Hola people - welcome to Sunday CET!
Here’s a coffee thought on a cold Saturday morning where everybody is asleep - I like weird people. It’s what the startup world is like, in its whole - a collection of weirdos taking incredible risks, on a time when everybody in the society and their mothers live their lives by safety nets. And kinda different from the finance people chasing those guys - a mostly conformist bunch who act the same, talk the same, have the same expectations, and even dress the same.
This combo makes for an interesting circus I have been part of for most of my adult life, and which I have been writing about in this little email for more than six years now. It’s fun and full-filling, and am enjoying every little bit of it - actually my rule of thumb is that if on a Saturday AM I don’t have anything interesting to put in the mail, I will rather not do it. Not optimizing for engagement nor chasing reach “to win”, but seeking to feed a meaningful Sunday habit for many with an exercise of self reflection about what I found important during the week. And really grateful for each of you opening up the email every week and even taking the time to hit reply with comments, counters and snarks (boy, I love those :D) - thank you!
The interview series I have been doing for the past couple of months (an idea which I have O. to thank for), is a discovery process from recommendations I specifically ask for. It is refreshing to find interesting stories as I dig deeper into people’s background - I am doing tons of research before reaching out asking for an interview. And ask hard questions, which makes it equally interesting for them having their perspectives shared, beyond a conventional PR exercise.
Carmen is such case - Spanish based in London, has been a founder before, worked in VC and now runs Cocoa, an angel investment company that just raised a second fund and adopted a choco puppy lab called Bombon.
The money quotes:
the mood today is a combo of a) excitement, we know we’re in the middle of a huge opportunity, and b) confusion, what is value these days, and how do you measure it?
benchmarks for value and growth have been reset - but only exceptional people can build multibillion-dollar companies that sustain market cycles.
sourcing pre-seed founders is a commodity and proprietary deal flow is dead - the war is not to see, the war is to win.
in a world of AI, as anything IQ-based becomes more easily replicated, intrinsically human aspects like EQ, authenticity, courage and connection will matter even more.
probably the most exciting time to build in the consumer space in the past 20 years.
The whole thing is a must read - scroll down for it.
Also today - the Brits and Europeans are sovereign-ing at each other, the EU calls the Americans on tech blackmail and the UK has a budget that left no-one happy.
And a whole lotta more - as always, hit reply with thoughts and comments
Enjoy,
Dragos
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Market talk
We are doing an interview series for taking the pulse of the startup market through the eyes of the investors. This week - Carmen Rico - founder at Cocoa VC, VC-turned-angel based in London, which announced a $23 million close for their second fund just a few weeks ago.
What’s new with Cocoa, and what are the highlights of this year?
Some Cocoa hard core bets are proving to be crazy but not stupid. I’m mostly excited for the founders - it takes courage to do the hard, non-obvious things.
We raised Cocoa II - $23M fund backed by Sapphire Partners and three US endowments supporting children’s health, public education, and cutting-edge research. We’re deeply grateful that the value created by the founders we back will contribute to their missions. To celebrate I wrote a letter to anybody fundraising and we will be raving with robots, join us!
I started Cocoa II doing exactly what I said I wouldn’t do: consumer in the US. I just could not resist The Creature Co. I have also incubated a nuclear energy company, but that’s stealth.
We open-sourced Cocoa’s in-house VC content here.
My husband left PE and launched lolaspetsalon.com. It was all a master plan so we could get a puppy. Her name is Bombon and she’s chocolate, obviously.
You just announced the new fund - in today's tougher market, how do you define success over the next few cycles and what’s one thing Cocoa fundamentally understands about pre-seed that the market still misjudges? How does differentiation look like in the European pre-seed market?
