carmen alfonso rico / cocoa ventures

Fabri Cara: Cocoa is built around the power of small. I don't think you ping the fan who owns 15% of your capital so they come to hang out with you on the weekend, right? It's a natural thing. Your business rules or rules of life is nature basically.

And I think that Cocoa works from a fan return math as well because it's small. So I've always been vocal around the fact that if Cocoa is built around my superpowers and That requires small. If I raise a big fund that suddenly needs to take into account ownership stake as a constraint in in their investment, it's gone. The power of Cocoa is gone.

I realized end of 2020, I was living this bipolar world in which I was investing $50k dollar checks into pre-seed companies in Europe, getting into any company I wanted, building captives, collaborating, not competing with my friends. And on the other hand, I was writing $25 million checks and competing with my life for 15 to 18%. And I realized that if venture is a business of access, being small to your point gave you the best access. More than that, I also realized that I love that more.

That I'm very driven by building win-win situations. I don't get a kick on winning against somebody else. No, I didn't know what to do because. All I had learned in venture up until that moment was steak, steak, steak, steak is what matters.

I'm like, well, all I cannot have is steak. Because if I have ownership stake, my kind of power that's unique and also all I enjoy to do goes away. But how do I build a fund without optimizing for ownership stake? And it was honestly like a proper question.

I wrote fund returner equals fund size divided by ownership stake Alexa. And I kid you not I should tattoo that the formula because it just changed my life. It was like this venture you can be in tech, not being technical moment because I was like, wait, of course, like stake matters and math is math, right? But it's relative to fan size.

So if I'm willing to keep the fan size small and accept the trade-offs that come with that, I can actually invest like I like it and make the fan economics work. And that was like Massive aha moment. Season four, episode eleven. Today we're talking to Carmen Alfonso Rico, founder of Cocoa Ventures, the founder's in-house VC.

She spent a decade as a VC inside Europe's top establishments, Felix, then partner at Blossom, and then did the thing almost nobody does. She walked away from the institutional path to become a super angel and built a fund that acts like one. She closed their $23 million fund too that's 93% institutional with three US endowments behind it. A model every institution she pitched told her it was an impossible challenge, and we quite agree with that.

San Wu, tell us more about this one. Carmen was the first check and actually ended up building the entire early cap table for a company that went from zero to 140 million in revenue and nearly 8 billion valuation in 24 months. That company was hop-in. She made nothing on it because she never sold it and she'll still tell you that that's the best thing that ever happened to her because it taught her the one idea that Cocoa is built on, which is the power of being small, being tiny on a cap table with total trust, beats fighting for ownership every single time.

She spent years learning the VC game from the bigger guys and then walked away from it to write the first check and hand founders the rest of their cap table. Let's get into it. Thank you so much for joining us today and a very warm welcome to the Slice Pod, where we uncover the stories of fresh emerging managers across the early stage venture landscape. I know you describe yourself as a VC turned angel, which we typically have the other way around on the podcast.

I'm excited to even say, and you call Cocoa the founder's in-house VC, which I've seen you refer multiple times. And I think that's one of the more charming ways anyone subscribe to fund that just close $23 million fund two with institutional US backers. You write 250 to 500k checks that precede and seat across European founders. And I know you don't lead, you don't take board seats, and this is all very intentional.

But before all of this, building Cocoa, you were at Felix and Blossom and you became one of the more distinctive voices in European venture. And I know you were a lawyer in Spain as well. Somehow you ended up in London. So I'm excited to start there.

Tell us about what it was like growing up for you and how did you end up in tech? I come from a very Spanish family, but my parents were always very ⁓ focused on languages. And Spain didn't have sort of school systems where you could learn languages. So they made the hard decision to kind of send us to Germany very early on and then to the US.

So I have always had this contradiction in me, which is like, you know, very big homie Spanish family and also always striving to like live abroad. And I think ⁓ My dad still regrets having, you know, because I was telling him it's your fault. He complains we don't live in Spain with him in the same building. And I'm like, well, you made us this way.

I just ⁓ got really lucky that ⁓ I think I had a childhood that was very intellectually open. We could read anything. In the world of ideas, everything was kind of followed. And also I think, and this is something I've realized ⁓ fundraising Cocoa too, that ⁓ my sister and me were raised With like this almost like fundamental belief that the world is equal.

