Plural 合伙人 Taavet Hinrikus：创始人为何终将意识到，多阶段基金正在损害种子轮

Do not be that guy. There are plenty of stories out there of respectable VCs not picking up the phone when times are bad. We are a commoditized product. Harry, VCs are a commodity. You can press them down.

Fundamentally, the idea of collecting 2 and 2.5% in management fees does not really make sense. It does not align us with the outcomes. If we can’t imagine 100x, we should not be entertaining the idea of this deal.

Taavet, I’m so excited for this. I’ve wanted to make this one happen for years, so thank you so much for joining me, finally.

I’m so glad to be here.

The pleasure is all mine. I want to start before Plural. You were a prolific angel. Can you start with your investing career there—how it went, whether you liked it, and the transition to Plural?

I made my first angel investment probably about 20 years ago. Through the years of building Wise and still working at Skype, I met other people who were building businesses. I was excited about what they were doing, I wanted to be part of the journey, and I wrote a small angel check.

I went into overdrive once I stopped running Wise, doing 30, 40, 50 deals a year. That was fun, but it started feeling a little bit Wall Street-esque: high-speed deployment. I think it was a great portfolio strategy, since the portfolio has done really well, but it didn’t feel very missionally aligned to me.

I thought there was something more that could be done, and that was the beginning of thinking, “Hey, we should start Plural. We should really think about getting founders who have scar tissue from building companies to become investors.”

What was the single best investment from that period?

One of the things I missed out on was investing in Bolt’s seed round. I was too busy building Wise. But then, a couple of years later, I was really impressed with Markus, and I spent a lot of my limited liquidity buying up secondaries in Bolt in 2017.

I love that. Markus is fantastic, and what a great story. I want to start with a core question. You said it felt a little bit like Wall Street, and that really hit when you said it because it made me think of Doug Leone, who said on the show that venture has turned from a boutique cottage industry into a commoditized, high-volume industry.

Do you agree with that transition from boutique cottage industry to high-volume, commoditized industry?

A lot of that rings a bell, but I think we need to unpack it a little bit more. It’s very different if you’re talking about deploying big checks in the mid- or late-stage. It’s very different if you’re doing high-speed investing in the early stage, which is what I did as an angel.

1. VCs are Spreadsheet Monkeys

It’s also very different from what we do at Plural, which is backing the most ambitious founders. Sometimes there’s no one else who wants to back them. We need to unpack this into different parts of the venture ecosystem, because different parts are going through different journeys.

You said this before, and I thought it was too good not to start with it. You said, “VCs are spreadsheet monkeys who have no idea how to run a business.” Can you unpack that for me?

What I meant by this is that if you’re looking at a mid-stage SaaS company or consumer company, where all you need to do is stack up the cohort curves, take away the CAC, multiply by LTV, and then pay a very high price to win the deal, that’s not very exciting to me. That’s what I mean by “spreadsheet monkeys.”

But if you’re talking about the early stage, when you’re really looking the founder deep in the eye and trying to figure out why they’re doing it and what their unfair advantage is in building a generational business, I think that’s very different.

One thing I’ve said many times is that if you look at the European landscape, the vast majority of European GPs have not spent a single day working in a real company. They’ve worked in consulting firms and banks, but they haven’t worked in a real operating company.

The scar tissue you have from working in an operating company—or, even more, the scar tissue you have from building a company and being a founder and CEO—is very different.

There are 2 elements I want to unpack there. The first is your point about the movement away from spreadsheet investing. I had Nabeel from Spark on the show, and he’s made some great investments recently in companies like Granola and Anthropic. He said that we’re actually leaving that era: the predictable SaaS growth era is over.

You see companies like Lovable, Bolt, Mercor, and Midjourney, where revenue trajectories are unparalleled. That SaaS predictability era is over. Do you agree that the era of spreadsheet investing and predictable SaaS growth is over, and that we’re now in this unbelievably unpredictable time?

There’s a lot more unpredictability, but there are still companies that are on a growth trajectory. I think they will look somewhat similar and more spreadsheet-like, and they need capital. People need to give them some capital. There’s nothing wrong with that.

But that’s maybe even more similar to what public-market investing used to look like a long time ago. If you’re talking about trying to spot the next trillion-dollar company, I think that’s a lot harder—maybe even harder now than it was back in the day—because competition is bigger in some sense. There are more people trying.

You mentioned before that only 8 to 12% of European GPs have actually had operating experience in real companies. How does previous experience working with founders change the mindset when comparing an investor who doesn’t have any operating experience with someone who does?

Do you think it’s about the ability to assess the founders and think about what this could look like once we get to product-market fit?

When you have product-market fit and you have metrics to look at, everything becomes a lot easier. The challenge is really before that.

A big part of it is also that we’re 5 partners at Plural, and we’ve all built companies before. We’ve all raised money. We’ve either raised money or tried to raise money from pretty much everybody who was around 10 years ago—the best of the best and the worst of the worst.

Every time, we had the most insightful conversations with people who had built their own companies. We got Max Levchin in the seed round when we were raising money for TransferWise, as it was called before Wise. We raised money from Ben Horowitz, and the same is true for my partners.

We had the most insightful conversations with people who had been on operating journeys. That’s why we were always looking for people who were a couple of years ahead of us. Even now, when we speak to founders, they really appreciate the fact that we’ve been in their shoes.