I’ll admit I’ve always struggled with the word success. It means very different things to very different people, and it also puts on us a sort of pressure to pursue something undefined. The reason why Cocoa is inevitable to me, why I don’t see a world in which I don’t build it, is because it allows me to invest in and support Killers with a Heart. And of course, in the end I’ll be measured by returns. So, if I get to back and work with lots of Killers with a Heart, and return a lot of money to support Cocoa LPs’ missions, I’ll be very pleased.
Cocoa is built on a few assumptions that are non-obvious in venture theory. Key amongst them:
The power of small
The way the industry is evolving, funds are getting bigger and bigger, in number and in size. So are a lot of the pre-seed and seed rounds.
In that context, Cocoa is built on the power of small. We believe ownership stake matters, math is math, but stake is relative to size: 5% is to a $20M fund what 25% is to a $100M fund. So if we keep the fund size small, we can have small ownership stakes in absolute terms that are still relatively high for the fund size and make the fund math work. From that small position in the cap table we can build trust with founders and collaborate with investors.
Being small is not free of trade-offs. First, money compounds, and in a small fund we’re multiplying a small base, so the absolute amount of value created may be lower - we face higher pressure to achieve high multiples, which is a good motivator. Secondly, fees are a percentage of fund size. So if you stay small, you are resource-constrained.
I deal with these trade-offs on a daily basis. It’s not always easy, but I accept them very happily as part of the model. In a business that is a lot about access, Cocoa gets to invest in the best founders, with the world’s best co-investors, and in a way that is true to who I am. And I know that is possible because Cocoa is small.
The power of EQ (vs. IQ)
On the Cocoa I deck, I had a slide that only said: We have EQ. And so many people told me to add ‘and IQ’. I didn’t, I didn’t think it was necessary.
Venture is a people’s business, especially in a world in which capital is a commodity. We are all humans and building a company is one of the hardest things someone can voluntarily choose to do. It’s a brutal and often lonely place. I also think the founders we back have more than enough IQ themselves, what they need is more EQ around them.
Likewise, when it comes to executing, we believe that Killers with a Heart ultimately win: you have to be a killer to win; but kindness and EQ make the magic.
You're saying you back "killers with a heart" - can you unpack that? When you meet a founder for the first time, what patterns, signals, or behaviours immediately catch your attention?
Killers with a Heart are brilliant beasts with a right to a secret, building because it’s inevitable to them.
I am attracted to founders who have earned a secret and clearly understand the bet they’re making. Who lead with their product and love to show it, because they’ve been building before fundraising - they just couldn’t wait. They’d move to the US, or to the end of the world, in a heartbeat if that means they can build a stronger right to win. They’ve got fire in their eyes; you can feel their passion. Work and life are not two different things for them, they’ve been waiting their whole lives to build this company. And it’s not what they say, but what they do.
Walter, founder of Fractile, is going after Nvidia, developing AI hardware for inference. Semiconductors is the hardest space to succeed in and there’s no bigger opponent to take on than Nvidia. Yet the world he described 2.5years ago is materializing bit by bit. He’s a student and master of tech, and an absolutely brilliant one.
Thomas, founder of ScrapChef, is a PhD in Physics and AI who managed to explain to me the challenges in steelmaking by comparing them to baking a cake (I haven’t tried the recipe yet!). If you can explain something so complex to someone with no context in such a simple way, you have the kind of depth that keeps you ahead. He’s the same guy who sleeps in the steel plants.
A Cocoa company received a pre-seed term sheet before being a Cocoa company. Three founders: one in Ukraine with a 3-year-old; one in Berlin as a refugee with a 6-month-old. They didn’t think it was the right partner, so they decided to bootstrap for the first year.
The month he became a father, David said no to becoming the COO of a global scale-up and instead moved back to Spain, used his own money to buy two accounting firms, and began an AI-enabled roll-up.
A Cocoa founder has an anonymous X account where they share deeptech thoughts. It’s followed by the who’s who. He doesn’t know I know.
How has the AI changed what pre-seed readiness looks like? Has the bar for product maturity, technical depth or founder profile shifted compared to two years ago?
