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#35 Manuel Silva: VC firm building, LP fundraising hacks, and the future of finance
Co-founder & General Partner at Mouro Capital (fintech VC with $400m AUM), Ex Co-founder & Partner at Santander Innoventures (Banco Santander corporate VC), Ex Co-founder and VP at BBVA Ventures
We are Pol Fañanás and Gerard García, two friends passionate about tech, startups, and VC, getting views from exceptional people doing cool things and sharing it for free with those who lack access. Thanks for reading!
Manuel Silva is General Partner and founding member of Mouro Capital, venture capital investment firm focused in the future of financial services, with $400m in investment commitments across Europe, North America, and Latin America. Portfolio includes companies like iZettle (mobile payments, acquired by Paypal for $2.2bn), Creditas (Brazilian lender, raised over $1.1Bn from Softbank and many others), Socure (identity verification, over $750m funding from Accel, Citi, Capital One), and Securitize (blockchain based access to digital alternative asset securities, >$50m funding by investors like Morgan Stanley Tactical Value and Blockchain Capital).
Mouro is born from a VC spin out of Banco Santander Innoventures, a $100m AUM corporate venture arm focused in fintech of Banco Santander where Manuel was Partner and Head of Investments, lather further funded with an extra $300m upon spinning out into the current Mouro Capital. Banco Santander is one of the worlds’ leading financial powerhouses with >150 years of history, >160m customers worldwide, €1.15t in customer funds, €9.6bn profit in 2022, and a €57.7bn market cap.
Before Santander adventure, Manuel helped lead the creation of BBVA Ventures in San Francisco Bay area, the corporate venture capital arm of BBVA and at that time one of the 1st ever VC arms in global banking. BBVA is a Spanish bank with >89m customers, presence in 25 countries, >115k employees, €6.4bn profit in 2022, and a €48.0bn market cap.
Manuel is also a strong supporter of Included VC, the best fellowship focused on empowering individuals from diverse and often overlooked or excluded communities, with potential of having significant professional and social impact in the worlds of venture capital via education and unique access.
Summary
1️⃣ Career beginnings and the curious role of China
2️⃣ Leading the creation of one of the 1st ever corporate VC arms in banking
3️⃣ Lessons from exposure to one of the hottest periods in Silicon Valley
4️⃣ The adventure of leaving to create something bigger
5️⃣ From zero to building a €400m VC
6️⃣ Secret hacks for a successful LP fundraising
7️⃣ Firm building advice for new emerging managers in 2023
8️⃣ Opportunities and challenges in fintech right now
9️⃣ Present and future of the banking system
1️⃣ Building VCs, having hundreds of millions under management, playing a key role in fintech VCs and banking innovation, … however your career beginnings was quite unusual and even related to some interesting situation in China.
Curiosity has been my bedrock. I was raised in Belgium in a very international environment, and I had the luck that my fathers worked for the European Commission so I could experience quite a lot of exposure to people from all around the world. I’d say I was a pretty weird kid and this background helped me flourish - it woke up my curiosity.
As a young student I remember feeling pretty bored. I enjoyed economics, maths, and computer science, but in general university felt like kind of a bummer. I got an offer from McKinsey but I was 100% sure I didn’t want to join them so I said no. Yet I didn’t know what to do as an alternative.
To get some inspiration, when I finished my undergraduate studies I went to the director of the education entity where I was and told him: “look, I’m 21 and I don’t have any idea about what the heck I should do with my life”. I was thinking about maybe becoming a diplomat or getting a PhD to get into teaching. And this man, in 2003, told me “ey, there is a thing named China that is going to be relevant in the future, look into it”.
To that end, I decided to go to Paris to start with an MSc at Sciences Po, which could give me the option to then move on to a PhD focused on Chinese economics, for which I also had to learn Chinese. I like to be open minded and experience more things in other places. I wasn’t thinking about being in VC either, but more about letting reality guide me.