Does it make us better investors? Frankly, I don’t know. Time will tell. But I think it makes us better partners for the people we invest in.

If you go through the different elements of venture—sourcing, selecting, securing, which is winning, and servicing, which is helping—do you think, if we take it one by one, that operating experience makes you better at sourcing and finding companies?

Do more founders choose to come to you inbound because of the operating experience and success you’ve had, or not?

Frankly, I think venture is a brand game. If you’re a new fund, the brand is the brand of the GPs.

I would say that Plural has built a brand around doing deep, hard tech that most other people are like, “I don’t understand that.” Would you say that’s a fair representation of the brand you want to build?

We’re looking to back the most ambitious entrepreneurs, whatever they’re building. We’re looking at Proxima Fusion, which is maybe what you would call deep tech. Then, on the other side, we have Teton, which is using CCTV cameras to monitor patients. It’s not that complicated, maybe.

We go the full spectrum, but I think the character of the entrepreneur is perhaps the most important thing. Approximately half of the founders we back are repeat entrepreneurs.

2. Why Serial Entrepreneurs Are Better

Look at Torsten, who built a gaming company, then went into building a defense company, and started Helsing in 2020 or 2021. You need to have something that makes you tick differently to go and build a defense company 4 or 5 years ago, before this became a hot topic. We think the world of Torsten.

How do you feel about the value of serial entrepreneurship? Inherently, I feel so much more comfortable backing a serial entrepreneur. There’s so much learned through the scar tissue of the mistakes you’ve made before.

But others talk about the benefits of naivety and being a first-time founder. Where do you stand?

We love repeat founders. When we look at the people we’ve backed and the ones we haven’t backed, what stands out to us is that repeat founders typically go for a much bigger goal.

Torsten did a gaming company, then went into defense. We can also talk about Daniel: his first company was in e-commerce, and then he took on the massive challenge of building Spotify.

We love the fact that these people go for a massively bigger goal next time. Again, I don’t know if they have a higher likelihood of success, but even if the likelihood of success is the same, the outcome is so much bigger. They’ve also learned a fair few things on the journey.

I don't think I would be that excited to back a founder who built fintech company one and then goes on to build fintech company two. I had Delian Asparouhov on the show from Founders Fund, and he said, “If you are a repeat founder building in enterprise SaaS, you are doing a massive injustice at a time when we have income inequality like never before, climate challenges like never before, energy problems like never before, and conflict and defense problems like never before. You really thought the second time you'd do payroll again?”

There are many great founders building great enterprise SaaS companies, but for me personally, it's pretty hard to get excited about the good old SaaS company.

I still get very excited. So that's the joy of this game: there are many different ways to do it. We are complementary, Harry. I agree totally.

Do you think rich investors make better investors? I often think this with a Sequoia of the world, because they are not scared about downside protection. They are upside-focused. They are not scared of losing their jobs. They are not scared of not making money. It is solely upside. Do you think rich investors make better investors?

What I would ask is: are they investing other people's money or their own money as well? I think there is one thing if you're a rich investor and you play with only other people's money. There's a different thing if you're a rich investor and you're investing your own money.

3. Why the 2:20 Fee and Carry Model in VC is Broken

I think it's a question of alignment, and hopefully we'll talk more about this. We've thought deeply about alignment in venture and how to make sure that we are better aligned with both our LPs and our founders. To me, a core thing is: look at what a person does with their own money. I think that's kind of the most important.

Do you think, when we look at the current state of venture, it is aligned sufficiently?

I don't think it is in general. Fundamentally, the idea of collecting 2% to 2.5% management fees does not really make sense. It does not align us with the outcomes.

At Plural, we charge about half the management fee, and we think we are much better aligned. What it enabled us to do is make a few more investments per fund. In fund one, we probably made 2 more investments because of this. In fund two, we think we'll make 4 more investments as a result. That's 4 more shots on goal. That is pretty damn important.

And still, we have a fantastic team. We have 5 GPs. Everyone is being paid well, but not ridiculously.

What would you say to the GPs who say, “Hey, I need these fees. I need them to pay benchmark salaries against the salaries at other firms, which are the same. I need a platform team. I need a head of talent. I need—you name it.” Earn your right to do it.

When hiring people for a startup, you want to hire the people who are dying to work to build this company. You don't want to hire the people who are coming here for the biggest salary. Yes, you want to make sure they are compensated ridiculously well if things go well.

I am very proud of the fact that when we built Wise, everybody had stock options, including every customer support agent. I think the customer support agents who joined in the beginning all made $1 million when Wise went public. I'm super proud of this.

Similarly, in venture, the team and GPs, once we have this magic DPI, should make lots of money. But I don't think people in venture should make a lot of money just because they are deploying capital.

Do you blame the VCs or do you blame the model? Fundamentally, it's just a game of human incentives. You said their DPI liquidity is so backdated now. I mean, it is so elongated that it has now been 15 years or so. It's really 15 to 17 years before most funds are seeing DPI meaningfully. Do you blame the GPs?

I think it's a game. Don't blame the player; blame the game. Obviously, it goes both ways, but as the industry evolves, maybe things will change. We're hopefully doing our part to make this a better game for everyone.

