Ep 160: Taavet Hinrikus
On Taking Wise from 0 to an £8bn Direct Listing, his Investment Principles, the Importance of Building a 10x Better Product, Managing Stress & Motivation
Taavet Hinrikus is a partner at Plural, a VC investing in founders on a mission to change the world through technology.
He co-founded the legendary Estonian unicorn Wise (initially TransferWise) in 2010, where he was CEO and later Chairman. Wise went public in the first-ever direct listing in Europe in 2021.
Prior to that, Taavet was Skype’s Director of Strategy until 2008, starting as its first employee. He’s been an active investor supporting more than 100 companies globally. More recently he co-founded Jōhvi Coding School to help increase the number of people with coding skills in Estonia.
On this episode we talk about:
Early challenges and scrappy marketing strategies at Wise
Building trust for a Fintech startup
How the Wise culture shapes the next generation of entrepreneurs
What sets successful entrepreneurs apart
Dealing with stress and pressure
Taavet's investment principles
The mission of Plural and learnings from investing in 100+ companies
How to navigate the current fundraising environment
Support for this episode comes from Nexpay > https://paynexpay.com/
Watch select full-length episodes on our YouTube channel > https://www.youtube.com/channel/UCP6ueaLnjS-CQfrMCm2EoTA
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Read the full episode transcript below
Uldis (00:02.551)
Hello, hello, dear listeners. Welcome to another episode of the Pursuit of Scrappiness podcast. Whether you're building a business, running a team, or just starting out in your career, we are here to bring you scrappy and actionable insights to help you become more productive and more successful. My name is Uldis Teraudkalns, and my co-host is Janis Zeps. Hey, Jan.
Janis (00:24.962)
Hello everyone.
Uldis (00:27.647)
Before we start, a quick reminder, follow us on Spotify, Apple Podcasts or whatever podcast platform that you use. It helps us more than you know. It helps others to discover the show. It helps us to attract.
bigger and better and more insightful guests and we are trying to do that week in week out. So in exchange to that you will find more than 160 episodes that we have recorded over three years of ageless wisdom, scrappy stories and productivity tips. So there's plenty to explore, scroll down the feed and find founders or vcs and industry operators that you're interested in. About today.
One of the main purposes actually of this podcast has been to help current and future startup founders believe that it's possible to succeed on a local and global scale by having impactful entrepreneurs come on the show, share their experience, making what they have achieved and gone through more relatable to the rest of us. And today we have the opportunity to hear from a person who fits this definition to the dot.
and has built technology, business and investments on a global scale. Please welcome Taavet Hinrikus. Hi Taavet.
Taavet (01:43.902)
Hi guys, great to be here.
Uldis (01:47.447)
So using this David Letterman's, this guest needs no introduction. I could say that, but still a bit of introduction. So for those of you who don't know, Tavet is a partner at Plurall, a VC investing in founders on a mission to change the world through technology. He's a co-founder of Wise, initially Transfer Wise, back in 2010 and acted there as CEO and later chairman. And the company went public.
in the first ever direct listing in Europe in 2021. And before that, Tavet was one of Skype's early employees or employee number one and the director of strategy. Has been an active investor supporting more than 100 companies globally and more recently also co-founded the Jochui Coding School, which we have also covered on the show historically.
I'm very happy to hear some stories about Wwise, about Plural, about many things. So let's jump in and let's start a bit of a trip down memory lane already 15 years back and the birth of Wwise. So maybe you can start with the biggest struggles that you initially you faced to get it off the ground and maybe there was a challenge that was with you the whole journey.
Taavet (03:11.754)
I think the challenge for Transferwise when we launched was really how to think about marketing and building trust. We had this brilliant idea, or at least we thought we had a brilliant idea for how you can send money internationally, but we had no clue about how do we go about marketing and making this known and finding customers. So I remember...
Janis (03:27.828)
Mm-hmm.
Taavet (03:38.878)
When we were building it before launch, I started chatting to friends about, hey, what is this thing called marketing? What should we do? The first thing we stumbled upon was a friend says, hey, you should think about how do you launch it.