Shortly after finishing my MPhil (having also spent a year in Hong Kong), I started working at the BBVA Corporate Development team with focus on Asia and other emerging markets. I did some econometrics models for China as well as other deals (acquisition of minority stakes, advisory for entry market strategies, structuring) linked to finance players in Asia and Latin America.
Then something happened. I took a leave of absence to get deeper into my PhD, but I started to see some red flags. For instance, I remember a guy helping me get into a relevant Chinese communist library to get some statistics that could be useful for my econometrics model and finding it impossible to get good data. This struggle of not being able to access trustworthy information just grew bigger and I ended up giving up on finalizing my PhD.
Back at BBVA, I wanted to keep following my curiosity and ended up coming across a rare opportunity to start investing in technology companies from within the bank. None of my corporate colleagues back then really wanted to be travelling around looking for startups in a garage - but for me the chance of being able to go around the innovation community to find and support founders building something out of nothing was extremely exciting, so I pursued this path.
2️⃣ How was the journey of helping create one of the 1st ever corporate VCs in banking?
I feel like during the last years everyone is asking “how do I break into VC” and trying to have clear paths into the industry - my journey wasn’t like that at all.
As I mentioned earlier, 2 years before “starting in VC” I was in China trying to finish my PhD. 2 years before China I wanted to be a diplomat. And before that I even thought about going into the Army. I believe it is important to be 100% clear about this type of career stories because if not young people get an incorrect idea of what it truly looks like to “make it in the industry” - any industry really.
That being said, I’d highlight 3 things about my 1st VC experience in BBVA:
Right place right time. Sometimes serendipity just happens in your favour. At the time I made my move, the chairman of BBVA had been talking about the impact of technology in banking way before it was fashionable to do so. I am not sure how much people were embracing that vision at such an early time of the digital transformation of the industry. But we talked the same language and we just clicked around the idea of technology and banking. I have no doubt that starting at BBVA during the same period in time that he was driving the early technology agenda, was totally providential, and helped me feel like you can be innovative even against the tide.
Long-term complex problems. I always enjoyed very complex problems where there are a lot of multidisciplinar stakeholders and a tough project to execute in the long term - and this also helped. Building a corporate VC is not the same as just being a VC investor, specially if it is one of the 1st in your whole industry. But I love building something from zero and having ownership to manage a lot of very diverse professionals to achieve a meaningful goal that can bring relevant upside in the long term. I get excited by challenges where there is not a set solution from the beginning.
Personal fit. Maybe this is not so common to share, but the personal situation where you are at any given moment obviously has an effect in your actions. In my case, at that time, I was single and bored of Madrid (Spain). Getting my bag and going to San Francisco to fight for a new compelling adventure was an extra incentive.
From this starting point, what followed was 4-5 years of a lot of work. We went to the Valley to study the best and learned by doing. Our thesis was going after a $100m Fund 1 focused on innovation in finance that could have synergies with the bank, in order to become a catalyst for innovation which could accelerate the whole BBVA innovation agenda. We had lots of fun with great colleagues and amazing experiences!
3️⃣ What were the main lessons of the exposure to one of Silicon Valley’s hottest periods?
Relationship of investors and entrepreneurs. If you ask me about lessons, maybe one of the things that impressed me the most was how different the dynamic between investors and entrepreneurs was, in comparison to what I saw in Spain and Europe at that moment in time (and some times, I still see). In less developed ecosystems the vision of this relationship was somewhat based on antithesis where the investor is coming to make something more serious out of the founder, and the founder is the young bold guy with ideas but who is also chaotic and who spends a lot of money. Kind of an equation that tries to generate a positive outcome but through opposing roles. In Silicon Valley though, I learned about how precisely the understanding of this relationship as a true partnership becomes one of the most relevant catalyst of outstanding success. The culture regarding this bond was absolutely different. One based on everyone being on the same ship where each individual is expected to contribute something different - maybe the founder comes up with the enthusiasm, super hard work, and smart brains; and the investor with the duty of providing valuable support because having had the chance to allocate money, not with the entitlement of judging the founder and telling her what to do.