Do you worry about the elongated window to DPI and liquidity, especially for some of the projects that you do? These are such hard projects. These are multidecade journeys. Isn't it even longer for some of these projects?

I do worry, and I think overall we need to come up with better solutions for some of the long liquidity problems. Some of these companies may need billions.

But I think at the same time, if the companies are well-capitalized, they can reach milestones, and then you have liquidity. The best example of all is maybe SpaceX today. It's a private company and has had zero liquidity issues. There is always a secondary market open.

The journey in the beginning was very hard, but you were able to attract the capital to get to a place where you hit your milestones and made progress. Especially in what you call crazy companies that we back, it is definitely harder. But I think we need to make sure these companies are hitting milestones, delivering, and creating value, even if revenues take longer. I think there will be opportunities.

Do you think the 10-and-2 traditional venture model, in terms of timeline, needs to be updated, especially for a generation of companies that you invest in?

Ten years is short. If I look at it, maybe looking back now, Wise looks like a simple fintech company. Everyone is doing fintech companies. It took us—we started working on it with Kristo in 2010, launched at the beginning of 2011, and went public in 2021. That was a 10-year journey.

But, to be honest, the last 3 years were probably pretty liquid even while we were private, so let's call it 7 years. Maybe for deep-tech companies it's 10 to 12. If you hit a bad patch in the markets, it becomes 15. We need to recognize this.

But I think also, at some point, people just need to be more disciplined in returning some capital early. There are some investors out there who are very vocal. I think Fred Wilson has spoken a lot about taking some money off the table.

We mentioned fees and that structure as a misalignment in the industry. Are there any other misalignments you think are very prominent that we don't speak enough about?

Skin in the game. Fees.

When you say “skin in the game,” you mean the GP commit?

Yeah, I mean GP commit. I don't think venture should be a rich people's area only, but going back to what we spoke about before, look at where someone invests their own money.

We're the biggest investor in the fund ourselves, and additionally, every deal we do, the lead partner of the deal writes a personal check.

Can I be blunt? How much of the fund are you?

We're collectively the biggest investor in the fund. I don't think we're going to start talking about numbers, but you've been in the business. You know how much the biggest LP in a fund could be as a percentage, so you can infer.

And on top of that, the lead partner will also write another check.

Wow, that is unusual.

We don't like the idea of playing with the house money. It's something that we're not so keen on. The size of the personal checks depends on the individual's position. For some people it's smaller; for some it's bigger. But we want it to be something meaningful.

You think about it as: I'm investing my own money in addition to the fund, where I'm already an investor. I think there may be a ritual part as well of wiring from your own account at the same time as we wire from the fund account.

The thing I love about this job is that, still after 10 years, you hear things that you've never heard before about this business. I've never heard of that before, because the GP commit is one thing, but that as well is cool. I think there might be other people who do this. We haven't studied the history of venture half as well as you have, I'm sure, but I think there might be other people we've heard of. I don't know the facts.

You've been building a public company; I've been studying venture. Yours is probably a more productive decade.

But maybe another thing to mention is that there are other weird things in venture. Where does the idea come from that you should pay your investors' legal fees?

Well, we pay our own legal fees.

The vast majority of venture deals, as in the term sheets, say that you pay your investors' legal fees. I mean, what is this about?

It comes from the money you give the company. The company pays your legal fees.

Yeah. Why does it make sense?

I think it's just the way it's been done, and so we should continue.

And so you will pay the legal fees for the whole round?

No, we pay our own legal fees.

Okay. Usually the company pays the investor's legal fees.

I can show you where it is in the term sheet after the discussion.

And so you pay your own legal fees and the company pays their own legal fees. Fine. Where do you pay your legal fees from?

The management company of the fund.

Yes, got you.

What do you think are the areas of founder-investor conflict that people don't often talk about?

Timeline misalignment. Investors wanting their money back before the founder, which is a hard one. In a way, if the founder is in it for the next 2 decades, it's just a question of liquidity.

Has being an investor changed your mind in any major ways about operating? Now you see the other side of the table. Are you like, “Ah, I actually get it now,” on this or on that?

I think maybe the biggest thing that strikes me is fund composition. In Plural, we really don’t think we have much control over fund composition.

What do you mean when you say “fund composition”?

How many SaaS companies, how many carbon companies? You don’t want to have the same risk everywhere. You can have companies say, “We have too many deep-tech companies; we need a SaaS company.” We’re kind of okay, mostly, with the fact that we follow the most ambitious entrepreneurs, whatever they’re building. But I can start sympathizing with the people who are saying, “Hey, you have this great carbon-capture company. I love you, but we have 3 already in the fund. We can’t add a 4th one because it starts skewing the fund composition.”

You start getting demands like that, which on a deal-by-deal basis isn’t relevant, but if the whole fund is subject to the carbon market, for example, somebody should think about it.

Given the outlandish bets that you take, bluntly, in terms of outcomes and how ambitious they are, how do you think about portfolio construction in terms of how many you want per fund?

On a per-fund basis, I think fund 1, we probably had a model of 25 to 30. We ended up with 31, so we do pay attention to having diversity in the portfolio.

Yeah. Do you do reserves?

We do reserves as well.

What’s the ratio there?

The reserve ratio in fund 1 was limited reserves, which was less than a third. In fund 2, we drew the line roughly in the middle. I think we’ll end up with slightly less than half for reserves.