Not that it's equal, it's equal in the things that we deserve. And it's almost an instinct to me that I'm not entitled to anything, but that everything that I work for is for me to go for it, right? I think that I wasn't aware up until I raised Cocoa too and realized that ⁓ it was all about kind of being myself and just trusting that. And but that's probably the most distinctive thing that I take from my childhood now, on top of lots of great food and lots of kind of Spanish family love.

Then I went back to Spain to study university because again my parents wanted to make sure I got a Spanish degree so that I could Go back to Spain. I did law and business, which is what you do in Spain when you have good grades and don't know what to do with your life. I did six years of university, which I don't recommend to anybody. I think I've been playing catch up with time ever since.

And did law and business that actually started my career in politics. So what happened was that I got really good grades in uni and Spain was at a very difficult time back then. There was a time where the Southern Europe countries were called PICs. Southern Europe plus Ireland, and it was 2013, and it was the debt crisis, and it was Portugal, Ireland, Greece, and Spain.

We were the picks. And we were being basically rescued by the IMF every day because our risk premium back then was 500 basis points. And there was lots of reforms to be done at government in education and in healthcare. And I was not a member of any political party whatsoever, but I got a ping.

From the president of Congress and who was gonna be the president of one of the regions in Spain, it's a federal state. And she offered me a job. And I was like, wait, this is not something that you sort of apply for, right? You know, like, I don't know, so let's explore.

And I did that for two years and actually realized that politics is probably in Spain at least a great place to end your career if you like it, because it's beautiful and you have such an overview of how you know a country works and can have real impact. But it's just not a great place to start your career because there are no structures to learn transferable skills. I learned a lot about human nature, but I don't think I learned much of things that I could apply outside politics.

And so I went to serve my time to Morgan Stanley. Did three years of investment banking, and that's what brought me to London. And 13 years ago, when I look at the most kind of impactful decisions in my life, was coming to London and then joining venture. I was at Morgan Stanley, like finishing my year three, moving to New York.

And a friend of mine ⁓ told me about this thing called venture, which I had never heard of. And I was like, wait, you can be in tech not being technical? One of the biggest aha moments of my life because I've always had a very kind of acute sense of opportunity cost. And so I always wanted to be in tech because I understood that even from afar, that tech was at the forefront of change and growth.

But I also didn't have any sort of tools to be in tech or any network to be in tech. When I heard about this thing, I was like, wait, finance, like, you know, numbers, I can do numbers, I can do finance in tech. And so I actually like all my stuff was on its way to New York, like in actual boxes. And I had no flat in London anymore.

But I did this very Spanish thing of looking at any Spaniard in venture. And there was this guy called Guthman who was at Index Ventures. Who very kindly introduced me to Felix Capital. And Antoine, who I'm always forever and ever am grateful and in-depth with, gave me with no specific reason to do so because I had no background in tech whatsoever.

My first job in venture at Felix Capital. Felix Capital was just a lounging and they didn't even have an office. We were crashing 83 North offices and taking North Zones, which is a European fan, ⁓ Wi-Fi. And I still remember the password was go.

big or go home. And you can imagine like twenty-five-year-old from coming from Morgan Stanley suddenly working in a place that it was like go big or go home. I thought that was like, you know, the coolest thing ever. And and that was like I basically very quickly realized that I was an investor at heart and I had found my place.

And that's basically the beginning of my venture career. I love that. It means your very first check s you must still remember like it was yesterday. Can you tell us about it?

What company was? I'll tell you two. Yes. I my first the first company I ever sourced was Papier.

I don't know if you because f I feel like state consumer and commerce enablers. And so the first company I ever ever sourced that we made an investment. So the first company I ever sourced, I still remember, was Clect, which was a marketplace for rare sneakers. ⁓ which at the that was at the time of gold, like ⁓ a few months before code.

And I sourced it because my mother was complaining about my shoes in the summer being like not acceptable and took me to a store to buy sneakers. And I just asked the guy, because I had seen people queuing for sneakers in Soho and I asked like how these are 400 euros. Like how why do people queue? And he said, ⁓ they resell them.