And he was like, hey, I know this journalist, Steve Ohir, at this little blog called TechCrunch. I'll put you in touch and maybe he will write about this. So that effectively became Ceylon show TransferWise. And we got Steve to write a story about us. And we were...
we were clever or he was clever and he called it Skype of currency exchange, which was a pretty cool tagline for a startup, which was just about zero days old. So that was, that was the moment of launch. But after that, it was hard. Like, you know, we were, there's a joke about, let's call it a Baltic sales guy. You know, what does a Baltic salesman do? Baltic salesman goes to work in the morning,
Janis (04:22.019)
Hmm.
Taavet (04:45.362)
and starts aggressively waiting for the phone to ring. And I think that kind of summarizes me and my co-founder, Christos, the day after launch. Like we were like, okay, now things will explode. Well, guess what? Nothing happened. So then it was really the question of how do we go about, how do we go about making Transferwise known? How do we go about building trust? You know, we had this...
Uldis (04:49.32)
Hahaha.
Janis (04:50.05)
Hehehehe
Taavet (05:13.858)
weird feelings that people do not really trust the internet with money. And you know, to be honest, TransferWise was a website that popped up on the internet.
credit by two Estonians and we asked people, give us all your money or like, you know, give us the money you want to send, which was frequently thousands. Give us your money. And then we said, you know, we'll try to exchange it and we'll pay it out on the other side. It's pretty big ask to do for a website on the internet. Um, so that was kind of playing against us, but, uh, I think, you know, we also had something playing for us.
Janis (05:32.98)
Mm-hmm.
Uldis (05:46.683)
especially 15 years ago.
Taavet (05:55.158)
and playing for us was hatred against banks. This was right after the global financial crisis. And people were so fed up of banks, they said they were willing to try anything. People were willing to try a website on the internet to help them with their money because banks sucked.
Uldis (06:18.035)
At which point did you start those guerrilla marketing campaigns? Was that early on? Was it the two of you that came up with these quite crazy ideas? For those of you who don't know, you can look up early transfer-wise ads. They were quite interesting campaigns, right? That you guys did very out of the box in London city.
Taavet (06:42.514)
That took us quite a bit longer. You know, I'm just thinking back in my head about who were the people doing it. And, you know, it was probably kind of years three and four and three, four, five when we were doing this stuff. But really, you know, the challenge is that.
As a startup, you need to kind of build awareness and, you know, classic awareness, awareness measuring doesn't really do you any good in the beginning. But you need to build awareness. You need to build trust. And we were, you know, if we, if we build awareness by going on a street corner in London and standing up with a sign saying cheap money transfer, you know, guess what? Nothing is going to happen. So you have to find, you have to find ways to kind of break through.
breakthroughs of barriers. So I mean, what did we do? Like, you know, we think about the different tools we have in our arsenal. You know, of course, PR media is one, you know, if we get, if we get someone to write about us, you know, we'll make sure we play this back to everyone, you know, so the good old tricks about putting these headlines on our front page, you know, we were, we were lucky enough. I think pretty early, we had a piece of coverage by BBC, which worked magic and so on. You know, so it was a question of, you know,
use other kind of
other things that we have. So we had Skype connection. So having been the first employee of Skype, we did try to make use of that as much as possible. Remind me later to talk about the kind of A-B testing stuff that we did. That's one example I'll cover later. And then we were thinking about, we were trying to get on the Estonian innovation train, wherever we could use the example of Estonia as an innovative country.
Taavet (08:34.016)
Then there was a question about what other things we can do which kind of fall in the realm of marketing where instead of paying a lot and getting a...
a mediocre result, classical advertising. How do we try to stand out? And that's kind of how we ended up with doing some of these stunts and a bunch of these worked, a bunch of these didn't. And I think over time we got pretty good at optimizing that and really kind of, you know, the question is maybe it's less important to act of the stunt itself, but how do you make use of all the footage you generate? And who do you place this back to? And what emotions does it create?
creating the viewer and what actions do we want to provoke as a result of that. So it was kind of a, you know, I say it was a journey of experimentation and optimization where over time we became pretty good, but it was also, you know, I think we must have gotten lucky with a couple of the first ones. And for all of these things, I think timing matters.
I think we've seen so many stunts and so much experiential marketing over the years. It's a lot harder to do that now. That's my gut feel. And in every kind of year or every decade you have to think about what are the things you can use to break through at this point.