And reserves are still something that we’re iterating and learning about—the best ways of doing it. I haven’t found anyone who says they’ve nailed it.

No, I really also don’t like uniform reserves. There are some people who say, “If you get a good round, we’ll always write a reserve check.” I don’t think that’s right. I think you should actually be all in or not.

Fundamentally, I agree with the idea that just doing a pro rata is a cop-out.

Yeah, you either want to do nothing or triple down.

However, I think the real world is slightly more complex. A round happens a year later, the company has done well, and there’s this weird signaling thing. I don’t know. Some days I think signaling risk is real; some days I think it’s not real.

But I think you want to make sure you have some kind of more uniform way of doing it through the fund. We’re working on that.

We’re going to get to decision-making. I do just have to ask: I think the thing where you get in trouble with reserves is the communications, where people think that it’s coming and then it doesn’t come, and you surprise them at the last minute.

Now, I work with some of the biggest and best founders, whom I bring in to co-invest with us. The thing that uniformly shocks me in communications is how much harder former founders, or founders, are with founders than VCs are. VCs kind of tiptoe around founders. We don’t want to get a bad NPS: “You’re doing great, you’re doing great, but I’m not going to do the reserve check.”

Former founders or founders are just like, “Dude, you’re not hitting the bar. This is not impressive.” They’re much more direct and less empathetic in some ways.

This is really hard. We try to be honest, but we’re also there for the founders. We promise we’re not going to give up before you, but that doesn’t mean we’re going to write bad money after good money.

We’ve told our funders, we’ve told our founders, that we’re here to have GDP-level impact. If your company isn’t doing it, I’m sorry, we should not continue funding it. You may keep on working on it, and we’ll do our best to help you, but it doesn’t guarantee the next checks.

4. What are the Biggest Ways VC Investment Decision-Making is Broken

When you say that you’re here to have GDP-level impact—we’re going to get to Europe later—but just on the decision-making, I hope that you don’t have traditional investment committees, which are the hallowed structure of decision-making in venture. How do you think about investment decision-making on a per-company basis in the firm?

It is super simple, and it’s actually very formulaic. There are a couple of things. Every investor can only do a limited number of deals per year. Two to 3 deals per year is the right pacing. If you come saying, “I’m doing deal number 6,” we’re going to be like, “Hey, Taavet, what’s going on?”

The second is a limited number of shots on goal and skin in the game, so you’re willing to commit your personal money. The 3rd one is that you write a memo about the deal.

The memo starts with, “Why is this company important to me?” For every deal we do, we’re testing whether you would be willing to be a co-founder of the company. All 49 deals we’ve invested in so far, we feel that the partner who did the deal felt, “Bloody hell, this is so important, so exciting. I would love to be a co-founder of this company.”

So the memo starts with why this is important to you. Then we talk about the founder. Why is it important for the founder? How can it be 100x from here? If we can’t see that, we should not be entertaining the idea of this deal.

There are many great investments that are 5x guaranteed. There are many great investors who should do this. It’s not Plural.

Once we have that memo, we have an investment committee.

Can I just pause there? When’s the memo sent—first, before that discussion?

We typically start talking about the company way before the memo. The lead investor says, “I’m writing a memo. We’re going to have an investment committee.” We have a brutal discussion at the investment committee about the company, and then the ball goes back to the lead investor.

Can I just pause again on that discussion quality? I think it’s most often damaged because not all of the investors’ or partners’ knowledge is at the same level as the lead partner. You’ve got some people who know nothing about the company and some who know a lot. How do you make sure that the partnership’s knowledge of the company is at a sufficient level to have that quality discussion?

Most likely, we’ve spoken about the company a few times before over the past weeks, during our pipeline meeting and so on. There are a lot of companies where more than 1 partner meets with the team, so we try to bring people along the journey.

Does every partner need to meet the founder?

No, absolutely not. I think there’s probably no company where all the partners met the founders before the deal. It’s typically 1 or a few partners who meet the company.

5. Why is it BS when VC Firms Need Every Partner to Meet the Founder

But we give a lot of trust to the individual GPs. The bar for being a GP is super high, so we give them a lot of trust. We felt that it doesn’t make sense to hire someone brilliant and tell them, “You have to come on Mondays to ask permission to do a deal.”

Going back, we have the IC, and after the IC the lead partner goes back and thinks about the feedback. We have many cases where, after hearing the feedback, the lead partner is like, “Hey guys, you raised great points. Ian, you raised great points. Karina, what you said about your experience in the market is very true, and I’m not going to do the deal.” There are many cases where this happens.

What’s the percentage of the time? I know it’s unfair, but is it 70/30, 50/50, 80/20?

It’s probably more like 70/30: 70% gets done, 30% doesn’t get done. But I’m not sure measuring is the right thing, because it starts setting the wrong incentives.

By the way, sometimes there’s also a time factor. We look at a deal and it doesn’t make sense. The lead investor comes back like, “Hey, I’m not doing it.” Then 6 months go by and they say, “Actually, I’m going to have a new IC. The company has done what they promised, or something has changed, and I want to lean in now. So let’s have a discussion.”

How do you feel about compressed timelines for deals, when founders are going, “I’m sorry, I’m running a process and I need answers by Friday”? How do you as a partnership feel about being put under that urgency?