I was like, wait, where? He was like clicked. I was like, ⁓ my God. And then I went and sourced it and I pinged the guys, ⁓ the founders who had never heard of venture either, didn't know that there was such a thing.

And that was the first one I sourced. We didn't end up investing. Then I sourced Papier, which we did, and it was thanks to my friend Chick, who runs Ada Ventures and Diversity T VC, who introduced me to Tamor and we did that. With that, you spent a better part of a decade inside more established European funds when you walked into Felix versus when you walked out of Blossom.

What do you think had changed? the most about the European ecosystem itself. I think when I joined Felix series A's were four million. It's like crazy.

It's like ten years ago, right? when I left Blossom, we were doing like 25 to 30 million Cs, you know, like and and value some of the valuations because it was 2021. So it was that the craziness on itself. I mean, they were in the hundreds.

So it was without the AI, but it was a similar so less concentrated than it is now because it was more a macro effect of very low interest rates and lots of money in the system. But it was similar to some of the rounds that we see here. So I think that had changed. I think the other thing that had changed, which ⁓ continues to change, is just sort of how popular or contrary and it was to become a founder.

I think when I joined Felix, even me leaving Morgan Stanley for a VC was like a shock. Nobody understood. They were like, wait, you're not going to a hedge fund and you're not going to a PE. What what is even VC, right?

⁓ Whereas like by the time I left Blossom, being a founder was the coolest thing on earth already. And ⁓ being a VC was kind of very established. And I think that sort of the volume of founders and the type of profiles that became founders ⁓ had changed a lot and I had changed a lot because I still remember at Helix the first time I got a company pitching me saying that they had got a partnership with Self Bridges. You know, Selfridges the mod in London.

I genuinely thought it was the next Amazon. I was like, ⁓ my God, they got like a partnership with Self Bridges. By the time I left Blossom, I had sort of learned all the economics of the situation and stuff. So I think I was I think I always say venture is network muscle and hustle and the hustle powers the network and the muscle and the muscle is this, right?

The muscle is actually having the privilege of seeing many companies and actually seeing them evolve as well and learn from that and kind of train. It's very expensive training, but it is training. So I think I had changed ⁓ in that sense a lot already as well as an investor in my judgment muscle. Yeah, I wanna spend some real time on this one because I know the lesson you took from And ⁓ I think the biggest thing that I took away that you took away was that it was more meaningful to be small and captable with deep trust than actually fighting for like an X percent amount of ownership.

And I know that reframe is essentially the origin of Cocoa. Can you take us back into That story summer twenty nineteen where you met Johnny Buffard and he's trying to close like a tiny 250k pre-seed round for months and just can't. And I know you wrote a very small check into the company and ended up syndicating the entire round. And two years later it was valued at 8 billion.

You must have been just like constantly meeting these founders. And I'm just so curious, like what was it about Johnny specifically that made you not just write the check, but be able to pick up the phone and call. the people around you to close the rest of the realm beside him. Yeah, I think I have this ⁓ love hate relationship with Hoppin.

I it's now as I grow up, it gets more like love inclined. But I always say I owe Cocoa to Hoppen. But so this came I made no money in Hoppin because I also didn't sell. So ⁓ and and my husband always says that I say that I owe Cocoa to Hopp.

Cocoa to Hopping and that that's enough to make myself feel good about it. But it it's genuinely I don't think that Cocoa would exist without hopping because I wouldn't have the insight that I had, which I'll go back to. ⁓ but I had so many hard learnings, ⁓ hopping that were gross but still painful. And I'll go through them.

So I met Johnny because a business angel called Andrew Bites asked me a favor. He was like, Can you just go meet this guy? He's raising to fifty K way too early for ⁓ for you. It's pre-launch out of scope.

But like I think he has something. Would you mind? And so I met him. I mean, like, I was sort of a junior VC, like I had been inventor for like three years.

And I still remember like he came to here in my office. And it was a Friday, five PM May, super sunny London day, like today. And I was like, Great, last meeting and weekend. starts.

This was also before I had my own fan. So I actually had some sort of weekend notion of weekend. We sat there till like eight PM. He was clearly very magnetic and very complex.

