful
entrepreneurs, really verysuccessful entrepreneurs that
want to be in contact with otherentrepreneurs but don't want to

(37:03):
have the pressure of being infront of you.

Okay, a couple of quick questions
before we wrap it up.
One of them is like what is anynotable mention in your
anti-portfolio?
So, for those who don't know,anti-portfolio is a company you
passed on and has made it reallybig right and you want to be
proud of.

I almost invested in Uber that I passed on uber
right so, but I had the chanceto actually there's a lot of
them, um, but, but it was not somuch my anti-portfolio, it's
not so much so my, myanti-portfolio.
But I wasn't able to convincemy bosses there because I wasn't
deciding the decision, uh, butactually in la nevera rojo.

(37:41):
So the guys of Samaipata weregood friends since I was an
analyst back in so many yearsago.
I tried probably not too much.
I put in too much effort tothat because actually never
succeeded on convincing thepartners of the fund to invest
in them.
So that's one of the biggestanti-portfolio I've got.

(38:02):
Trovit is another one Iinvested in.
The competitor, it's Nuruam.
That's the company that I saidI had to struggle to make a
spin-off and getting out of thecompany.
Actually it was wronginvestment.
They were great guys.
I'm still good friends withthem, but actually Trawit was
the one making a lot of moneyand they were just doing good.

What's the kind of company that has got
a terrible, fucking terriblewebsite and you're like this is
never going to work.
And then they, they sell for somany millions.
It's not even funny, Right LikeCraigslist in the U?
S.

But you know, yeah, I don't know which one to say
there was a no there was anotherone here that sold to eBay.

If I remember correctly, there was
something like, something likewhat was it?
Another Craigslist in Spain.
Maybe somebody can help me, butanyways, don't worry.
The other thing is, there'sanother question we always ask
to everybody is what has beenyour most expensive fuck up, and

(39:05):
can you quantify?

Speaker 4 (39:05):
it with money?
Here's another question.

We always ask to everybody is what
has been your most expensivefuck up.

And can you?

Àlex Rodríguez Bacardi (39:12):
quantify it with money?

Yes, the second part is the best.
I said I created the companyeight years ago.
For the first five years, Ithink, we invested in another
company.
So as an entrepreneur, Iinvested in the company
alongside with my two partnersand we invested between the
three of us half a million euros.
So we get debt for that.

(39:33):
I don't have such a big amount.
We created a whole bunch ofteams.
We created so big overheads inthe company because, I said, we
raised 40 million euros and wemisconsidered all the legal
stuff we had.
It was for a fun investing inSpain and the UK.

(39:53):
So we created offices in Spainand UK.
We had team in the twocountries, so working remotely
with the guys in the UK, westarted the scouting
opportunities and then Brexitcame.
In the UK we started thescouting opportunities and then
Brexit came and then some ofthose LPs decided that we
weren't too British to invest inus if we separated into two
funds, in the Spanish fund orthe British fund, then we

(40:16):
weren't too British to be thereand we weren't too Spanish to be
here because we had the wholeteam in the UK.
So that led to not creating thefan and we spent a lot of money
.

How much money Come on share?

I mean, I've been drinking a little, Half a
million, half a million.

Jesus Wow Kate.

For a managing company.
It's not a startup.

It doesn't make the top 10 of most
expensive mistakes, but it'sgood.
It's good, thanks for sharing.
I mean it's important that weshare.
We don't.
I mean we don't share this kindof stuff just to make fun.
It's kind of like, hey,everybody fucks up, like
everybody, even people who deal.
That was the fee of the M&Aboutique.
Imagine how big the deal was toget that amount of money and

(41:11):
they kind of like got drunk onenight and they slept on it and
it just slipped away, you know.
So that went to kind of liketop 10 of most expensive
fuck-ups.
So I mean, thank you forsharing.

No, I would be investing much more now on my
fund.
You know, the bad thing is thatat the end you invest a lot.
It's great because a great teamcame from that.
Yeah, we were a good school,nico, which was the name that I
created for the managing company.
There was people that is nowrunning their own funds, so they

(41:43):
learn a lot.
We paid great wages and we werea own funds, so they learn a
lot.
We paid the great wages and wewent to school.
So at the end, how about, like?

what is the strategy now for this year,
seeing that in the last 24months 30 something we've been
having a changing landscapeEvery three months.
There's something going on.
There's a fucking war.
There's like borders closing,there's a decline in the stock
or like something in the market.
There's something going on.
There's a fucking war.
There's like borders closing,there's a decline in the stock
or like something in the market.
There's a bank shutting down.