Janis (09:55.344)
Mm.
Janis (10:01.166)
Hmm.
Uldis (10:01.447)
And that's also, I think, a diminishing returns game as well, right? You either have to be somehow extremely creative or find some other ways because obviously you're not going to shock the world many times over, right? You're going to do it once, maybe you're going to do it twice, but if it's going to be, you know, the fifth time, every time, ah! Those transfer-wise guys again. That does well, the good question, yeah.
Janis (10:23.358)
Well, these days, what can even shock the world? I mean, like with the...
Taavet (10:29.766)
Yeah, I think that becomes a lot harder now compared to 10 years ago. You know, because the attention span has, has become even shorter and so on. Like 10 years ago, this was a lot easier.
Janis (10:41.61)
It's like, I think some half year ago I noticed like US government basically said like UFOs exist. Nobody cared. Like they announced something, that they filmed something. Nobody had time for this. Like it was like the war was there, the post-COVID. Like everybody, inflation was crazy. People were like, okay, well...
Uldis (11:01.579)
there might be UFOs but you know I feel the pain at the pump from my gas price
Janis (11:08.138)
If I wanted to, actually I remembered, we spoke many episodes back, but if listeners can scroll back, Trin Hartman, I think she was also early days with You and Wise, and she was telling us stories also how scrappy the beginnings were, like, you know, like a lot of things done in Excel and stuff like that, any kind of scrappy memories that you have when you started, like how you got stuff done with very basic tools and things.
Taavet (11:35.494)
I think we definitely had the mindset of build things that do not scale. You know, I'll be...
happily admitting that most transactions were done manually for a long time. It's also a function of, you know, to be honest, there were not that many transactions in the beginning. And, you know, back in 2011, banks did not really have APIs you could use. So it was really about how do we do stuff manually. And also, but also, you know, it just doesn't make to automate something unless you have a big volume of it. You know,
Janis (11:49.772)
Mm-hmm.
Taavet (12:14.856)
start automated because you're going to get to thousands, hundreds of thousands of transactions immediately but in the beginning that is not really the case. I think you're so much more valuable launching early and starting to gather feedback and then optimizing based on that and automating based on that. There's a little bit of a gamble to take always. You may end up being overwhelmed with load and everything breaks. That could be the end of it but it is a little bit
and taking chances in this game. But yeah, it was everything was manual to start with. And in retrospect, it definitely was the right way to get started back then.
Uldis (13:00.787)
At which point did the banks realize what's happening? Because they must have not in the beginning had much idea about what you guys are doing or they did and they were supportive or they just didn't understand what's going on.
Taavet (13:16.362)
Do you think they understand now what's going on?
Janis (13:20.238)
question.
Uldis (13:21.389)
That's a very good point.
Taavet (13:23.422)
But I think the real question here is, do banks even care? And I would say they don't really care, because we're not doing something which is particularly threatening to any individual bank.
You know, what we are doing or like, you know, let's go back in time when TransferWise launched and what we did, you know, for the first phase of the business, it was international money transfer. So that means that, you know, you're a customer of Barclays. It's a fine, it's a very fine bank, you know, one of the biggest banks in UK, you know, what does Barclays make money? You know, they make money when you use your debit card.
they make money when you take a loan and so on. Yes, they do make money and they make possibly a very high margin if you make an international payment, you know, because effectively they've been lying to their customers about the exchange rate. But the reality is that they're also very inefficient in doing it. So some banks made a lot of money on foreign exchange transactions. Some didn't make that much because they were so poorly organized. But no bank...
cared that much about this business. You know, the customers of Barclays that make these transactions, they live in London and you know, yes, they're good customers for Barclays, but it's not the main business. If Barclays started doing international money transfer much better, they would not have won many customers. So in some sense, we were not particularly
Taavet (15:11.43)
And it made no sense for any bank to do it because we were also building a global business. Barclays in UK does not care about customers in France because for many regulatory reasons, et cetera, like it's just not what they do. So, you know, it's kind of a funny situation that we took one slice of banking service, which we believed can be scaled horizontally and globally. And no bank...
particularly cared about it. Yes, over time, we've given back billions in bank fees to our customers, which we're really, really proud about. But there was no one bank that particularly was hurt. And we had the benefit of being able to make fun of banks, which was just too much fun, and we couldn't keep ourselves back for maybe even too much.