But more than anything, he showed me this very, very, very early demo of the product that he had and the way he spoke about his product, the passion he had on his product, but also the simplicity and elegance of the product, but of the thinking that was reflected by product, I was just really impressed. It was everything that a BC would hate. Events and ticketing. Literally like untouchable, right?

Hence him not being able to raise anything for so long. But I just, in a very natural and not thinking much about it, just started to make interest. And and I made a small investment, but like basically 100% of the captives ended up being my intro, except for this angel who had connected me to them, including Sitcamp. So I met Johnny in May.

Sitcamp committed like after the summer. So it took us a long time to actually be able to close that round. And the insight for Cocoa is that because I was so small, right, in his captivity and I knew like who to connect him with, I introduced him to a lawyer, I reviewed his termship, I Like build the actual exos presid the cap table. And my aha moment was I was building a very unique relationship of trust with him.

And I figure I could do it because I was small. And that's the insight behind Cocoa, is that there is power in being small, in the relationship of trust that you can build with founders. And I owe that to Hopp. And I didn't think I was starting a fan back then at all.

But I took that and started to do lots of angel advancements. And so by replicating this situation a few times, I was like, there's something there. And now there were many other hard learnings. And first one, it's actually not even the selling, is that I was very close to a company, PreSEET, and then seed.

I introduced him to the seed, ⁓ to Excel, who led the seed. This is all pre-COVID. But then it went to Series A, Series B, Series C, and it sort of escaped me. And I wasn't part of that conversation anymore.

I would talk to Johnny from time to time. But I didn't manage, I was I guess too junior also and too young to capture the full value, not only financial, but of the experience. Like I think a Finn Murphy, who you know, who's a great friend, he wrote this tweet the other day that was fantastic. I think businesses don't do this for the money.

You do it for the kind of cultural relevance. of it and missing that experience of the company that goes from literally zero in everything to 140 million ARR and seven point seventy five eight billion in valuation in 24 months. I wanted to be in the room, but I was in the room so that made it really painful. And the other one was that and this it took me a long time to come to terms with.

Hopping was an incredible precedent investment. It was a horrible serious investment. And to come to terms with that was not easy because for some time I had put together Hoppin's pre seed and the seed. It just so I was like amazing in an industry that's so like track record based as venture, right?

And so it was incredible. And then suddenly Hoppin flop and it got sold. And then suddenly, like you could not use Hopping in your kind of track record because it wasn't a good investment. And I just battled a lot with it.

I was like, wait. At the end of the day, as an investor, how I need to judge my ⁓ decisions and learn from them is not on the output, because there's so much on the output that I don't control that can be misinforming one way or the other, because I might make a bad precision that like actually goes to do well for luck or for whatever reason. To me, what I strive to do is to take consistently good decisions with the information I have available at the point of investment. And that's what I constantly go back to and judge myself.

And through Hopping, I actually realized that Hopping was a great precinct investment because he was an exceptional founder who took this company there with COVID, but COVID can as well kill you the same way as it can lift you, right? You need to be a special type of founder to write that tsunami and not get engulfed by it. It was a really bad CRC investment. So it was a really bad decision not to sell.

But it was a good precinct investment. And I think that that for me, in this sort of whole journey that we go through to become like the best investors, we can be and learn from every ⁓ investment decision that we make. And it has informed a lot of what I do at Cocoa. I think Hopping and Eleven Labs, which I passed on, are the two biggest impact in how I think about making investment decisions and what not to do and what to do that I've ever ever had.

We'll get into that right now. Actually, that's a perfect segue. But I think it takes a certain type of individual to be able to go through something very painful like that and not internalize it. I'm sure that there were moments of that, but to spin it around and turn it into something beautiful where you're leading Cocoa and continue to do things your way and compounding into the things that you're really good at, which you learned through that hopping lesson was getting there really early.

And being a first believer. You know what's interesting though? I think that I have many flaws in my character that I ⁓ certainly work on and need to work. But there's one thing I which I think is positive, probably difficult to deal with around me, but positive for me, which is my relationship with mistakes.