(42:09):
How do you plan for that?
What else?
What else Like?
How do you plan for that?
And you make annual planning.

Not really, so now it's what I'm seeing.
I started managing the traveltech fund before COVID, so all
my portfolio was travel techcompanies Good travel tech fund
before COVID, so all myportfolio was travel tech
companies.
No one was traveling, so that'sgreat.

So you had Exotica right on the fund.
I have Exotica.

I've got Teamfly, which is for flights.
All of them were great revenues.
Next month, zero revenues.
That's great for studyingmanaging a fund.
I created a fund and neverpredicted Brexit, so lockdown,
so no word.
Now that I've created this fund, so we've reached the first
closing, we're giving anestimate of how many years we're

(42:58):
going to be investing and howmany years we're going to be
divesting, but now we always putlike a plus one, plus one on
investing, plus one in divesting.
So one more year maybe, becausewho knows?

There's the margin, definitely Okay.
So kind of like the last twoquestions.
First is how can we help you?
In the spirit of startup brand,we always try to help everybody
coming.
How can we help Merced andEncomenda Capital Partners
Spread the word and EncomendaCapital Partners Spread the word
.

So, as there's a scarcity of funds, we have a
pretty new fund just to bedeployed during this year and
the next two years.
So anyone that and we invest inthe really early stages and we
love to see the prices when theyare really really starting.
We try to be helpful and try tovalidate with the market, which

(43:44):
at least we think that it'squite win-win.
We try to validate with themarket, which at least we think
that it's quite win-win.
We try to identify a potentialcustomer for you, try to
validate it with them.
It helps us on our duediligence but actually you may
get a customer which at the endis better.
If you can go through customersand never need an investor,
that's amazing.

Yeah, I mean probably we share the
vision and also remember thename.

So if you meet really someone with a high net
worth person that needs toinvest in a fund, I'm open to
having someone joining to thefund.

There's a lot of these people here.

Obviously they want to invest in funds, yeah, but I
know that's amazing guys, atleast not for these funds, For
the next ones they exit.
They become high net worthindividuals.

Just remember my name Get money from
her sell your companies, maketons of millions and then invest
in her next fund.
Exactly, oh, pizza, okay.
Last question, the questioneverybody has been waiting for,
the question that we didn'tprepare for.
Nobody prepares for thisquestion.
It is everybody has got auseless superpower.
It is a superpower.

(44:47):
Purse for this question.
It is everybody has got auseless superpower.
It is superpower, it's uniqueto yourself it's fucking useless
but you do it super fucking.

Well, what's yours okay?
Uh, super fucking so useless,useless I know how to play piano
, but I broke a finger.
I was thinking about that, soI'm pretty good.
I spent many years studyingpiano playing and after, when I
was pregnant, I just pulled andbroke my finger.
So it's kind of a useless powerright now.

So playing the piano with one
finger, it's without that that'spretty difficult.

I would say We'll accept this one.

Àlex Rodríguez Bacard (45:25):
Everybody please give it up for Marce.
Awesome Actually.
It was pretty fucking intense.
We went deep on certain things.
Usually we don't get thistechnical.
Somebody like we got a mic here.

It was pretty boring for them.
I was only scared on that.

No, now we will get the real difficult
questions from the audience.
We're going to toss around thismic over here.
I don't know if we can have themic.
Yeah, Somebody who wants themic?
Just toss it around.
Rules are one question perperson and otherwise we're going
to boo you and say your name.
Oh, it works Really.

(46:05):
Like this Whoa, that's cool.
There's no COVID anymore, don'tworry Hi.

Speaker 5 (46:11):
How much you invested in this startup you mentioned.
On which one you say youmentioned like AI, early stage,
no profit for now.

Yeah, in this company actually we wanted to
invest 250,000 and theentrepreneur, the founder, has
decided to let us only 50,000.
Oh, wow.
Yeah.

They're playing it hard.
That happens Okay.
Thank you, good question.
That happens Okay.