Lots of things seem to have changed in the past two years. Being a founder today does not seem at first like a totally irrational risk-adjusted return decision; though I still think it is. There’s a lot more of everything, that looks a lot the same. Founders are much younger, dropouts are a thing again. Benchmarks for value and growth have been reset. In fact, we’re not even sure what value means anymore.
But I’m not convinced the fundamental thing has changed. The way we build companies is changing, but to me, it’s still true that only exceptional people can build multibillion-dollar companies that sustain market cycles. And exceptional means: brilliant beasts, building because it’s inevitable to them, in a market where they have a right to a secret.
Hence, to me, if anything, the bar is higher now than it was before. I am drawn to founders who have started to build something already, even if they’ve only tinkered, to test their insight - it’s easier and cheaper than it ever was.
A lot of times I feel founders want validation from VCs before going all-in. I understand that, but I can’t get convinced if you’re not more convinced than I am.
Today, it is easier to build, but it’s much harder to win - it’s Hunger Games out there. You’ve got to know something the market doesn’t know or doesn’t agree with, make a bet, and build your product and company around it. And you’ve got to be an animal. But it’s still a very long-term game.
Relentless hustle is a must, and many of the founders I meet are totally unhinged execution machines. But that’s not enough - the obsession, the commitment, if it's going to last, needs to be to build the company.
How would you describe the mood of the European tech and venture ecosystem? Do you see a pattern in how American VCs enter Europe at seed, and how much of that impacts the market behavior?
I think the mood today is a combo of a) excitement, we know we’re in the middle of a huge opportunity, and b) confusion, what is value these days, and how do you measure it?
The line between pre-seed and seed has blurred so I think of rounds in terms of round #1, round #2, Series A, etc. And there it’s a tale of two markets: the best and the rest.
There’s a world dominated by
(i) founders from top talent hubs (e.g. ex-Palantir, ex-Revolut), often building AI wrappers or other applications that go from 0 to multiple millions in ARR in a matter of weeks, and
(ii) academic founders developing cool AI tech (often robotics). In this world, rounds are huge, valuations are astronomical, and follow-on rounds happen within weeks.
Though we’re also starting to see concerns about POCs that never make it to deployment and the extreme customization required for each customer. Multistage and American VCs are actively investing in these round #1s, but not in other types of pre-seed/seed, as there it makes more sense for them to wait for more signal on who the winner might be.And then there’s a world in which, if you’re not an obvious founder profile and/or don’t have an obvious AI strategy and explosive growth, you might struggle to raise, especially beyond round #1. Round #2 (a.k.a. the traditional $4–5M seeds) is almost dead - investors have cognitive overload and are hyper-focused on AI-driven momentum, meaning that anything that’s not already a rocketship by round #2 often struggles to capture attention or raise.
Two things I’ve been thinking about in this context:
It makes me wonder if $2M round #1s are doomed, as the $4–5M intermediate rounds seem to be disappearing and founders may need to raise their round #1 on the basis that their next round will have to be a Series A.
In this crowded market, where customers and investors are overwhelmed by opportunities that mostly look the same, and companies are being king-made earlier and earlier, capturing revenue isn’t enough. You also need to capture mindshare. As a founder, you want your company to be the one everyone thinks of when they think of the category.
What does conventional wisdom in Europe look like to you right now? And how do you mentally compare London to Berlin, Paris, or Stockholm in terms of opportunity, founder psychology and risk appetite?
I’ve been thinking a lot about consensus and the impact it can have on outcomes. Most of the companies we invest in will need very large amounts of money and, as such, need to become consensus at some point. But when does consensus start to matter? My hypothesis is that as money concentrates more and more in a few companies (and funds) and companies get king-made earlier and earlier, consensus matters sooner. But how soon?