I don’t think it’s happened to us. We do see different types of deals. I completely respect the fact that we need to communicate to the founders how long something is going to take. If we tell them, “We’re going to have an IC on Tuesday and we’ll tell you on Wednesday,” it makes sense.

We can get things done very quickly. We’ve probably gotten things done within a number of days, and if something is super competitive, we need to move. We need to decide soon.

Generally, we believe that we tell the founder what our process looks like and try to make it compatible.

I don’t like 2020 and 2021. There were a lot of deals done under the gun, basically. I did some myself personally and made some big losses. We may even have done some together, but they were great. Those were the winners, definitely.

Definitely.

So I think it depends on the type of deal. I don’t see the crazy companies moving so quickly. That’s momentum spreadsheet investing, which starts moving way quicker.

Tell me, do you have some form of scoring or voting mechanism in the partnership to give that very objective feedback to the lead partner to take home?

Not really. We talk about it, and we share our feedback very directly.

Do you think you should?

So, we are the same as you.

People say to me it’s very helpful to have a historical record, so you can see, bluntly, how the partnership picks and thinks over time. You can look back and see how the partnership has picked and thought historically.

We keep notes directionally because I think it does help calibrate. In an ideal world, we want to come back to it years later and say, “Hey, let’s recall that and see what we learn from it.”

Is there anything that you think you should change about your decision-making process?

Absolutely not. We’re brilliant.

On the reserves side, how does the reserves decision-making look?

For reserve, or follow-on checks as we call them, we flip it around. The lead investor writes a memo and comes back with a proposal, but this needs a majority vote.

Got it.

We feel that the idea of marking up your own homework is problematic. The idea of the fund is that we write 25 or 30 first checks. Everyone does 4, 5, 6, or 7; it doesn’t matter who does more or less, really. But when we talk about reserves, that’s a finite allocation, a finite asset we need to divide up. You cannot do that unless you take collective feedback and collective input. So we think these decisions are done best collectively.

We’re trying to balance how we keep a bunch of reserves for the best companies, but you don’t know the best companies. At the next round, you might not know; it might be the round after next. How do we do our share to help the companies forward in the next fundraise? Oftentimes, that means doing the pro rata, which I think is a cop-out, but doing that and then balancing it with whether we can keep larger reserves for deploying checks in companies where we are actually, at that time, maybe not confident of 100x because we’ve already seen 10x.

But if, at that point, you see momentum and you feel maybe there’s 50x left, 30x left, you want to deploy more capital on the deal.

On the deal structure itself, we spoke about misalignments earlier. Liquidation preferences are increasingly under scrutiny. Maybe I’m seeing it more in the US, but people are now often doing deals with no liquidation preference. How do you feel about liquidation preferences as a former founder and now VC?

I don’t think it makes that much sense. We are here for unlimited upside and 1x downside. The difference is purely marginal.

It’s something we spoke about when we were starting to play around with the idea for Plural and thinking about the structural misalignments in the industry that we wanted to fix. I think this is one of the next things we should work on. Ultimately, we haven’t felt it was important enough.

Also, to be honest, as a founder, it feels shitty. What we need to think about in the industry is how much capital gets deployed for a given size of outcome. I think founders too often think fundraising and large fundraises are the ultimate measure of success, which I think is bullshit.

Something that hasn’t been spoken about widely is that Wise supposedly raised a ton of money. We probably raised $1 billion or more. Wise only raised $160 million of primary capital, and we only burned through about $100 million of primary capital. That’s $100 million of primary capital to build in excess of $10 billion of value.

If you look at companies out there where you’ve raised $2.5 billion to create $10 billion of value, and then you deploy—if a company raises $1 billion at a $5 billion valuation with a possibility of getting to $8 billion, $9 billion, or $10 billion—maybe the liquidation preference is different. But early-stage liquidation preferences, I don’t know; they don’t really make sense.

Another element of term sheets is boards and involvement on boards. Do you need a board seat with every deal?

We do not love boards. I think that’s a fair starting point. The things that I don’t like about boards are that they oftentimes become way too big, way too quickly. Your C-round investor takes a board seat, your A-round investor takes a board seat, your B-round investor takes a board seat, and then your C- and D-round investors do too. So you end up with 5 VCs on the board and 2 founders. I don’t think these boardrooms are any good.

Why are they not good?

Because you have 5 people with a relatively similar mindset and a similar view of the world. They might be looking at the person with the biggest fund, or the person who wants to be the smartest guy in the room. They will dominate too much of the discussion.

I think the right boards are slightly more balanced. I am very much in favor of the idea that founders who are building companies should, at some point, be on 1 board of another person building a business. I think it’s good for both.

We’re seeing an increased dilution sensitivity from founders, especially at the early stage. They don’t want to dilute more than, say, 10% on the first round or the first proper seed round. Are you seeing this increased sensitivity around dilution from founders?

We are a commoditized product. Harry, VCs are a commodity. You can press them down. Someone told me early on, which I took pretty seriously: the only person to fight for your ownership is yourself. No VC will ever fight for the founder’s ownership. You need to fight for it.