Speaker 4 (46:36):
Thank you, good question Next up Okay, this
question is not for Mercy, it'sfor Alex.
Mercy, thank you for beingbrave enough with all these
reverse solicitation rules, andyou're in stage of closing funds
.
So, yeah, it's a brave one.

(46:56):
But for Alex, I have a question.
You said that for you, if VCsinvest in a startup on pre-seed
stage, it's like not good foryou.
Why?

For me it's a sign that they were not
able to get only BAs, andusually for a business angel
it's better if only businessangels co-invest in the round If
a VC gets in the mix.
Not saying all the VCs are bad,just some right, I mean all of
them.

But the other way around.
If it's only business angelsand I'm saying this exactly the
same there's business angelsthat have no idea or tend to put
valuation really high.
So it's better when someonewith a bit of idea on multiples
on on something that is kind ofthe standard in the market for
some type of businesses, makessense that's a good point.

I would first see like, oh, these come
like.
For instance, I I said somecompanies in my portfolio.
Some of them they're raisedaround right now.
No, vcs are like good, some ofthem are like we had a VC, but
it's this VC and the rest ofBusiness Angels we're all really
super fucking good, great.
But if I decide to invest, Inormally audit and check who the
other investors are and I'mlike I see no one I know and I

(48:12):
check their LinkedIn profiles.
I'm like you know mom and popkind of investors that have some
money but like they're reallythey are not well known.
I don't know what kind of valuethey would add to the company.
I will also not invest in thiskind of company.
So to your point yeah, somebusiness angels are really good
at checking and making likegiving more authority to the
deal.

And I've seen, probably from during the last
year, business angels that arereally well-known guys but that
have never been business angelsreally active, big in value, but
are big names that sound somuch and it's pretty cool to
have them on board.
They try to kind of create anexcitement and everyone wants to
join, but actually never bringany value to the company or it's

(48:54):
a small amount of their totalcapacity, so they are investing
like peanuts for them or somereally, really, really famous.

Be up, not gonna say names, um, but you
see the cap table and theyinvested 300 euros.
It was like motherfucker, likeeverybody could invest in the
company like that.
But just because they're super,famous.

I've seen that many times last year.

Many times.
I'm not this, I'm just sayinglike it's kind of a trend.
Or VAs that they invest andthey sell services to the
companies they invested in sothey can like.
So you know it's not like VAscould be bad.

Never give shares for any service.

No, exactly Just you know, oh no,
exactly Just you know, oh no nopeople who just like that's
people who pay for it.
No, no, no.
Like some people to like putmoney.
They invest like 5,000, 10,000,whatever, but they're like day
one they're like, oh, by the way, oh, you got to hire people.
I got a pet hunting company,let's hire services from my
company.

(49:53):
So yeah, that was a really goodquestion.
Thank you for that Good.
More questions Toss it around.
Don't worry, it's not going tobreak.

Speaker 2 (50:03):
Hi, my name is George Pop.
I would like to ask you, Merce,if I am a private person in
Barcelona, why specificallywould I invest in your fund and
not some other investmentvehicle?
And let's say, take a five-yearperspective what kind of

(50:23):
returns do you realisticallythink I could expect?

So the reason to invest is basically the only
thing that differentiates one VCfrom another one is the
experience that the partnershave.
If you put the experience ofthe partners of this new fund
all together so that combines myexperience managing funds,

(50:49):
carlos Blanco investments in thepast and Javier Dariba
investments in the past thatmeans 250 companies that we
invested investments in the past.
That means 250 companies thatwe invested between the three of
us and that makes a return of a25% IRR for the company.
So it's three times what weinvested, is what we got in
average.
And if you put these companiesin terms of every 10 years, so

(51:12):
if you put kind of the bin dashfor the companies on all of them
, we have returns.
So all those companies thatinvested from 2000 to 2010 and
so on, we had returns.
That doesn't mean that wethat's what we're going to be
getting on this fund, but it'swhat we try and that's what we
are pitching to the investorsthat we're going to get three

(51:34):
times what we invest.

That's a good question, thank you.
Next up, we have time for acouple more.
There's one in the back, no toofar away.
Come on, toss it around, goahead, it's not going to break.
I mean you might break somebody, but Okay, ooh, we made it.