And it's because I need to make I'm so value driven. I think that I can tolerate like I need to turn everything into a valuable experience to kind of tolerate it. And ⁓ mistakes for me, as long as we extract the growth bits of it, suddenly become healthy. So I have a healthy relationship with mistakes because I take value out of them.

This is why I can so openly also I can be very brutal in all the misses I've had and all the mistakes, but it's because there have been opportunities to learn. And I think that I obsessively look for the mistake. But it's a survival kid, just need to make something positive out of something that is obviously and face value not positive. And that's what I try to do with every experience that is hard.

Yeah, I love it. Well, let's get into the thesis now with Cocoa then. And now you're looking to back killers at the heart. I'm curious to understand where this comes from because at Pre Seed, there's nothing to underwrite except for the founder.

Beyond what killer with a heart means to you, what are some of the characteristics that you are really looking for in a founder these days? Yes. So a killer with a heart. Because it's very kind of sort of bottom-up.

I am very proud of the interest that I make with people. I spent lots of time thinking about what to in because I think that that sets the ground for great relationships and I love to connect people and let them go build value themselves. And I use that for two specific founders. Every time that I ⁓ met them, I was like, he's a killer with a heart.

And it was just a way to define them. And then so many people came back being like, This is such a great way to put it. And I was like, well, that's actually the founder's way back. And then sort of we incorporated Killer with a Heart into it.

So Killer with a Heart has like two dimensions to me. One that is personal and own learnings, and then another that's what I've learned works, or what I've learned you need to have to even stand the chance to build kind of a venture outcome kind of company. And so I'll start with the personal bit. My biggest learning from Morgan Stanley was that you got to be a killer, but I never wanted to kind of lose my heart.

And so it was like, how do you combine this idea that the world demands you to be a killer for certain undertakings and that you basically need to be a beast, but still not losing what makes you a wonderful human. And I've seen that trait in many founders and I think that it's actually very powerful because they're beasts, they're animals that can But they will also have the empathy and the EQ to lead and to get people to follow them and to build movements instead of just companies.

And so that's kind of the killer with a heart. I always say like life's way too short to live without a heart. It's just not fun. But now going one level below Killers with a heart, basically I always say like crazy beasts or crazy beasts that build very weird stuff that's hard to build.

So if you think of it as like crazy, weird heart. Right. I just feel very attracted to people who choose very, very hard problems that are not the obvious ones to go after. I always use this example of Thomas, he's the founder of a company that does machine learning applied to metals, to process engineering of metals.

And he raised this round. Now he's doing very well. And obviously physical AI and metals and everybody is super excited about it. But in February twenty twenty two, people were like, Wait, still?

What are you talking about? And it was Relatively difficult to raise that pre seed, but when Russia invaded the Ukraine, energy prices in Europe rose so much that all the steel plants closed down because it made no sense to keep the lights on. And socially, you're a pre seat founder who needs a steel plant to develop the product, and all steel plants in Europe are closed. So, what does he do?

He went to Hamburg. There's a big arcelor metal factory like plant there, steel mill. And he convinced the head engineer to let him turn on the factory from 1 a.m.

to 5 a.m., which was the cheapest window of energy prices. And he's left at the plant.

And he took two engineers, moved to Hamburg, and worked from 1 to 5 a.m. turning like with the like steel mill on. Like that's an absolute killer with a heart.

It's like a somebody that basically is just not gonna stop because building this company for them is inevitable. It's like there's no world in which they don't build it, right? Also, there is Walter from Fractile, which is a chips inference company, right? ⁓ now chips are hot because everybody has sort of agreed that compute is the bottleneck that we need to solve right now.

But chips weren't hot at all, up until like three months ago, basically, right? And Walter was so convinced that inference would be the biggest opportunity and NVIDIA wasn't structurally built, the GPUs for inference, and that he was gonna be able to pull it off. That I remember him having just a couple of months of ⁓ runway and having lots of people on his favor. It's just this calmness that you don't know how, by the way, you have no idea how it's gonna happen, but you know it's gonna happen.

And so I think this idea of these killers with a heart that are just it's not even obsession, it's like inevitable. To them that this company is gonna happen and they're just gonna do everything that's humanly possible to make it happen. And that are also good people. I think that that combo is very powerful.