This summer, as I dissected the Cocoa I portfolio across every possible dimension, I wanted to test whether bets that were consensus at the point of investment were performing better than the non-consensus ones. So, I ran a Consensus vs. Performance regression analysis. Results: no correlation. With a correlation of just 0.0033 (on a scale of -1 to 1), there's almost no relationship between how highly consensus-rated a company was at the time of Cocoa’s investment (round #1) and how it actually performed. Which I guess means I’m free to back the founders I believe in, building the things they believe in.
In terms of geo, I think of founders first - you can of course draw conclusions backwards about ecosystems, but I don’t think much in terms of hubs; I think in terms of founders, and then they tend to be in hubs, if that makes any sense. To me, what matters is backing founders who are based in, or want to move to, the place where they can build the strongest right to win.
What verticals are intriguing for you and how do you go about exploring business opportunity? How much signal is data-driven and how much is being in the right circles?
I’ll try to be non-obvious, as so often I feel so much of what we do is repeating each other’s ideas. ;)
Right now, consumer is very intriguing to me. I feel we’re at the verge, if not already in, a new SEO moment. It’s probably the most exciting time to build in consumer in the past 20 years.
But to be honest, my signal is almost entirely founder-driven. I’ve ended up in the most interesting spaces because I met great founders building in them: steel, semiconductors, affective computing and many others, I would have never reached, or dared to consider, through a top-down market analysis.
I spend most of my time with founders; they know best where opportunities lie. In fact, I joke that numbers confuse me ;) Some of my biggest investing mistakes were when I assumed the numbers reflected the founder’s abilities, and they didn’t. I’m even more wary of that today, when some of the revenue and traction we’re seeing across the board is hard to grasp, and it’s difficult to tell whether it’s the founders, the market, or the mania.
In terms of finding these founders, sourcing these days is a commodity even at pre-seed. As soon as profiles with a strong logo in their background update their LinkedIn, they face a deluge of inbounds, often receiving 50, even 100s of LinkedIn pings from investors before they even start fundraising, or even start the company. There are tools for that. There are also a million lists circulating over WhatsApp with the same profiles. This industry trades on information, but that information is less and less valuable as it becomes more and more public. Proprietary deal flow is dead. The war is not to see; the war is to win.
What are some interesting founders or startups you came across lately?
I like founders with strong opinions, making a bet, ideally one that generates strong opinions. And I’m very happy to back crazy.
Dan, the personification of taste, believes that in a world where productive computing is solved and that’s evermore lonely, affective computing is the next frontier - decorative, non-utility high-tech devices designed for emotional value above all. The first product is The Little Guy, and when X went crazy with it and people kept asking ‘what does it do’, the answer was always ‘nothing, it just hangs out’.
Yesterday I met a founder working on uploading the human brain. I still need to get my head around that one, but it blows my mind, in the best way, what we can now aim to build commercially.
I’m fascinated by a founder in reinforcement learning who livestreams himself on X, building for hours on end.
Looking 3-5 years out, what part of the European ecosystem do you think will look completely different from today? And who do you think are Europe's unsung heroes when it comes to building startups?
Love this question… and I certainly don’t have the answer. But I do have tons of questions for a world in which capital and execution become commodities. I also always think we overestimate the impact of things in the short term (human nature and our social and economic constructs are hard to change) and underestimate it in the long term (our minds struggle with compounding). But whether it’s in 3–5 years or in 10 years:
Will seed even be a thing, or will founders raise money only after PMF, for GTM? Or not need to raise at all? Will there be more venture funds? Or far fewer funds?
What will an AI-native fund look like? If AI can underwrite early-stage risk better than humans (will it?), what is the essence of venture? Does a fund become a model? A distribution engine? Or does it become a relationship business at an even deeper level? And will our judgement even matter or will it be purely programmatic allocation of capital?
What will a truly AI-native company look like? Will competition for talent continue to be the most brutal of wars or what will companies compete for?
Will it be the US or will it be China leading? And will Europe be very much on the map, or not at all?
