Matthew Le Merle is co-founder and Managing Partner of Fifth Era which manages Blockchain Coinvestors – the world’s leading blockchain venture fund of funds. Matthew is also Managing Partner of Keiretsu Capital – the most active early stage venture investors backing almost 200 companies a year. He is Chairman of CAH and Securitize (Europe), Vice Chairman SFOX and an advisor at Warburg Pincus.
Matthew grew up in England before living most of his life in Silicon Valley where he raised his five children with his wife Alison Davis. Today he splits his time between the US and UK. By day he is an investor in technology companies and a bestselling author and speaker on innovation, investing and the future having worked at McKinsey, A.T. Kearney, Monitor, Booz and Gap. In his spare time, he enjoys reading, writing and photography. He was educated at Christ Church, Oxford and Stanford and is an adjunct professor at Singularity U.
To learn more go to www.fifthera.com.
Portfolio ventures that are going great need almost no support, and the ones that are in the bottom aren’t worth helping. Apart from the two extremes, how do you know how much effort, time, persistent to put in the ones that are somewhere in the middle?
Actually, I think that the ventures that are doing the best also are the ones that need the most support because they are quickly transitioning through new phases and they are growing so fast that their leaders and teams have to keep changing and growing themselves. So you see the best companies relying the most upon help including investors, advisory boards but also coaches, mentors, etc.
For an investor, your time is always precious and so triaging how you spend it is always a challenge. I think it is true that the troubled companies always suck you in, and you have to be disciplined, but the best companies are where you are needed most. The middle companies, you have to selectively try and help migrate to being top quartile. But in leveraged ways that don’t use up too much time
How do you balance your time between (1) sourcing quality prospect ventures (2) doing due diligence for prospective investments and (3) helping current entrepreneurs? Which of these are you comfortable outsourcing to principals/analysts and which do you absolutely have to do yourself?
We wear more than one hat. Fifth Era is our family office, we manage Blockchain Coinvestors which is the leading blockchain venture fund of funds and I am one of the three partners at Keiretsu Capital which manages the funds for the world’s leading early stage investor group. The answer to this question varies across the three.
1. At Fifth Era, we are very selective and only invest and work with teams where we feel we can drive success and value creation. Most of our time is in 3. We don’t do much of 1 and 2.2. At Blockchain Coinvestors we are a fund of funds, so we do a lot of 2. to pick our managers and they do most of 1. and 3.
We do selectively reach in to our combined portfolio and do 3. but only with the agreement of the venture funds we are investors in which have backed the companies3. At Keiretsu Capital we benefit from the largest global network of angel investors. They are doing 1. and most of 2. and we cherry pick the fund investments from their deal flow and most of our time is spent on 3.
Many GPs are good investors but don’t master one of the core skills – adding value as a board member. What do you think are some tricks to a productive relationship with founders? What should the culture be for the board and CEO for a quality relationship?
Every investor is different and their personal skill sets will also be different. Good investors know what they are good at and what they are not good at. Then they figure out how to get their companies everything they need. Even if they themselves are not good at it. In our cases, both Alison and I have been professional advisors at leading strategy consulting firms, corporate executives and board directors of public and private companies.
So we think we are good at helping advise and coach fast growth company leaders and teams. But our personal bandwidth is limited. Maybe 5 to at most 8 each. Which is not enough so we have to find others – or more specifically, our VC partners have to find others – to engage.
The worst possible situation is where financial investors join a board, have no skills in business strategy, go to market, operations etc. but then take a very active and directive stance. They often end up pushing the company in directions that it should never have gone. I personally think WeWork is a great examples of this. I still believe WeWork is a great model and that model will change the world – but Adam Neumann was pushed by investors to go places he should never have gone and at a pace that overstretched the company.
Nowadays, mental health is more present than ever, with things like burnout, stress, depression, among others. What do you think of external intervenients like executive coaches, both for a founder and for a VC partner? Do they usually add value?
I think every CEO and every member of the senior executive team of an emerging unicorn should have access to support of various types and should use a coach or mentor/advisor if that is something they want. But good executive advisors are very rare, and conversely, giving a fast growth company leader a “bad” coach is of course worse than doing nothing
How do you solve important conflicts with CEOs, such as lack of alignment on exits, strategy, or just the CEO being in denial about things like performance? Does the resolution begin with a private conversation or with involving other board members in a decision?
All of the above. 360 degree. Private, board, outward in (voice of customers, voice of investors, voice of regulators, etc), bottom up (employee surveys, idea boxes etc.)
Really good CEO’s of emerging unicorns will be hungry for input, but will have blind spots too. A good board and coach help complement their natural strengths by keeping them aware of their blind spots too
When raising money from LPs, what is the thing you emphasize the most when “selling” the fund? Past returns? Team expertise (domain and/or entrepreneurial expertise)? Unique angle?
Access, Performance, Expertise in that order (we are primarily fund of funds)
Key Lessons from Matthew
- Good board members figure out what the company needs – and deliver it. A good board member knows what their strengths are, and uses them to help the company with its current needs. The worst type of board members are ones that don’t have the required skills but still push and insist with the CEO;
- A unique, efficient sourcing mechanism can decrease time and perform a part of due diligence for prospective investments. Having companies come from a qualified source, such as an early-stage fund or other close contacts that already performed some diligence will reduce the required time and pre-vet them, saving important time for you as a GP;
- A good CEO is hungry for feedback. A quality CEO doesn’t avoid their weaknesses – they are open about them and request feedback from stakeholders such as board members;