Janis (15:42.819)
Hmm.
Uldis (15:59.668)
added benefit.
Janis (16:04.258)
Yeah. How is it now? But why is now is taking a, you know, taking a bite in other sectors of the banks when you have a payment card or so for companies and other products coming out. Are they now looking at you differently or still like just slicing away slowly from their pie? So, I think that's the first question.
Taavet (16:22.826)
I think in reality you have to go and ask the banks to get a more sophisticated answer. Wise is still occupying a relatively unique niche of international banking, international customers. You know, I would... You can use a Wise card for your everyday needs, but I would say that Wise has never prioritized that. It's always been, this is a bank... This is a way...
to deal with money if you're an international person. It's never been a priority to make your local payment experience the best. And to be honest, my local payment experience means I go with my phone, I tap on the payment terminal. It's not that broken. It's not, you can't do it 10x better. And kind of like say, so the original philosophy was very much about we are 10 times better experience to the problem our customers have.
If you're talking about paying for the newspaper on the corner, you can't quite make it 10x better. So I'm not sure there is that much of a problem that essentially has to be solved either.
But yeah, I mean, you know, we're wise as taken on other services where banks are banks are horrible. You know, I think maybe the latest example is just paying customers interest. You know, it's a lot of banks who are earning a shit ton of money now, but they're keeping it all to themselves. You know, why is that said? Hey, like, you know, we actually can do sort of ways we can, we can pay back to our customers for keeping money with us, which is kind of a philosophically very much aligned with ways of.
Janis (18:05.23)
Hmm.
Taavet (18:05.56)
ways of doing business that is foundation of how the company has been built.
Uldis (18:13.379)
Yeah, and obviously making fun of bankers is a core cultural tenet, but seeing how the company has grown and people have spoken a lot about the Skype effect in Estonia, now there's also the wise effect, right? We see the second generation founders like, mentioned Trin Hartmann, like Martin Sok, besides making fun of bankers. What kind of top...
three things you would name as the kind of core driving forces of the Wise effect.
Taavet (18:50.87)
I mean, I think for every company.
It's a success of the culture if you have an alumni network that is a fan of the company and that is entrepreneurial on their own. I think a lot of what we built this company on will be used to build other companies. You mentioned Trin and Martin and there is probably a couple dozen people who are building their own companies now, which is really fun to see. I'll take an episode from Memorial Lane and I'll go back even before Wise.
was the first employee for Skype. And last fall, we had 20th anniversary of Skype, which was celebrated in Estonia. And there was research about the thousands of companies that people have created that have come from the Skype mafia. And I'm hopeful that when we'll have the same party for WISE in, of course, it'll be like in six years, we'll be able to show similar things.
is bigger than why it says and why is itself.
Uldis (20:01.287)
Speaking about the early days and also the journey along, so you started the company with Christo and maybe you can talk about how do you assign and maybe also shift responsibilities between co-founders as you were CEO for the big period of the company's life, then you passed it on to Christo. Maybe you could share from your experience how to...
part, right? Because a job that seemingly founders think that any of the founders could do maybe at some point, right?
Taavet (20:40.966)
I think every company and all founders are...
are really unique in that sense. I think it's hard to generalize it too much. You know, I think we got, two of us got started building wise and initially we were just dividing things in a way that Christo was doing tech operations, regulation, I was doing product and
Taavet (21:14.888)
particularly focused on who's got what title. So at some point we were like, hey, we need to formalize this a little bit, which we did. The company was at hundreds of employees. And then when we got to one point, I realized that we've built a great business.
We had become profitable. We had a great team in place. And we're like, okay, I know where we're gonna be going next. You know, we'll be a public company one day and when we become publics and, you know, if you have an operational role as a CEO, you're kind of stuck with the business for a while, you know, stuck in a good way.
And I was like, hey, that's a great future to look forward to. However, you know, that was seven years in, and that means seven more years. I was like, hmm, you know, do I want to do that? Or maybe there are other things that I want to do.