What I really hope is that venture will still be about the people. In a world of AI, as anything IQ-based becomes more easily replicated, I hope that intrinsically human aspects like EQ, authenticity, courage and connection will matter even more.
Unsung heroes when it comes to building startups: the families and friends of the founders, who support and endure, even when they don’t fully understand.
You can read all the interviews here. Who else would you like us to do next? Hit reply with your favorits!
Signals
Interesting early stage deals
🇪🇸 Anyformat (AI for structuring complex data) - seed
🇫🇮 Gosta Labs (compliance ML for health) - seed
🇵🇱 Juo (agentic commerce-ready toolkit) - seed
🇸🇪 Kovant (enterprise-grade AI agents) - seed
We add more of those on Linkedin and keep a religious track of what’s interesting in Europe on Nordic9. (yup, better than the other guys)
Substance
a closer look at how a Romanian built a hyperloop business while doing a PhD and seeded it with $13 million as the project got legs in the States
also - Brits killing it in the US, just raised one of the highest A rounds this year in Europe
new Euro funds announced this week (10)
people on the move + long tail deals
… and more premium items → zero noise, just pure signal = everything that was important in VC Europe this week ← join Europe’s best investors, gotta sign up if you’re serious about European intel.
Cheat sheets
Q3 in Europe - high signal & high value deals and most active investors in the Nordics, DACH, UK, France, Americans etc
British case for AI prediction markets
Lovable’s financial projections.
the VC economics for a drone interceptor biz
What would you invest in?
I have picked three early stage startups from Europe with intriguing odds for growing. You're the VC - who gets your term sheet?
Last week’s results:
🟨⬜️⬜️⬜️⬜️⬜️ 🇸🇪 Bardo - AI for carbon footprint tracking (11%)
🟩🟩🟩🟩🟩🟩 🇫🇷 Dessia - AI automation system platform for engineers (61%)
🟨🟨🟨⬜️⬜️⬜️ 🇬🇧 Mock AI - 3D animation AI co-pilot (28%)
Let’s see your say this week - click on the link of your choice below - we’ll add the result next week.
What startup would you invest in?
Stories
American Big Tech agenda
What happened: US officials asked the EU to reconsider its rules for big tech companies if it wants to see lower US tariff rates on its steel and aluminium exports. Europe wants relief from tariffs added since the two sides struck a tentative deal in July, including on steel and aluminum. The US has conditioned any rollbacks on Europe easing its regulation of tech companies - a steel for tech compromise.
Why it’s worth following: Big tech agenda push from the US onto the EU was long-time coming as Trump’s even wined and dined big tech CEOs, promising them to solve the EU-being-a-pain-in-the-ass problem - this is Trump solving it. It is a direct clash to the public anti-American tech stance the EU administration has had over the past decade - tamed now by the American leverage over Russian war against Europe. Besides, Europe has never had great tech policy leaders - remember Thierry Breton?
What people are saying:
- US Commerce Secretary Howard Lutnick: There’s the carrot and the stick. If the EU take their foot off this [DMA] regulatory framework, the US might ease or adjust steel and aluminium tariffs.
- Europe’s antitrust chief Teresa Ribera: This is blackmail to strong-arm the EU into watering down its tech rulebook - the EU’s digital rulebook should have nothing to do with trade negotiations.
The UK’s budget
What happened: The Brits have an official budget for 2026 - here is the original and its key points.
Why it’s worth following: It’s a survival budget for a government itself fighting to survive. The UK economy faces serious challenges: weak growth, inflation, the aftermath of Brexit, and a high national debt burden, which had the government struggling between pleasing markets (and creditors) and winning back voters - and satisfying neither fully.
What people are saying: Hot mess - the budget is prioritizing short-term revenue or political survival rather than structural reforms to boost productivity, jobs growth or long-term public investment. The middle class, essential to political stability and economic confidence, is squeezed the most as it bears much of the cost - people are not happy because what was sold during the election (a break from austerity and a fairer economy) is increasingly clashing with the harsh reality of tax hikes, economic uncertainty, and what feels like broken promises.