So there’s a lot of truth in it. Founders need to fight for their ownership. Absolutely. The other side of it is that it was, and still is, easy—if you’re a good fundraiser and you’re building something that’s deemed to be hot. If you’re building an AI SaaS company, it’s easy to put a round together, dilute 10%, and nobody gives a shit about the business.

So I think you need to think about whether you have people involved who will help you through the good times and the bad times. In the good times, you don’t care about their advice. You don’t need their help. But you want someone to pick up the phone when it’s a bad time.

There are plenty of stories out there of respectable VCs not picking up the phone when it’s a bad time. Do not be that guy. I think it also goes back to founders actually creating a round where you have people with enough skin in the game to feel interested and to feel that the company is important.

There are so many things I wanted to pick up on. The best founders do not need the help of the VC. Keith Rabois said it on the show, to the point of, “We’re there for founders. We’re here to help you. Founder value add.” How do you reflect on the idea that the best founders don’t need you?

6. When and Why Will Founders Realise Multi-Stage Firms are Bad Early Investors

Fundamentally, I agree with this, but I think we have the ability to be very deeply involved if you need us and get out of the way the rest of the time.

You’ve said that early-stage investing is art, not a science. What worries me is that the multistage funds have so much money now. You’ve got $8 billion, $10 billion, a firm raising $20 billion, and the pre-seed and seed stages are literally just a massively high-velocity option game.

Five on 50, fine, it doesn’t matter. It’s $5 million. We just want to have a chance to write $25 million at the A and $100 million at the B, and all that matters is that it could be the next Databricks. Actually, seed is being destroyed by this high-volume game.

I don’t think this game will last. I think the best founders will realize that getting a check on good terms from a multistage firm is by no means a guarantee of raising money from them in the future.

I think the game will change. The industry will change, the game will change over time, but it is becoming a market with more capital coming in.

The question is, are we going to have more founders? How do you keep it in balance? If you have more capital, founders are getting better terms; if you have more founders, it flips. Do you think we have an excess supply of capital for the founder base that we have today?

Yes. In certain sectors that are deemed hot, in 2021, if you were an ex-Wise employee, everybody would write a check to you without even meeting you. Does that make any sense? No. The same happened to Google employees maybe 5 years before.

I do think that you need to separate early, pre-product-market investing from later-stage investing. But at the same time, it’s safe to believe that returns will be coming down over time as the asset class matures and becomes bigger.

What do you think? Will they come down as the asset class matures and becomes bigger, or will they go up as outcome sizes become bigger and trillion-dollar companies become more and more commonplace? I mean, trillion-dollar companies 10 years ago were unheard of; now there are several.

The best investors will continue generating the best returns, but I think the median is probably going to come down over time.

If Plural does not hit the heights that you would like it to, what will be the reason?

Europe did not have enough ambitious entrepreneurs. It’s them, not us.

Speaking about putting in the effort, I do want to move to Europe. You said that now is the time of all times for European sovereignty. Why is it so important now, more than ever, that Europe stands on its own two feet?

7. Why Does Europe Need to Build it’s Own Tech Now More Than Ever

Even zooming out, when we were starting to think about Plural in 2021—we raised our first fund in 2022—there were 2 things that were really important: European sovereignty and GDP-level impact. That was true 4 years ago, and it’s even more true now.

Two things have happened in between. One is the Ukraine war. Before that, investing in defense felt strange. After the Ukraine war, it feels like we need to do this in Europe.

The second thing that has changed is really what happened in the White House in February, where likely Zelensky was taken for a grilling, and the fact that the US cannot be trusted anymore to be the protector of Europe. This results in a world where we need to rebuild a lot of things on our own. We need to build our defense sector, we need to build our space sector, and we need an independent energy sector.

We need security and intelligence. A lot of sectors where I think we're going to be living in a tripolar world. Is that a word? Did I make it up? So there's going to be an American version. Let's call it likely Anduril.

There is a European version, likely Helsing, and a Chinese version. Defense, space, energy, security, intelligence—everything, all of the critical services. These critical services make up a vast portion of GDP.

8. What are the Dangers of Having US Made Tech in Europe

Do you think our relationship with the US has fundamentally changed?

I think it has.

Does that worry you?

I think we probably were living in a slightly naive world before this. We see human nature hasn't changed, and we're now post-Cold War in a different world. Maybe history could have worked out differently, but I think now, looking back, the world is still pretty similar, and the idea that we overly relied on the US was probably already wrong back then.

I think we all need to punch our weight. I believe we are better collectively. Estonia is better as part of Europe. The UK is better being part of Europe. Europe is better together with the US. But I think we all need to collectively put in the effort, and maybe we were relying slightly too much on the US before.

I think today, when you look at NATO contributions, with 75% coming from the US, we massively over-relied on the US. So I think that's very clear.

But I think also what we're seeing now, with the US saying, “We'll sell you a 10% worse fighter jet,” right? Who is ever going to buy US defense equipment? I mentioned Teton before, which is doing patient monitoring. Do we want a US patient-monitoring solution in our hospitals? Why would we want a US patient-monitoring system? We have US data-storage systems. We have US systems.

What if they turn this off when they don't feel good about Europe anymore? Do we want US robots roaming around our streets, collecting intelligence information? I think it's pretty clear we don't want Chinese ones. But at what stage do you draw the line? If you draw the line, then you're living in a completely compartmentalized, deglobalized world where you could say that for everything.