And I know to find these killers of the heart, you're very often between San Francisco and Europe. Can you tell us why that's so important to you and why that's more of a gap that you're filling here that nobody else in European venture is thinking as a priority of doing? My whole thing with SF has been a full journey. So I first went to SF a few years ago and spent time there trying to figure out if it made sense to invest in the US or not.

I concluded that there are plenty of exceptional funds in the US and that it's very hard to argue that I would have a right to win in the US circuit. What I realized by spending lots of time there was that Europe has exceptional talent. I honestly think that Europe's raw talent, pre-being a founder of any kind, potential founder talent is as good as the US, but the US is a better place to build a business. Undoubtedly.

And the challenge is that that compounds day after day after day. And this is before the world concentrated in the West Coast. And so I started to spend like one third of my time in SEF to build follow on capital relationships. Because my thinking was well, I invest at Preceed very early and these companies are gonna have to come to the US as soon as possible.

So Walter's in the US, Thomas is in the US, the guy by now he's left Hamburg and now lives in Austin. Like it's they've all sort of done that journey. And I wanted to be able to support them as in-house VC, same kind of value prop that I have in Europe, but in the US. And for that, you need a network.

I started spending lots of time there. That was also very useful to me to set the bar. I think it's very crazy to invest out of Europe, not knowing what's going on in the US, even to just calibrate. ⁓ and then last year, I realized that Pre-seed European founders were just going to the US directly.

They were just landing in a CF pre-raising in Europe, right? Traditionally was you raise in Europe and then maybe you go. Initially it was CSB, then you went after at your seat, but now it was directly. There was like no pre-seat like happening in Europe necessarily.

They were just trying their luck in the US and staying there if it worked. I started seeing that and I was like, ⁓ it's the great migration. I called it. And then I set up, I did an experiment, which I never set up out of offices because I don't like for people necessarily to know where I am.

And so I I did set one that said I was in San Francisco with a song, like I left my heart in San Francisco, you know. And ⁓ I then arranged like meetings with founders in Europe, with European founders, and I kid you not like one out of three was like, ⁓ my God, you're in SF, I'm in a C. ⁓ my God, I'm arriving like next week. Or ⁓ I was just there in SF.

And I was like, wait, I wanna be the welcome committee. And so now I spend like two weeks a month. I have a flood, I have like everything. And it's just like literally to welcome them and do the in-house VC value proposition, which I have in Europe, which is based on Cocoa will bring you network, all the VC hacks on some EQ, because being a founder is a very lonely place.

All that gets multiplied in a CEF. if you're not from a CF, right? Like network is harder to access, you know less of how the market works and you're more lonely than ever, for sure. And so that's basically what I do now.

I spend half of my time there and I'm the welcome committee. That perfectly covered my next question I had, which was how do you work with them as an in house species that you've been alluding to, especially when you're coming from a country that is so different from what you're used to? It's nice to have a friendly face to welcome you. You know, it goes a long way.

The privilege. I would say I'm the luckiest ⁓ person. It's absolutely my privilege. I was in the US last week and I went for five days because it was out of kind of the plan and I ended up being there two weeks.

I have an angel of a husband. I always joke I can't divorce him anymore ever. But because he allows me these kind of decisions without any drama. Like he's giving me the gift of no drama and just endless support.

And and I'm forever grateful because I left for five days and I came back two weeks after. Right. And all I got was words of support. But basically, I was flying from New York to London.

And then one Cocoa founder who I barely ever see told me he was in New York. I was like, ⁓ I'm staying, having dinner with you. So I called my husband. I was like, I won't be there tonight.

I'm not flying tonight, I'm flying tomorrow night. And he's like, Perfect, don't worry. And then another Cocoa founder who had raised a massive round told me, Hey, I need to stay in a CF and because I have a meeting on Monday. Are you by any chance?

Here this weekend so that we can hang out? I was like, absolutely. And so I flew from New York to a CF and then spent the weekend with this founder. But because I understood that it's a, first of all, it's a privilege, and obviously, like having access to these founders and spending time with them.

But I also know how lonely it is. And I learned that from Cocoa. And I will always remember when I got my first US endowment as an LP in Cocoa too. And I knew that that changed a lot of things.