Defence money
What happened: Talks to allow UK companies to play a greater part in the EU's €150 billion defence loans scheme have broken down after a dispute over money.
Why it’s worth following: Major VC spending in Europe has been in defence this year, and the British investors/startups have the lion share in it. Besides, the UK/EU unity is quite important in the light of the Americans pushing a Russian deal down the European throat just before Thanksgiving.
What people are saying: Specifically, the EU asked for a financial contribution between €4 billion and €6.5 billion (plus additional administrative fees of €150-250 million) for full or enhanced participation - combined to a would-be cap of 35% of contract value on non-EU components, under ‘third-country’ terms.
The Brits say that the math doesn’t work - why pay 6B to participate in a programme where your companies are capped and structurally disadvantaged? Asked more value for money i.e. a potential 50% cap, meaning being able to sell highly integrated defence systems, and not just mere components.
What is the cap and why is important: The cap simply means suppliers cannot source more than 35% of parts, subsystems, electronics, sensors, software, engines, or services from British providers. To the EU the cap is protecting EU industrial sovereignty while making the Brits a component subcontractor - 50% makes the Brits a co-equal partner, just like France or Germany. But Brexit made the Brits sovereign of some sorts as well, therein the pickle of two friends sovereign-ing at each other over cash.
Other notes
Nvidia says it’s not like Enron in a private memo refuting accounting questions - just because circular deals are done legally doesn’t mean the AI bubble won’t pop.
Why this is happening - Nvidia hand in hand with the VCs is subsidizing money-losing AI startups across the entire value chain, while Google is already in beast-mode competing on costs. Something’s gotta give.
What we’re seeing is the Donald Trump school of tech marketing […] most AI startups are all tweets and no product - optimizing only for the next demo video. The frontier labs will survive but it’ll be carnage for the rest. Everyone’s just trying to get their money and get out.
16 founders who got rich out of AI data centers (notably a few Russians in there too) - good reminder that you don’t need to solve the world’s problems for building lucrative schemes.
related: every new batch of business school grads invents bank fraud from first principles.
Why YC startups are just a reflection of serving up what the broader Consensus Capital Machine demands - see the above lucrative schemes.
Btw, Google began showing ads in AI Mode (AI answers).
OpenAI’s wearable will provide an incredible contextual awareness of your whole life while giving the vibe of sitting in the most beautiful cabin by a lake and in the mountains and just sort of enjoying the peace and calm - that’s as much you will get from this video.
Alibaba started selling AI glasses, $270 a pop.
Amazon has more than 900 data centers in more than 50 countries.
AI workers tell their friends and family to stay away from AI.
Earlier this year, both Wayve and Tesla got enacted the ES-AV framework in Spain that allows them for Phase 3 testing for their self-driving cars - Level 2 with DCAS i.e approved for high-autonomy, driverless-with-remote-oversight trials on open public roads, enabling large-scale data collection.
FWIW…
… Wayve will start doing Level 4 testing (fully driverless) w/ Uber in the UK next spring and is already doing Level 2 tests in Germany.
… Tesla otoh has no approvals in the UK yet but already doing Level 2 testing permissions tests in Sweden, France, Norway, Germany, Italy, Denmark and now Spain.More than 16,000 millionaires worth a collective $92 billion are estimated to have left the UK in 2025.
Gautier Cloix of H on why Europe is a mess.
Max wrote a great analysis of the schism from within the buying market aka the VCs business.
Stefano also pointing out some obvious thesis of the world we live in - outside the AI that is - surprised not too many people talk about it tbh.
Simon being a VC contrarian: you don’t need to move (from Europe) to the USA to build a great company.
How AI models would vote - we asked 6 frontier AI models to vote in the elections of 8 countries.
An American travelogue in London.
That’s all folks, have a wonderful week!
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