We are thrilled to present you with an inaugural investor profile in our interview series:
“What makes a good VC?”
We sat down with Carmen Alfonso Rico, a
VC-turned-angel and a founder of Cocoa Ventures, to learn about her journey in the industry. Read below about:
o Investing in businesses with “insane customer love”
o Carmen’s first angel investment into Hopin
o Building her own VC-turned-angel fund, Cocoa
o The power of EQ and differentiating yourself in the industry
o Skills that an associate in VC should possess
A: Hi, Carmen! Thank you so much for finding the time to speak with myself for the UCL VC&PE Club’s “What makes a good VC?” profile series. Could you take us back and tell us how and why you chose to enter the VC industry?
C: Absolutely! Actually, my first job after university was in politics, so I followed quite an unusual path into VC. I then moved to London to serve my time at Morgan Stanley, I did three years in investment banking. I guess I always thought I was going to be a founder, I come from a family of entrepreneurs. But I didn’t have an idea of what I wanted to devote my life to and I didn’t have a network to build a tech team with. And so, I thought that VC was the best way to become a founder: because it was going to, one, teach me what companies fail and succeed, as I was going to see so many of them. Little did I know that it takes 10 years to build a company, but that was my assumption. And the other assumption was that in VC I could build a network of potential co-founders. So, I joined Felix Capital when they didn’t even have an office and it was very early days, and I spent two years doing a lot around consumer and commerce enablers in Europe and the US.
I then left to launch my startup, – as planned: I bootstrapped it, it was a direct-to-consumer brand for pregnant women. A year into it, I realised I really missed investing. That was, back then, the biggest “Aha!” moment; suddenly, I realised that I was not an operator. I was missing the variety, speaking to different founders, solving different problems, knowing a little bit about a lot of things – so I went back into investing. I have not looked back since. I’m an investor at heart, I love it, I cannot imagine doing anything else in the world. The energy of working with founders and with investors is just electrifying. So, I joined a Spanish fund to launch it in the UK, named Samaipata, that was doing B2B and B2C marketplaces and network effects.
So, I took the two theses – consumer and network effects – and started developing my own thesis: I invest in businesses that have insane customer love. I look for very painful pain points where people absolutely love the solution; so much so that users get out of their way to refer people, to bring each other onboard, to build communities around it, to interact through it. These are very high barriers to entry and drivers of organic growth. So, on top of that emotional connection with the product and experience, you can build a highly scalable and defensible business. And this can happen both in B2B and B2C, so I have invested into D2C brands all the way into Open Source devOps tools.
Obviously, with my name and my accent, you can figure out that I’m from Spain. What people don’t know is that I was actually raised in Germany, so this idea of emotional connection bringing scalability and defensibility combines the two very contradictory personas in me very well.
Cocoa specifically, we started investing in January 2022, so we have been live for less than a year. But the start of it all was in Summer 2019 – that’s when I made my first angel investment into a company that some of you may have heard of, called Hopin. I put together 100% of Hopin’s pre-seed: every single investor from seedcamp to my family, I brought. I did the same for the seed, introducing them to the lead investor, which was Accel.
What is interesting from Cocoa’s perspective though is the relationship I built with the founder. It was my first angel investment; I was angel investing, because my fund wouldn’t do pre-launch businesses and Hopin was pre-launch. I wanted to help Johnny; I wanted to help with the tools that I had. We often joked that if I could cook, I would have made him dinner. I can’t cook, but I can build cap tables. So, I introduced him to investors, helped him with the deck, reviewed his term sheet, built the spreadsheet of the cap table… All the things that for a VC are bread and butter, but for a founder aren’t. And doing so, I realised I was building this very unique relationship of trust with him. I figured that it was because I was small, I was basically insignificant in his cap table, but I had all the knowledge of the big guys because I was a big guy in my day job. That allowed me to build an incredible relationship with the founder, like a trusted confidant; I really liked this relationship, working with founders like that, and so I started doing loads of angel investing.
At the same time, I was a partner at a Series A fund called Blossom Capital. And by being a VC and also angel investing, I realised that there was an opportunity to become a VC-turned-angel. And that’s Cocoa. We invest $200-250k checks, depending on the size of the round, but the point is no friction in allocation, we don’t compete with other investors, we collaborate. We don’t give a damn about stake. This allows us to be 100% aligned in interest with the founder. Now, to that angel check and angel stake we bring on our VC network and expertise, because we have been VCs. And we become the in-house VC for founders: we help them hack the system with independent investor insights! Our investors are mainly tech founders, we have 20 founders of unicorns in Cocoa with no VC funds, so we can be really neutral inside-out.