Speaker 5 (51:54):
Yes, yeah, amazing.
Hi, my name is Duncan.
You touched on marketvalidation.
My question is what advice doyou have for validating a market
where you're generating a lotof high resolution, very unique
data that's generating value fora specific customer base that
you can project, but there'ssort of this wild card where, if

(52:15):
you can combine that with otherdata sets, you could tap into a
much, much bigger market,potentially much more valuable
company, but that's less known.
That only becomes relevant onceyou hit a certain size.
What advice would you have forvalidating that type of market
as a potential multiplier onwhat you're building?

Oh.
Well.
Yeah, you're building.
Oh, wow, yeah, you're going tobe helping.
Right now it's so deep, so deepon the question, because
actually I guess you arethinking about a specific type
of company building something.
It's difficult because it'sreally tailor-made.
So for each company, we try toidentify every project that fits

(53:00):
to us.
Which is the potential customer.
We struggle ourselves to thinkif it should be applied to other
particles, sometimes even toconsider if they're going to be
getting in conflict or potentialconflict in the future with
other portfolio companies.
So that's one of the thingsthat we spend time on on trying
to validate if their technologyor their solution applies to

(53:23):
other things.
In terms of validating themarket, it also depends on which
type of project.
It's true that the singlecustomer doesn't give us really
the odds on how it's going toperform.
That's why we try to contactthe customers that the company
provides us, the ones that arerunning pilots and trying to see

(53:45):
which is their feedback, butalso trying to identify
ourselves potential customersfor the company.
That's what we do, and itdepends on the person.
For instance, one of thecompanies that we invested.
They validated their marketapproach with providing with a
freemium model to theircustomers.

(54:06):
That's great.
We've validated there's amarket for that, but it's not a
paying market.
So now our validation goes ontop of that, trying to validate
that someone is going to beplaying for the new features
that they are launching.
So it depends on each projecthow you validate that it's going
to be big enough for us.

I think we can agree that all the
questions have been superinteresting.
We can take one last one,really quick, really quick.
You got 10 seconds to ask it.
She's got 30 to answer 10seconds.
No, just let's bring the dice.
Come on, come on, let's get it.
I mean no pressure, but you'reseparating us from the beer and
the food and I'm already gettinganxious.

Speaker 4 (54:46):
Go ahead 10 seconds, very fast and simple.
So everyone is talking about AIand like SaaS and whatever.
Would you also give like moretraditional companies a chance?
Maybe a company like that orsomething?

We invest in traditional companies.
Actually, with the fund thatinvests in the venture builder.
They are launching projectsthat come from food tech, for
instance, and I believe there'sgood opportunity there.
There's a lot going on in termsof food tech, for instance.
We don't invest in things likehardware because of the timing.
I've said that we spend five toseven years to exit the company

(55:27):
.
If we go to the hardware or bignot to say biotech or
semiconductors, those types ofthings that it's far from the
market, if there's a lot ofresearch to be done, then it
takes a lot of time for us todivest.
That's why we're excluding that, because otherwise our funds
would be lower than ours.

Thank you for the assist, because
Henry is a little bit shy.
He didn't want to ask why woulda VC not invest in a company
like this, right?
So I can give you 10 reasons,but I want to hear one.
Or why would you invest in acompany like this?
What are you lookingspecifically in a company like
this, besides having a realbusiness, by the way, I know.

Actually, if you cut the pattern and there's
something that no one may bedoing exactly the same, that
would be an issue, but it'sdifficult to find barriers to
entry At the end, anything thatgoes to customer and it depends
a lot on market strategy and itmay be even a trend that's
difficult for us to invest.

Yeah, you would go more for like
strategic investors, more likecorporate.
Exactly.
Like maybe like EstrellaGalicia, they have fund.

maybe like something like that yeah, exactly as well
, as I was running the Paladingroup, which is a corporate VC.
They look for other things.
They look for fitting, theylook for bringing their channel
of distribution to the companies.
It happens the same thing withthose ones that come from big
productors.

Awesome .
Well, thank you very much.
Thank you, marce, it's beenphenomenal.

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082 - Road to profitability and AI, with Mercè Tell (Co-founder @ Encomenda Capital Partners)

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}082 - Road to profitability and AI, with Mercè Tell (Co-founder @ Encomenda Capital Partners)