Why is GoCardless COO Carlos Gonzalez-Cadenas pivoting to become a full-time VC?

'I think this is the best moment in entrepreneurship in Europe'

Index Ventures, a London- and San Francisco-headquartered venture capital firm that primarily invests in Europe and the U.S., recently announced its latest partner. Carlos Gonzalez-Cadenas, currently COO of London-based fintech GoCardless and previously the chief product officer of Skyscanner, will join Index in January.

Gonzalez-Cadenas is a seasoned entrepreneur and operator, but has also become a prolific angel investor in the U.K. and Europe over the last three years, making more than 50 angel investments in total. Well-regarded by founders and co-investors, his transition to a full-time role in venture capital feels like quite a natural one.

Earlier this week, TechCrunch caught up with Gonzalez-Cadenas over Zoom to learn more about his new role at Index and how he intends to source deals and support founders. Index’s latest hire also shared his insights on Europe’s venture market, describing this era as the “best moment in entrepreneurship in Europe.”

TechCrunch: Let me start by asking, why do you want to become a VC? You’re obviously a well-established entrepreneur and operator, are you sure venture capital is the career for you?

Carlos Gonzalez-Cadenas: I’ve been an angel investor for the last three years and this is something that has basically grown for me quite organically. I started doing just a handful and seeing if this is something I like and over time it has grown quite a lot and so has the number of entrepreneurs I’m partnered with. And this is something I’ve been increasingly more excited to do. So it has grown organically and something that emotionally has been getting closer and closer as time has passed.

And the things I like more specifically are: One, I’m quite a curious person, and for me, investing gives you the possibility of learning a lot about different sectors, about different entrepreneurs, different ways of building businesses, and that is something that I enjoy a lot.

The second bit is that I care a lot about helping entrepreneurs, especially the next generation of entrepreneurs, build great businesses in Europe. I’ve been very lucky, in the past, to learn from great people, like Gareth [Williams, Skyscanner co-founder] and Hiroki [Takeuchi. CEO at GoCardless], in my journey. I feel a duty of helping the next generation of entrepreneurs and sharing all the things that I’ve learnt. I care a lot about setting up founders as much as possible for success and sharing all those experiences I’ve learned [from].

These are the key two motivations that have led me to decide that it would be a great time now to move to the investing side.

How have you managed your deal flow while having a full-time job and where is that deal flow coming from?

It is typically coming in three buckets. A part of it is coming from my entrepreneur and operator network. So there are entrepreneurs and operators I know that are referring other entrepreneurs to me. Another bucket is other investors that I typically co-invest with. Another bucket is venture capitalists. I basically tend to invest quite a lot with VCs and in some cases they are referring deals to me.

In terms of managing it alongside GoCardless, it takes quite a lot of effort. It requires a lot of dedication and time invested during evenings and weekends.

The good thing is that my network typically tends to send me quite highly curated deals so essentially the deal flow I have luckily tends to be quite high quality, which makes things a bit more manageable. But don’t get me wrong, it still takes quite a lot of effort even if the deal flow is relatively high quality.

Presumably you haven’t been able to be all that hands-on as an angel investor, so how are you going to make that transition and what is it that you think you bring with the operational side to venture?

The way I think about this is, the entrepreneurs I typically invest in and their companies tend to be quite capable in their day-to-day perspective. Where they tend to find more value in interactions with me is what I call the “moments of truth.” Those key decisions, those key points in the journey where essentially it can influence the trajectory of the business in a fundamental way. It could be things like, I am fundraising and I don’t know how to position the business. Or I’m thinking about my strategy for the next 18 months and I will basically welcome an experienced person giving me a qualified opinion.

Or I have a big people problem and I don’t know how to solve that problem and I need that third person who has been in my shoes before. Or it could be that I’m thinking about how to organize my team as I move from startup to scale-up and I need help from someone who has scaled teams before. Or could be that I’m hiring three executives and I don’t know what a great CMO looks like. It’s those high-impact, high-leverage questions that the entrepreneurs tend to find helpful engaging with me, as opposed to very detailed day-to-day things that most of the entrepreneurs I work with tend to be quite capable of doing. And so far that model is working. The other thing is that the model is quite scalable because you are engaging 2-3 times per year but those times are high quality and highly impactful for the entrepreneur.

I typically also tend to have pretty regular and frequent communication with entrepreneurs on Slack. It’s more like quick questions that can be solved, and I tend to get quite a lot of that. So I think it’s that bimodel approach of high-frequency questions that we can solve by asynchronous means or high-impact moments a few times per year where, essentially, we need to sit down and we need to think together deeply about the problem.

And I tend to do nothing in the middle, where essentially, it’s stuff that is not so impactful but takes a huge amount of time for everyone, that doesn’t tend to be the most effective way of helping entrepreneurs. Obviously, I’m guided by what entrepreneurs want from perspective, so I’m always training the models in response to what they need.

Will you have a particular remit at Index in terms of geography or sector?