And Cocoa is called Cocoa because cocoa is the seed of chocolate, and from the cocoa beans to a chocolate bar there are many stages, – like you’ve got in the life of a startup. And because we love chocolate, and we love taking our founders to a chocolate-making class, and just building a brand that is super fun, playful and memorable!
A: Incredible! You have already touched upon the value that you bring to the founders. I was looking at your presentation and saw all the messages you get from founders at 1am being like “Help me!”, so you obviously have a lot of skills that help them on their journey. So, what skills have been most useful to you on your journey as an investor?
C: It is a very good question. And it’s a journey, right? A journey of ‘self’, learning about yourself, identifying and accepting your superpowers, and what are not your superpowers. The biggest realisation about myself as an investor was the power of EQ. This was not necessarily an easy realisation; I have always relied on my brains as a condition of self-worth, but then I realised that the biggest most differentiated value I bring to a founder is not just market knowledge or any other specific expertise, but rather being there, and having empathy and respect for what they’re going through. If you look at my WhatsApp, the most common message is probably “Do you have 5 minutes to chat?” and I always have 5 minutes for founders. And it is the biggest privilege. The founders thank me, but no, it’s like I should thank you for your trust.
So, I think that this journey of finding your superpower (whatever it is), and acknowledging it, and building on top of it, is very important. Because, at the end of the day, this (like any) industry is super competitive and you need to differentiate yourself. If you try to be like everybody else, it’s tricky, if you try to be everything, it’s tricky, and so just acknowledging what you’re the best at and doubling down on that… And just owning it and enjoying it! This has been the biggest breakthrough for me in building Cocoa.
A: Thank you! That is very honest and humble, and shows a great deal of self-reflection. So, on that note, have you had any challenges or failures that helped you grow and learn?
C: Lots, lots, lots. 100%. That is also a question I ask a founder. I frame it like: “What’s your chip on the shoulder?”, as in what has gone wrong that is now powering you? And how do you transform that failure or mistake into energy that now powers you? And there were many. If you see my career, it is not a straight line, I had no clue what VC was up until I was at Morgan Stanley. And I always say that to people, I have, as a big Spanish family, tonnes of cousins and they all want to know who they’re going to be at 16. Like, I had no clue what VC was up until I was 24 and now I would not do anything else in the world.
I think the thing that powers me today and what inspired Cocoa is probably the Hopin story, because it both made me in terms of track record and made Cocoa as it showed me a different way of working with founders that is the basis of Cocoa. However, I never actually got my fund back then to invest in Hopin, I could only angel invest, so I learned a lot from the situation of having the relationship with the founder, having the conviction, but not being able to invest…
Cocoa’s model of not caring about stake, just optimising for working with the best founders and putting yourself in a position where you can be their trusted confidant, comes from the frustrations I experienced at the time. And I work relentlessly to see and work with every top founder, so that I can fully grab the next Hopin. It’s not that I wake up every morning thinking about Hopin, but it shaped me: all of the failures and the missed opportunities from back then, I build upon to create Cocoa and not stop.
A: If you were to be looking for an analyst or an associate, what are the characteristics of a VC that you would look for? I’m sure our students would love a couple of tips.
C: That is a very good question! In full transparency, whilst Cocoa is an evolving organism and we adapt with imagination and flexibility (in case in 6 months you may see me hiring 3 associates), for us Cocoa is currently partner-only. This is because everybody needs to be a check-writer to build this trust. But, if I were to hire for an associate (and this is going to be very contrarian), I would look for somebody who has done either banking or consulting, because they can work insanely hard. They understand what top quality looks like in the output, they understand how to prioritise, they have a lot of soft skills that are useful for the job of an associate, which is a very different job from that of a partner. An associate’s role is based on sourcing and supporting in analysis. This structure and analytical skills that you learn in consulting and in banking are highly-useful.
Then, I would look for someone multi-dimensional. So, okay: you have the skills of a banker or a consultant, but to that I would add curiosity and spark. That’s what’s going to allow you to grow. So, the banking or consultant skills is what is going to allow you to add value to a partner or a principal, and this curiosity is going to allow you to keep on going in the VC world.
I would also do a lot of expectations management. When you move from certain industries into VC, you make a lot of assumptions (I certainly did) that are not right, so being a junior in VC becomes very difficult. So, I came from Morgan Stanley and I thought: oh, small fund, lots of room to grow and progress super-fast. Well, a fund does not grow like a startup, it grows in fund cycles every 2-3 years and very rarely does somebody move up in position until then. In banking or consulting, it may take you 12 years, but there is a path. In VC there is no such a path; it depends on each fund. Also, it can be a lonely job vs. being in a team. It is important to understand that VC also has its challenges as a career choice. To me, it is the most interesting and rewarding job in the world, but it is not an easy place to build a career.
A: Thank you so very much for this amazing insight! We really appreciate it.
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