Janis (22:11.254)
Hmm.
Taavet (22:16.774)
So, you know, I was very lucky that Christo was really keen. And so he became CEO. And with him and the rest of the team, which I think was largely in place through his IPO, they were taking the company forward. I became executive chairman. And, you know, we can see now the company has gone through a super successful transition to be a public company, a public company that is not only growing, but is
also profitable. So it's been an amazing journey and I'm really fortunate and lucky that I've had a huge part in it. But also I've now been able to take a seat which is where I'm not in any way involved with the company anymore and I have the freedom to do other things. And I'm super excited to be building Plural and if it took me 10 years to get one company
Taavet (23:17.528)
I'm really hoping that myself and the team in plural, we can help another 10, 20, 30 companies go through a similar journey and have similar impact on the European ecosystem.
Uldis (23:33.931)
So perfect segue to turning to your present-day activities. So before plural, you do say that you have invested in more than 100 companies. So you must have some kind of, let's say, principles for investing and they might have evolved over time from some of those experiences. So what are your main investing principles?
Taavet (24:02.922)
So I did my first angel investment in 2007 or 2008. And since then, I've been actively angel investing.
maybe the busier years of TransferWise, you know, I was doing it very, very slowly, but I think it's probably every year is the main investments. And when I stopped my operating role, I went into kind of hyperdrive doing 30, 40 investments a year, which kind of led to starting Plural. I mean, what are the principles? You know, I think it's actually. Probably been I've kind of codified it a little bit to myself, but
Janis (24:33.73)
Hmm.
Taavet (24:45.158)
in the angel years and also now transfer wise. I mean, what I really think is a basis for building a huge business is having a product which is 10 times better.
you know, a 10x better product. And if we, if we think about Skype, you know, before Skype, you had to call the operator like, hello, could you connect me, you know, with this phone number in the U S and the operator says, yes, you know, sure, we'll do it. We'll call you back in two hours. Replacing that with a high definition video call, which you can do for free and talk to somebody across the world.
Janis (25:19.626)
Mm.
Taavet (25:21.03)
You know, it's, it is easily an order of magnitude better than, than the old experience and doing it for free. So kind of similarly, once we had shrunk the world with Skype, you know, so I'm kind of thinking about transfer wise, you know, somehow I can send an email across the world, I can have a high definition video call across the world. But somehow I can't send money across the world. That is still impossible. You know, I go to a bank, I send in line, money takes five days to arrive and send the greedy banks.
you know, take five or ten percent of it. So, you know, we said it is our mission of how do we make sure that money can go around the world as easily as emails or video calls. And then that is similarly a 10x better experience, you know. Instead of going to a bank waiting in line, you can do all of this on your smartphone. And now if we're looking at, I think, the last results of Y, I think 60% of transactions go instantaneously.
Janis (25:53.18)
Mm-hmm.
Taavet (26:20.778)
That's quite mind boggling. 60% of times after you click send on your phone, the money within seconds is deposited on the other account. You know, it probably...
Janis (26:21.088)
Mm.
Taavet (26:37.178)
It definitely takes longer for the speed of sound to go from here to Australia than it takes for money to go. I think it might be, I haven't done this math in a while, but maybe the speed of light is kind of comparable to how quickly we move money across the world. So the first kind of pillar is do we have a 10x better product, which was true for Skype transfer wise and that's what I'm looking at investments.
Taavet (27:08.052)
Do we have a big market? You know, you may often times have a 10x better product, but if that is targeting a market of, let's say, one Baltic country or even Scandinavia, that's probably not large enough to build a huge business. You know, I think it's, you can build a big business, which is gonna be great for founders, could be great for the country and the customers there, but...
Janis (27:27.896)
Hmm.
Taavet (27:33.714)
might not be huge enough to build a global business. And if we're talking about investing in companies, I think for venture capital, we really need to talk about companies that have global ambition, because the odds are so against you.
So that if the biggest outcome is going to be here, then all being against you, it averages out to be here. You need something which can be global. So it could be this big, and then averaging out, you end up like, OK, the average result is going to be here. So it starts making sense for venture capital.