Dimension of ideas. This maybe sounds like the classical self-help book type of learning, but people in SV just thought way bigger than what I saw in Europe. Funny thing though, is that with time you realize it is not like these thoughts are more valid than someone in any other ecosystem. However I learned there the importance of having a flexible and ambitious mindset when building a company
based on pushing hypothesis to the limit in order to test the maximum positive scenarios that your ideas could reach. In Europe we lacked this back then and we still could improve nowadays. I see entrepreneurs proud because they reach their business plan expectations, but I’d love to see more drive towards crazy qualitative jumps.
Ecosystem and networks. More fundamental and probably obvious stuff, yet very significant and not always executed properly. It is important how the most successful periods in this specific ecosystem were in part defined by the existence of a collective intelligence fruit of an hyperconnected network of entrepreneur and investors with valuable experiences both in terms of success and failure. Sometimes it is more about being able to ask to the right person at the right time whatever you need (how should I approach the execution of X idea, how can I better understand this market, how can I build a superior team with this angle, etc) rather than having yourself the biggest brain in the world. I disagree with the motto of people working harder in Silicon Valley or being more intelligent, however I do believe that they are smarter in the way of building this collective intelligence and being able to access it in order to collect the value that they need. And one of the secret ingredients for this it is the mindset of “I will give you something and let’s see if in the future it comes back somehow”, rather than Europe’s style of “I’ll give you something if you give me something”.
Value of reputation. Strongly related to the previous one. This super basic concept of the people’s perception of your worth being firmly interconnected with your acts, is another big lesson I experienced. Way beyond the investment firm or company you represent, what matters most is your personal brand. When an entrepreneur wants to work with a fund, they want a specific investor. You want the specific individual that you know personally, who truly helps, and who wakes up in the morning focused on supporting you.
4️⃣ Why leaving BBVA spearhead to start again the arduous journey of launching a new VC with Santander?
Well, during my 5 years in the US the world changed a lot and my life too.
About the world:
Standardisation. When we started doing venture capital with BBVA, if I’m not wrong I think Citi was the only bank doing it too, at leat in the US or at a global scale. After some years though, it turned mainstream which resulted in the rise of new exciting opportunities with other entities.
From 1 hub to multifocal. When we were in Madrid with BBVA and we decided to launch in San Francisco, it’s not just that Spain scene was almost non-existent, but even London or NY weren’t very relevant. Either you went to Silicon Valley or you lacked enough ecosystem density to play the game. However after some years you could do the work from more places and in more ecosystems.
Geographical arbitrage. As a result of going from one global center to multiple ones, you could leverage the edge of already having experience in a more advanced and sophisticated ecosystem, to position yourself with more dominance in new ones that were starting to gain momentum. Prior knowledge gives you that advantage.
Availability of capital. The huge increase in global availability of capital changed the dynamic of the Valley a lot. After a while it went from being a place with a unique combination of elements that resulted in an extremely exceptional ecosystem to work in, to being one of the important places but not the only one. Gradually this collective intelligence went from having a beer or grabbing a coffee in some Palo Alto techie spot, to zoom. And at the same time the area became a worse place to live.
However I must say that even though they are true, the factors mentioned before are more of an afterthought - at the moment probably personal were more important for me. Specifically, what had a bigger weight in my decision to leave probably was the fact that my mum passed away and I wanted to be closer to Europe for family reasons. Additionally I felt like life quality in San Francisco was starting to decrease considerably.
Finally, whilst all these macro and personal elements were compounding, at the same time Santander started to consider the creation of a corporate venture capital arm and they were looking for someone who had experience building a corporate VC (not just investing but also creating a fund out of nothing in key matters such as team construction or portfolio management). I came across the opportunity and I ended up joining a few months after they launched as a partner in the investment team, responsible for new investments but also but fund operations.
5️⃣ How was the journey from zero to building Santander Innoventures ($100m AUM) and eventually Mouro Capital ($400m AUM)?