I'm fearful that Germany is buying $1 billion of energy a day, in some circumstances, from other countries because it is so woefully inadequately supplied with energy. I think we're going into a world of decoupling for a while. I'm hopeful that the Western world will come closer together after going through a rough patch, but these are complex topics.

Why do we need national sovereignty—or, like, continent sovereignty—around Helsing for Europe and Anduril for the US? Why is that important in Europe? What if the US says, “We're going to disable Anduril in Europe”?

You need independence. If we can't guarantee that the Helsing solution works regardless of what people do in the US, we cannot trust it.

If you're thinking about anything else that has access to vast amounts of information—if we talk about anything that gets visual or audio information, robots, cameras—we probably want to control who has access to the information we gather and who has access to a kill switch. That applies to robots, intelligence information, defense, space, and energy.

Do we have anywhere near the supply of capital today to fund this incredible depth of sovereign supply that's needed?

Do you remember how much capital Germany allocated to this in the last couple of weeks of February?

I think it was between 1.5 trillion and 2 trillion that Germany allocated just after the likely Zelensky White House meetings.

These discussions are happening everywhere in Europe today. The reality is, we probably cannot use 2 trillion today. We need 1 trillion this year, 2 trillion next year, over time.

Is that the right approach? Just like Germany saying, “Here's a trillion.” What does that mean?

I do believe that we need to work together in Europe, but we need to work together maybe in ways that are slightly faster than the way we've done it before. If you think about some of the defense collaborations that have happened in Europe, they're very painful. Italy says, “We will take part in this project, but this widget has to be produced in Italy,” and that makes things very slow.

If you look at how the war has happened in Ukraine, you don't have time to go and bring something. You need to be building and iterating constantly. I think we need to be a little bit more modern about the way collaboration happens, but we do need to collaborate around Europe.

And I think there's the capital. Everyone is realizing that, with defense contributions, we were not at 2% in Europe before. Estonia was ahead, and Poland was ahead, but we need to get to 3%, 4%, or 5% everywhere, and the same applies to other critical industries.

9. Will Putin Invade More European Countries

To what extent is it a very real concern for you that Putin wants to expand beyond where he is now?

I think it's a very serious, very real concern. We should be living under the assumption that whatever happens in Ukraine now, Russia will try in another country over the next few years, and we need to be ready for this.

I hate this question, but I do kind of worry: are we too far behind already? When you look at China and the supply of talent that they have, the depth of talent they have, the control that the CCP has, the funding that they have, and America and what America has shown in the last few years, have we already faded into irrelevance?

I think that if we go back to the question around defense and the timeline of a couple of years, if these budgets are unlocked soon, we can actually still get a lot done. But the urgency is higher now than it's ever been, and I think politicians at the highest levels are thinking about it in the same ways today. So I'm hopeful that they will come up with the right answers, but it's by far not guaranteed.

I don't think the political structures allow them to come up with the right answers in a way that's best for us in the long term. They are focused on a 4-year re-election cycle, and a lot of the projects that we're talking about are 10 or 15 years out. Actually, the capital requirements, prioritization, and strategies needed don't favor re-election.

I think it's a correct thing to worry about, but I think also we need to be more entrepreneurial and find ways to build things quicker. I think it's doable. Look at Helsing. It's a 4- or 5-year-old company, and they've built a lot. We invested in the exploration company, which is working on space; it is a 2- or 3-year-old company.

I actually think a lot is doable in a short amount of time if there is the right capital available for this. So, the right talent and the right capital—and in terms of both, I think we are in a better place in Europe than we've ever been.

10. How Does the Change in Relationship Between the US and Europe Impact How We Build Our Tech Ecosystem?

If we go through the problems that we need to overcome, what do you think are the single biggest barriers we need to overcome in the race against China and the US?

A lot of this comes down to sufficient early-stage capital for deep-tech companies. It's the kind of crazy investment that we like to do at Plural. If we're looking at, for example, Proxima Fusion building a fusion power plant—the most advanced fusion company in Europe—and, by the way, the new German government has said they want the first, not one but two, fusion power plants to be built in Germany, we're seeing that there's a political will to act now as well.

We're not ambitious enough. We're often told, “Hey, we don't work hard enough.” The other one is, “Oh, you're happy with a $50 million sale.” Harry, we don't brag about it as Americans do. That's a difference between Europeans and Americans. We're too humble, and I think we need to learn to become better marketeers.

Absolutely. Maybe we need to hire American marketeers. Another one that I never have an answer for is the regulatory hurdles that come from a fragmented Europe, being a barrier that stops us. To what extent do you think that is a very valid problem?

Two ways to look at it. No entrepreneur has ever not started a company because of regulation. The best entrepreneurs say they go through walls made out of titanium to make it happen. So, in some sense, it's an excuse.

On the other hand, Europe is a fragmented market of—I don't know how many countries—and we need to streamline things. I'm excited to see the 28th regime being developed with EU Inc. That's great, but we need even more to make Europe a more unified market: labor and capital.

Why do we need to have a stock exchange in Amsterdam? Great companies are listed there, in London, and in Estonia. I mean, I would love there to be an Estonian stock exchange, unfortunately.