And so kind of with like, with this viewpoint, you know, we've kind of set as our tagline in plural, we're looking to back the most ambitious entrepreneurs in Europe who are building businesses which have a real kind of sense of purpose and meaning behind them. And we're, I guess you can, you can say that we are, we're capitalists at heart. You know, we're
we believe that the business can be a part of a solution. So if you're building a business, which is doing something positive, then the fact that it's a business means that it can scale endlessly. If you're supporting a social mission where you need government money or private donor money, it can be a great mission and do something useful, but it's very painful to scale these things. The beauty of the capitalist system is that a business can scale itself.
So as long as you're building that and if you don't become greedy, then I think it's a great way of having very positive impact and being able to scale the impact in a big way where you can really have global impact. You know, if we think about WISE, the amount of money that WISE is giving back in terms of banking fees, you know, we're talking about huge amounts of money, which go back from bankers' pockets to consumers' pockets.
Taavet (29:30.942)
And that has a huge impact. And I think ultimately, the huge impact is what drives most ambitious entrepreneurs.
Janis (29:33.162)
Yeah.
Janis (29:40.11)
You mentioned now entrepreneurs to ask similar question, but differently. Now with 100 investments, your sample size is bigger than for a lot of funds and the people that you invested in. And since 2007, some have succeeded, some have already failed, some are still in process. You don't know, right? Is there any some characteristics of founders that I know succeeded or failed that stand out in your sample?
Taavet (30:11.418)
It tends to be that the people who have a deeper connection with a mission, I think there is a slightly bigger chance of succeeding. And why is that? I think it is because when it gets tough, which it always does, it's easier to pull through. If the only reason you're doing it is a mercenary reason, I think it becomes a lot harder.
it's a lot easier to give up and say, hey, there's something else I could be doing. Or guess what, I'm just gonna go back and get that well-paying consulting job. So I think that's kind of one. So other one is it's really about, do you have it in yourself to keep on going for a long time? It's about having some kind of tenacity and having, it's a marathon, it's not a sprint.
It's not about who can work through the summer 12 hours a day. It's about who can work 10 years in an environment which is often against you, always uncertain, very satisfying when things go well, but the ups and downs are really high and can go really low. And in a way, surviving XR, it does make you numb to a degree.
You know, the highs are high, but next day the low is even lower. So you have to kind of manage yourself in a zone in between where something goes well and like, oh, it's cool. And realize that, you know, next day if something goes horribly well, you can't burst out crying because you need to carry on and there's a team that you need to keep on motivating.
Janis (32:02.21)
What's your own like on this roller coaster ups and downs? What helped you to sort of start managing it? Was it just years of experience or was it like example of others? Like you said exactly, like when things go, you don't get too crazy when things go good and don't start crying when things go bad. Like what helped you to maintain the, I don't know, flat line or stable line?
Uldis (32:25.511)
must be the bankers.
Taavet (32:27.974)
Or the whiskey? I think it's different. Everyone has to find for themselves how to kind of, how to keep that balance. How to, it's about friendships around you. It's about staying healthy. For me, doing sport, just...
Janis (32:31.082)
Any answer will do.
Taavet (32:56.538)
Friday evening, when it's been a tough week, I'm going to run home and kind of through the run I'm going to be able to switch from work into weekend mode. It's about actually going also and having breaks and doing other things. I love being outdoors, so whether it's going hiking or skiing, I realize that I need to get out, get away and hopefully be some.
for a couple days where cell phones don't work and I'll come back being recharged. You won't be able to do that stuff in the first year of the business but at some point it becomes important to have that balance and that will make you a better leader for others in the business.
Janis (33:46.978)
Now with having like, just on the same topic quickly, having a certain success under your belt and having built a lot of companies, I think a lot of people might look at, you know, those ahead of them thinking that, you know, they don't stress about things or they don't, you know, they don't get into, you know, depression or whatever. How do you now like perceive stress or, you know?
Uldis (33:47.339)
Coming back to...
Janis (34:14.018)
Is it something that goes away with time or is it something that is this is always gonna be there?