One of my biggest lessons from my time at BBVA Ventures was that in order to succeed in this type of corporate venture capital strategy you need to be able to help the corporate but also forge a differential identity. And this can be a big challenge at times as you need to wear many hats in a smart way.
So when I landed in London (where the headquarters of the new VC were going to be based) this was a priority for me. But there was an important difference versus what I experienced in BBVA Ventures. Back in San Francisco, not so many people knew BBVA so I had a lot of freedom to construct this personalised identity, it was like a blank canvas. Santander in London was way different, the brand was really strong and carried a strong weight that had a decisive influence on the program.
Consequently, I remember starting off by having some relevant conversations with key executives of the bank in order to understand how we could help them so an initiative like this could win. They understood the “freedom approach” and how it could give us access to better dealflow, thus to potentially superior performance. We were sponsored by the bank as main LP, and we had independence to position our unique personality in the market, but we had to be very mindful about synergies with the bank.
Regarding the team, I had the opportunity to help in leading the initiative together with Mariano Belinky, who previously worked in places like Bridgewater Associates and McKinsey - the relationship was great, very complementary with lots of thought provoking moments. Additionally we managed to get many of the top key Santander executives in our investment committee, which helped the program and gave us tremendous insights.
We started with a clear investment thesis pointing towards synergies with the bank, which for us meant fintech related to the bank activities and the digital agenda. Over the years, as the market matured, so did our investment thesis, and we started complementing our investment scope with longer term investment strategies, sometimes at the adjacency of fintech (e.g. sourcing a logistics startup because some interesting fintech ingredient that we can help build up with our expertise). As a result, the companies in our portfolio did a lot of stuff with the bank (e.g. at some point in time 70% of our companies worked with Santander), and we also explored much more long term trends. All of this ended up yielding a pretty nice fund performance (including significant executed distributions back to the bank) - fact that developed into an improved reputation and a virtuous circle of increasingly good deal flow and market brand.
The internal recognition we earned at Santander, together with the support of many executives, allowed us to evolve our structure into an independently managed fund (while still managing 100% Santander money), predicated on the basis of better talent capturing and retention, more efficiency in managing assets, better incentives alignment, and lower risk for the limited partner via a stronger legal separation. This is how Mouro came to be, in 2019 - 2020, with a fresh injection of an extra $300m.
To this day, I am extremely thankful to Santander for the trust in the program and backing us since 2015, and I believe it is a win win relationship that has also brought lots of financial and non financial benefits for the bank.
6️⃣ What secret hacks would you recommend for a successful LP fundraising?
A few things come to my mind, all of them closely related:
Understand. Put yourself in the LP point of view. Being able to have a high degree of empathy with the LP vision and mission, thus avoiding the natural tendency to only focusing on selling your story without adapting it to why it is relevant to your audience, can help tons. Specially important to understand the details about what is the relationship any given LP wants to have with the GPs in important areas like relationship wise, reporting, ESG, etc. It is very relevant to learn what are their principles and having solid alignment with them to build up relationship, close fundraising commitments, and maintain that relationship in the future. There are some things you can’t improvise so you have to do your homework if you want to reach your product market fit with LPs as a VC fund.
Help. You must believe in serendipity and in the power of generosity. Maybe you’ll meet LPs that are not a fit for you, but try to understand when you could help, and do it even though there is no clear quick win for you in the short term.
Ask. An LP fundraising it is not about spitting out your pitch nonstop until you get a yes. I’d recommend to not start by losing too much time on selling your story, but more about asking the LP what are they looking for. Lots of GPs kick off the meeting by playing their song due to fear of time constraints and losing the opportunity to present to the LP, but it is better to collect as much info as you can from your potential targets to make the conversation relevant.
7️⃣ What advice would you give to new emerging managers trying to build a VC firm in 2023?