At Index, all partners have a bit of a center of gravity from their perspective, but I think we are still relatively broad. In terms of me, it’s something we’re still figuring out from our perspective, but I’m likely going to be more gravitating toward the software space, say SaaS plus enterprise plus a bit of deep tech, machine learning and artificial intelligence. That’s probably going to be my focus, and I’m primarily focused on Europe.

They’ll be people watching this announcement and they’ll say, “Why aren’t you joining Balderton?” Balderton has obvious links to GoCardless, etc.

I think the more interesting thing for me is why I’m joining Index. Obviously, there are lots of incredible funds out there and lots of funds I’ve had the privilege of partnering with from a GoCardless perspective, like Balderton. But I think the more interesting thing for me would be to share a bit more context in terms of why I’m joining Index from my side. I think there are a few things that I really like about Index. One is obviously that it is an incredibly high-performing organization. I’m very attracted to high-performing organizations, and Index [is] one of the top funds in Europe, by far in terms of performance, and one of the tier one funds globally. That high-performance culture attracts me a lot. The second thing is, I have a lot of appreciation for the journey of Index.

Index is the only tier-one fund that has been created first of all in Europe, and then has expanded globally into the U.S. and become successful also in the U.S., which is something that I’m really, really attracted to. I highly respect that entrepreneurial journey that our founders and every partnership has brought. I think Index is quite an entrepreneurial approach in terms of taking risk if you think about the percentage of companies that today are massive successes in Index’s portfolio.

So, for example, Revolut, Robinhood, Deliveroo, Adyen, Figma. All these companies, Index invested really, really early in the seed round, or, you know, the A, but the vast majority of those were in the seed round. And this is something that I think is super exciting, because it aligns a lot with what I do. I’m more of an entrepreneurially minded person that wants to invest heavily in the journey of entrepreneurs and take fundamental bets, as opposed to just waiting until the numbers are perfect and invest then. That’s not the type of investing that I like. I like conviction investing, I like going early, partnering and betting super early, and I think Index is definitely super aligned with that philosophy and has proven that time and again.

That’s, for me, incredibly important going forward because there is a massive explosion of capital going into markets. And that essentially pushes everyone to go early. This is an area where I think Index excels: partnering early, having conviction and finding the best entrepreneurs early.

The last thing I want to emphasize is the people there, in two ways. One is the culture. I really love the culture at Index, [which is] really respectful of the entrepreneur. And that, for me, is super important. Then the last bit is that it is a global team. I think it is incredibly important because there are other funds that are essentially the same brand but in reality they are different funds and different partners. And when you basically sign up for that as an entrepreneur, you don’t have access to the full team because you’re signing up only for the European part of the fund or for the American part of the fund. At Index we have a global partnership from our perspective. And this is something that is super exciting, to basically be able to tap my partners in the U.S. but also for the entrepreneurs themselves.

Given your angel investing experience, is Index going to do more seed?

We already have two funds within the Index umbrella. We have the venture fund and the growth fund, and we don’t have specialized partners for the different funds. So all the partners essentially invest across the board. The objective is to essentially find the best companies in a given space and partner with them. And obviously we try to find them as early as possible, but in some cases that’s not possible because we find companies later in the journey. But the idea is not to have partners associated with specific stages and for specific funds. So, what I’m trying to say is that I’m not joining to do seed. I’m joining as a partner to basically do investing across the board, including both venture and growth.

The other question of can we expect Index to do more seed? I think that’s generally the direction of travel for everyone in the industry. Because obviously there is an explosion of capital across stages … [and] I think that will force everyone to go earlier. I think the key difference that I find is that Index is actually really good at that and is actually eager to do more of that. So I think we will see Index doing more and more. That’s the direction of travel for almost everyone in the industry. The question is, how many of the funds are going to really believe in that? And how many of the funds are going to really do it well? This is where the DNA point that I was making before makes a big difference, because I think Index is very comfortable doing that.

Let me ask you about the Americans because Sequoia is setting up shop in London and there’s rumors of more firms putting feet on the ground here from the U.S. What do you think that’s going to do to the dynamics of the ecosystem here in Europe?

I think this is the best moment in entrepreneurship in Europe. I think the amount and the scale of the ambition of funders is changing a lot. We have seen companies not only in the billions of dollars valuation but also in the tens of billions of dollars. And hopefully we get to the first hundred billion dollar company in Europe. We see an incredible explosion of the creation of new companies, and we see also a substantial amount of capital coming into the market. Overall, I think these are exciting moments, because I think the key dynamic that I’m seeing is there is a huge amount of companies being created in Europe, and it is the best moment ever. There’s a lot more ambition than 20 years ago in Europe; we were more in the business of essentially creating the European version of X and stuff like that. Now, we are seeing global leaders being created from Europe, so I think I’m not super worried about the additional capital coming. I think that’s kind of a reflection of the special moment that the European ecosystem is in.

I think the next 10-20 years in Europe are going to be fascinating for everyone. And I think there’s going to be opportunities for everyone.