Taavet (34:21.926)
I think for people who are passionate about what they do, they probably always work hard. You know, kind of like the idea that work happens between 8am on a Monday and 5pm on a Friday in the office, I think that's kind of long, that's bullshit long ago. Work is more...
a state of mind, you do it wherever you are. I do believe a lot in being in the office and being with other people, but that's not the only time we do work. And it tends to be maybe even more as an investor, that you have founders who you need to speak to at all kinds of times of day. It doesn't matter if it's a Saturday or Sunday. So I love what I do. So I spend, I still spend a lot of time, a lot of time working.
The good thing about being an investor is that the stress level I think is a little bit different because in the end I'm not running the business. So I am there as a mental support for the founders.
You know, myself and my partners at Plural, we have a ton of scar tissue from building our businesses. We've seen pretty much every combination of how shit can hit the fan, and we will share that and help. But I think, you know, in the end, the doing is more on the side of the founders, so I do feel that while I can be working as much as building a business, the stress level is a little bit different, which is probably a good thing.
Uldis (36:05.439)
But then again, a question I wanted to ask, and which kind of puts you more into this business manager, owner shoes and accountabilities is that you did choose to switch from your own angel investing to attracting external capital and reducing the freedoms that you had in the model of self-investing. So how hard was that decision? And what's the main motivation to go that route?
and becoming dependable once again on others.
Taavet (36:41.162)
So, and you know, there is also an element of entrepreneurialism in what, in building a new investment firm. So, you know, in some sense, you know, building plural is like building another company. We have to worry about the same things, hiring people, culture, ways of working. So all of that is similar. And you know, while our headcount will never grow.
Janis (36:56.227)
Hmm.
Taavet (37:07.566)
exponentially as in a company, it's still similar. But kind of the core reasons for starting plural, it's pretty simple in my mind, in retrospect, maybe.
So I wasn't doing investing on my own, 30, 40, 50 investments a year. I joined forces with Sten so we can do more of that. But in the end, this became, it felt a little bit like a high speed deployment strategy, you know, great returns, but started feeling somewhat unsatisfying as there was very little chance to spend.
real time with entrepreneurs and companies. And we kind of started thinking about that. Assembling is a good way of calling it. And it started feeling that is this having real impact? And that's how when we started searching about kind of like what makes more sense and ended up with the idea for plural and the main driver being that if we look at the VCs in Europe.
Uldis (37:54.995)
It's like an assembly line approach a bit, right?
Taavet (38:19.966)
The vast majority of them have spent no time in a real fast-growing tech company. The vast majority of European entrepreneurs are ex-bankers and consultants. Nothing wrong with that, but they lack that scar tissue, they haven't been in the trenches. And we strongly believe that for early-stage investing...
most founders want people who've been in the trenches. You know, that's the investors I was looking for transfer wise when raising money. Like who are the people who are ahead of me, who've seen this and says so? We saw there's an opportunity to do that. And we strongly felt that if we do this well, we will end up having GDP level impact on Europe.
That felt pretty cool. That felt like a pretty ambitious goal that, you know, if we do this well, you know, within the next 10 years, we help a few dozens of companies get to a similar position as WISE, being a very large, iconic European success story. Then that's a goal where it makes sense to give away some of the freedom of investing my own money only.
Uldis (39:35.239)
And you recently.
Taavet (39:35.355)
We're still the biggest investor in the fund ourselves. We believe a lot in having skin in the game.
being very closely aligned with the companies we invest in and being closely aligned with the LPs from whom we took more money. But we also felt that we will, over a decade, will be deploying more money than we have access to personally. So it kind of made sense to take external money. It made sense to extend the team. My partners, Ian, Khaled, Karina, Sten, they're not people that...
Janis (39:43.49)
Hmm.
Janis (40:02.146)
Mm-hmm.
Taavet (40:12.186)
anybody can hire. You know, there are only people that we can become, we can become equal partners and this way I think it actually makes the whole a lot better than any one of us doing it alone.
Uldis (40:26.075)
And you just recently raised this 400 million fund and maybe you can comment briefly on this fundraising environment and what the LPs are looking for now that's in the post zero interest rate policy era.
Taavet (40:43.666)
I think we're still probably coming to grips with what it's zero interest rate environment means for venture. You know, venture is a very long-term game and you know, it takes five or ten years to get to see, five or ten years to see what the result could be and kind of in the end returning money can take even longer. So I think, you know, we still haven't fully processed everything that happened in...