Yes. I mean, I would love there to be a single global stock exchange. Maybe we could build it on something called blockchain. I asked the CEO of the London Stock Exchange, whether we should have a European stock exchange. When you look at the stock exchanges across Europe, they're all subpar and they're all subscale. I was met with a frosty reaction, let's put it that way.

Do you regret going public in London?

I don't regret going public in London. I think Wise is an example of a company that is well known amongst the investor universe and can go public anywhere. A company went public in Amsterdam. Who ever knew they had a stock exchange? They've done very well. Wise has done very well in the UK. It's been a massive up and down, but that's something which I think would have happened similarly in the US.

Do you think you would have a pricing premium if you were in the US?

I don't believe Wise would have a pricing premium in the US.

We spent a lot of time agonising over this over the years before the IPO. So, I think for Wise it has worked out well. However, structurally, we have a lot of issues here. We don't have enough retail participation in the UK, and we don't have enough institutional participation from pension funds.

So I do think the UK stock market is subprime in that sense, and I think if you're a retail product, you want your consumers to buy you, so it makes sense to go public in the US. But I also think, in some sense, maybe some of this is the wrong thing to spend so much energy on. Why would we have gone public in the US? The result would be the same. We would not be paying more tax in the US. We would still be headquartered here. So sometimes it feels to me that people love to talk about this, but I'm not sure how big the actual difference is for certain companies.

Do you think Nik should go public in London? He's built the business in London. The team is primarily London-based. Do you think you have a duty to go public in London?

I don't know the duty. I don't know what duty Nik feels, so I can't answer that.

What would you tell him if he wants to build a big business in the US?

I think here's what I would tell Nik: if he wants to build a big business in the US, then he should go public in the US.

You're a very wise, thoughtful, premeditated person, in a nice way. When you go public, also after lockups, you have liquidity. Just out of interest, for me personally, how did making money change your mindset, your approach to life, and your approach to relationships? How did it change who you are?

Frankly, I think it has not changed. I've realised that I've generated liquidity through the shares from Wise. I mean, not until we were valued at billions did I sell a single share in a secondary, but after that I've done it in, I would say, a systematic way. I was also lucky to make money from being the first employee at Skype through stock options. So, in that sense, I've been financially independent since 2002 or 2003.

Does it change your mindset, though? I'm really interested in the upside.

Yeah, and I'm interested in what are the good things I can do with the returns. But I wasn't before. I was like, “I need to pay for my family's home.” Do you know what I mean?

Of course.

I think for everyone, once you get through that moment, that's super important. Once you get through the moment of, “I don't need to go to work for the monthly paycheck,” I think that is an incredibly powerful moment for everyone.

Final one: if you were to sit in a room with the leaders of Europe and say, “Okay, the US and China—we need to compete. This is what we should do from here to change,” are there any policy changes that you would recommend to make us as competitive as possible?

More capital for deep-tech investment. Look at encouraging entrepreneurship. Look at reducing the regulatory burden. I think the way we do government purchasing decisions, whether it's in defence or other areas, the government should be the biggest customer for European startups. Cost-plus is one that I've talked a lot about before. It's a challenge.

11. Quick-Fire Questions & Reflections

Listen, I want to move into a quick-fire because otherwise I could talk to you all day. I say a short statement, you give me your immediate thoughts. Sound okay?

Yeah, let's try.

Okay. What do you believe that most around you disbelieve?

Estonia is a fantastic country. We have the biggest number of unicorns per capita, and nobody knows this.

Why do you think that is? What is in the waters of Estonia?

We had great education during Soviet times, and I think we had an early start thanks to Skype. So the ecosystem acceleration from an early success story is humongous.

Which company today in Europe do you think will be the biggest accelerator in the way that you mentioned there with Skype?

I mean, I have to say there seems to be a lot of companies coming from likely Revolut today, which is pretty cool to see. I don't know how many of them are doing exciting things compared to trying to do fintech widgets, but maybe today I'd say likely Revolut. I mean, Wise has a fair share of startups. Monzo has been great. Spotify—I don't know. Off the top of my head, it must be Spotify. Spotify has been pretty good.

Yeah. What buy in the public markets would you make for a 10-year period? What's your buy and hold?

I have never bought a public stock.

What?

That's really hard for 10 years. I mean, actually, maybe I would go a very classic way for 10 years. I think that is going to compound in a much more predictable way if it's the only thing I'm allowed to hold.

I love that you haven't bought a public stock. Wow. Lots of private stocks. What have you changed your mind on in the last 12 months?

I've become a whole lot more optimistic about Europe. I think, frankly, with everything that has happened in relation to the US, I've become so much more bullish on Europe. We will rebuild the critical industries.

When you look at your best investment—we mentioned Bolt earlier—is there another one that you think will be the standout?

Maybe likely Synthesia. I made a pretty big angel investment early on, when it was two crazy guys. AI was—I don't think the word, I don't think the abbreviation AI was used. They were doing video generation using smart engineers. So they've done an amazing job and are still early in the journey.

Tell me, if everything goes to plan with Plural, what happens? What does the world look like then?

Trillion-dollar European companies in 10 years. We will see.

Taavet, listen, thank you so much for this. I love it when conversations, bluntly, don't go to plan. It's always the joy of what I do. I've wanted to do this one for a long time, so I really appreciate you taking the time. This has been fantastic.

Me too. Thank you, Harry.