I was in Jacksonville, Florida's airport by myself, like completely by myself. And it was like 7 p.m. or 8 p.

m. So everybody in Europe was already like sleeping. And I had to wait till like this 11 p.m.

flight to LaGuardia, you know, and I felt this like insane kind of joy and also insane loneliness because I was like there by myself at the peak of like, you know, what I had wanted for Cocoa to fundraise to be. with nobody to explain it to and this vertigo of like, ⁓ my God. And now I was like, wait, I'm gonna take this flight. I'm gonna land in New York super late alone and going to and so I flew back to SF and had this amazing weekend with this founder.

But it's truly just like my absolute privilege to be able to spend time with Killers with a heart. Well let's talk about the fun size and how it allows you to maintain those types of relationships. But it's also A little bit of a resource constraint. I know Fun One was seventeen, Cocoa two is twenty-three million.

And a lot of people around you in the GP landscape is racing to get bigger and you've very deliberately stayed small. And this is something we think a lot about at SLICE because it's a fundamental belief that we have that the best returns come from getting in first in terms of the relationship and the capital. And that's a form of front running rather than competing. So when we see another GP wrestling with the same question, we definitely like to pay attention.

Why is staying small the whole point for you and not necessarily a constraint that you're working around? Cocoa is built around the power of small. I think that Cocoa can see the founders, Cocoa Seis invest in the founders. Cocoa invests in and build the relationships, right?

Because I'm small. I don't think you ping the fan who owns 15% of your capital. So they come to hang out with you on the weekend, right? Because you are really like it's it's a natural thing.

It's like pure like business rules or rules of life. It's nature basically. And I think that ⁓ Cocoa works from a fund return math as well, because it's small. So I've always been very kind of vocal and open around the fact that.

If Cocoa is built around my superpowers and that requires small, if I raise a big fund that suddenly needs to take into account ownership stake as a constraint in their investment, it's gone. The power of Cocoa is gone. And taking you back to this kind of hopping angel investing story, I realized end of 2020. I was living this bipolar world in which I was investing $58 checks into pre seat companies in Europe, getting into any company I wanted, building captives, collaborating, not competing with my friends.

And on the other hand, I was writing $25 million checks and competing with my life for 15 to 18%. And I realized that if venture is a business of access, being small, to your point, gave you the best access. More than that, I also realized that. And I was lucky that I was already like almost eight years old, that I could also own that, that I love that more.

That I actually get I'm very driven by building win-win situations. I don't get a kick on winning against somebody else. I I like it's a thing that counterintuitively, but I was at a stage in my life where I could accept that and build around it. Now I didn't know what to do because all I had learned in venture up until that moment was stake, stake, stake, stake is what matters.

I'm like, well, all I cannot have is steak. 'Cause if I have ownership stake, all that I my kind of power that's unique and also all I enjoy to do goes away. So but how do I build a fund without optimizing for ownership stake? And it was honestly like a proper ⁓ question.

I wrote fund returner equals fund size divided by ownership stake Alexand. And I kid you not I should tattoo that the formula because it just changed my my life. It was like this venture you can be in tech not being technical moment because I was like, wait. Course, like stake matters and math is math, right?

But it's relative to fan size. So if I'm willing to keep the fan size small and accept the trade-offs that come with that, I can actually invest like I like it and make the fund economics work. And that was like a massive aha moment. Cocoa one fundraise was not difficult because it was at October 2021.

So tech founders were throwing money at you, basically, but it was not institutional at all. Because the majority of institutions, and I spoke to most of them, just didn't believe in that math. Because they just could not believe that and they say, I know what you're doing with access, and I buy that. I buy you'll get the best access, but I can't see a fund working with those stakes.

It's not possible. I think by Cocoa 2, which was 2025 fundraise, they had get their head around that ownership stake is relative to fund size. And I've always had this slide that talks about like Cocoa's average ownership stake, let's say like five percent. For easy of math, that's the equivalent to 25% for a hundred million dollar fund.

There's no hundred million dollar fund with 25% ownership at entry, right? And so I think that by then the ecosystem had got around that idea. There were many more emerging managers building microfunds and everything. And so I think that that was much easier and allowed me to raise institutional funds.