2019, 2020 and 2021 and how many, how much of that should be written down and how much of that were actually good companies just invested at the wrong price. Fundraising for a venture fund is definitely hard today, if not very hard. I think we were lucky because we had a pretty unique proposition and we had a lot of our entrepreneurs vouch for us. Those are the people who backed us.
we're speaking to our LPs and saying, you know, we're actually doing something which does make sense and which is unique. So I think that's kind of the reason why we were able to raise our second fund and, you know, we don't assist, you know, second fund two years after the first fund. There is no, there is no data to look at yet. Yeah, we make great investments. A lot of these companies have raised their next rounds of funding, but, you know, it's not quantitative enough.
to draw conclusions from yet. So it was really based on the strengths of the five partners and speaking to the entrepreneurs and we were lucky that many people believed that what we do make sense and Europe needs us.
Uldis (42:22.471)
And what kind of signal are you sending with that, being the biggest LPs yourself in the fund? So did you kind of, in the conversation with other LPs, did you stress that? Was it something that made it easier or was it just a fact and didn't really make a big difference?
Taavet (42:46.522)
I'm hard to say, I don't know. You know, I think it's one of the things where, you know, you will never kind of, you'll never, unless you do an A-B test, you will never really, really know when these A-B tests are not possible to make. But to me, it's kind of like basics of being better aligned. You know, something which...
I don't really appreciate about the classic venture model of the two and twenties, you know, people making, earning lots of money from management fees for essentially doing nothing. So, you know, I'm not sure that aligns you best and a lot of these funds will never earn any calorie.
But in management fees they made lots of money. And I just don't think that is healthy for the ecosystem. So we're charging a more modest management fee because we don't think that it's needed. And we think that it just makes a ton of sense to be an investor and to fund ourselves.
Janis (43:31.286)
Mm.
Uldis (43:49.659)
Yeah, with 2% annual budget you could hire an army almost of associates and have a very big organization.
Taavet (44:02.118)
Yeah, we have zero associates. So we really think that the biggest product of the firm is ourselves. And it does mean sometimes things are harder because there's less things we can delegate to associates. But we think that makes a ton of sense. We just need to be pretty good at filtering ourselves. And if we get excited about some things, then we can move very quickly.
Uldis (44:33.971)
And it's an open-ended partnership, right? You are open to adding more unemployables. Am I right? Or how do you guys work?
Taavet (44:44.006)
Yeah, I mean, when we launched the firm, it was four, then we sent Karina joined us. You know, we're definitely going to be more over time. And, you know, we're looking for the right people who have entrepreneurial scar tissue, who can be who can help who can really kind of make meaningful contributions to our founders journeys.
Janis (45:06.018)
How do you feel competition for deal from Estonians or Baltic companies now after like a few years, there are a lot of Americans and global and larger European funds willing to come in. And I would assume that, you know, for local guys, it's a bit maybe different to get those deals. But do you feel bigger competition now in last, I know three, four, five years?
Taavet (45:30.546)
It's hard to say. I think the venture market... I felt it was very slow kind of one, two years ago. Things are definitely picking up now.
I think if we look at the Baltics, there are a lot of funds who typically invest before us. So I don't really see anything competitive about it. If anything, I see that all of these funds are partners that we would love to work with. It's a bigger competition. I think really we're talking about big West Coast firms who are more and more investing in Europe. But Europe has a number of great firms.
Atomico with what Niklas started after building Skype. There are good investors in Europe and we will happily face them in competitive rounds and we will also invest together with them. I think it's hopefully a world that we're making it slowly bigger instead of just re-slicing the pie in more cuts.
Uldis (46:40.871)
I think this is a perfect way how to finish this conversation, making the pie bigger instead of fighting for scraps. Thank you very much, Tabet, for joining and sharing your experiences. It was an absolute pleasure. Yeah, thank you.
Taavet (46:59.75)
Really enjoyed it and thank you guys.
Janis (47:00.114)
And to the listeners, we see you in one week again on Tuesday.
Uldis (47:07.423)
That we do. See you. Bye.
Please note that the transcript text is AI-generated. We apologize for any potential errors or inaccuracies. Thank you for your understanding.