Now, the question then is what do you do next? Because what you realize every day to your point on resource constraint is that Being small has big trade-offs, like and resources is a very big one of them, right? And not being able to acquire the talent that you want to even work alongside you is a is a very big one. And so I think that a lot of LPs th think that the biggest sort of challenge for Cocoa is that I give into the gravity of raising larger funds.

Right. And I always say that you can come back to me in 10 years, maybe and tell me, you know. Pure BS, what I say, but what I do know is that I know the trade-offs of being small very well. And I have a very healthy relationship with them because they're my choice.

So I'm choosing being resource constrained, which is the most obvious one, or leaving a lot of money on the table, let's say, for what I get paid, in exchange of being able to work with founders like Thomas, like Walter, the way that I work. Right. I think that's an equation that I run in my mind all the time. It's this idea that it's this self-awareness of knowing that Cocoa's power comes from being small and that if I grow, I will give away that power.

And there's plenty of history and precedence of that happening, together with the fact that I have chosen those trade-offs. And which doesn't mean they're easy, right? Trade-offs are hard, but I have a healthy relationship with them. Now I will just leave you with a question I don't have the answer.

The market has changed a lot. Since ⁓ 2021. And I think there's a fair question to ask ⁓ ourselves. I have a database of questions because I have databases of everything, like I built ⁓ everything on Notion.

And I have one that's questions, ideas, and experiments. And I put questions there that I have, big questions that I want to have there in store. And there's one that is like, can you be small and relevant in this market and how do you do it? I think that's a question that I have.

That doesn't mean I'm not gonna stop being small. I need to because that's kind of where the power comes from. But I think it's a very fair question. I think the reaction of many fans towards that is trying to get bigger and trying to do from pre seed to pre IPO.

But because the sand is shifting under our feet, and we need to figure out how to get back to firm get our funds into firm ground. Yeah. And I think you punch above your weight in many aspects. I think even I was surprised to hear that you were keeping your fund size relatively small.

And I think to your question, I would say it's a matter of compounding into what you're really good at. And the way to relevance is to be known as the person for X, Y, and Z. It seems like you are doing exactly that. I know that the fund sizes stayed relatively similar from fund one to fund two, but the thing that changed between the funds was the LP base.

I know the first fund was mainly European LPs, and then the second fund was more US LPs. I'm curious what was your thinking around then and what were you hearing from US LPs that was different from what you were hearing from European LPs? And what do they do differently? Not better or worse necessarily, but just differently.

Yeah, we're gonna get in the censorship area here. I'm gonna be brutally honest. In fact, Cocoa One was 17. Cocoa 2 was 23, it was meant to be 20, but we got an extra endowment that wanted to come in, and we decided to, of course, make the space.

I like event numbers, not odd numbers. And so I told my husband I didn't like the number 23. And he was like, it's Michael Jordan's number. And I was like, okay, fine.

So now it's 23, it's Michael Jordan's number. And Cocoa won, so you see the diff, like how much it changed, was 17 million dollars over 100 LPs. Majority individuals ⁓ tech founders. There were a couple of like European, very early fund of funds that were growing, like were basically born to emulate Sendana's model in Europe in the 2020, 2021s.

⁓ Coca two is ⁓ 23 million dollars, ⁓ 25 LPs, but if you remove my friends and family, it's like genuinely like 10 ⁓ institutions. I don't think the Cocoa One had any US exposure if Not like some individual that was based in the US. ⁓ Cocoa 2 is like 65%. So it's 65% US, 93% institutional.

So it's a complete different kind of LP based and fun. And Cocoa 2 has three US endowments. You've just listened to yet another episode of the Slice podcast where we uncover the stories of fresh emerging managers across the early stage venture landscape. That was the last guest of season four.

And next time it's just you and I, Sun Wu, no guest breaking down the entire season. The lessons that guide us in how we think about back in emerging managers and the through lines we didn't catch until we look back. This is on for finale in our own words. Make sure you're subscribed to our podcast on slice.

font slash podcast or listen on Spotify, Apple Podcasts, or wherever you get your podcast these days. Thank you, Sunbu, for producing the show and thank you for all of you who tune in for every single episode.