Not promises but facts. We are not in a world of unproven promises but in a one of facts. Do not lose too much time on telling stories about how are you great in doing X and how much money are you going to make in 10 years. It is better to show some old school hard work. “You don’t believe me? OK, I’m going to bring you a couple of deals to create value for you from day 1”. Doing small SPV deals before getting to your 1st closing can be a great approach. Accept you are trying to do something exceptional and difficult, and that you will need to work for free for a while without knowing if you’d see anything back.
Be honest and trustworthy. Do not lie about your skills, knowledge, and networks. Well, do not lie in any way. In this business there is a lot of cockiness and people who likes to talk but can’t back it up when it is time to perform. Be real and take care of your trustworthiness.
Long term relationship building. Nurture relationships with multiple LPs following a long term approach. Understand their problems and incentives. Then target providing value on a >10+ years time frame. Do not start relationships with the idea of getting a cheque in a couple of weeks - it will backfire.
Identify your uniqueness and share it properly. This is similar to what we (VCs) ask from entrepreneurs. Detect your uniqueness and show why you can execute on it. How can you generate value in a given space, and capture part of that value? If you are targeting a big investment opportunity but you don’t have a differential advantage, you will struggle in your LP fundraising. Do not start with “my VC TAM is this big”. Prove why your new vc has a unique insight that can provide distinctive access, thus increasing the probabilities of reaching a great product market fit.
Be a specialist. Being a 1st time VC manager acting as generalist is a tough one. I believe it is better to showcase a specialist angle, which even though can reduce your market exposure (so consequently your number of target LPs), at least it increases your changes of standing out from the noise of competition. Also, I believe it can help increase your trustworthiness and reputation. Being a 1st time manager with limited money and stating that you are a generalist going after everything, doesn’t seem an honest investment thesis.
8️⃣ Opportunities and challenges in fintech right now?
The fintech world is in a very interesting moment.
On the one hand, it earned a “not so good” reputation (unfairly) among investors that do not fully understand the sector. Mainly because corrections of sky-high valuations, business that got too entangled in the crypto bubble, or IPOs that happened earlier than they should. Many generalists got stuck in many deals they did not understand, and many of them happened to be in fintech unfortunately. This does not give credit to a myriad of amazing startups being built at all stages.
On the other hand, the underlying motives serving as bedrock for innovation in financial services are more present than ever. Banking (and insurance) keep transforming, and record profits being obtained by many banks can potentially translate in an acceleration of digitalization as well as superior allocation of resources into technology, both internally and externally. Additionally, if talking about the startup ecosystem itself, we should see more movement too. Rationalization is necessary. We should see exciting consolidation plays which could bring new big players to the game, thus impacting the current competitive landscape and making it more interesting.
Regarding new vertical trends, the regulatory push of open banking (increasingly extended on a global scale) or the new focus on consumer protection, are expected to continue thriving in the future. Artificial intelligence application to banking problems, from servicing to channels and creation of new products, is expected to leave room for major opportunities too. Even blockchain, besides crypto prices noise, keeps being implemented in some key uses cases under the radar. And who nows, maybe we are even able to see some great scalable quantum computing breakthrough in the short/medium term (actually starting to see some of it already, specially in capital markets applications).
I believe we are in a moment of rebirth for some fintech and insurtech verticals, that will bring more opportunities than challenges - specially in the early stage.
9️⃣ The banking system seems to be experiencing a lot of movement during the last years and the impact has already proven to be potentially significant. What are your views on the future of the banking system?
Similarly to fintech, I also believe banking is experiencing some sweet timing in terms of the innovation cycle.
After lots of years of digitalization, we are starting to see a polarization of the banking world. A few entities, either big global ones or local with significant market share in their main geography, jumped into the digitalization train with open banking and banking-as-platform as spearheads. I think these are the players that are going to endure the test of time and be able to compete in a world progressively technological. But then we have the ones which haven’t been able to understand and adapt to this tech evolution. And I’m afraid the latter type will end up succumbing under the weight of its structure.
Yet that’s not all. As we are all experiencing just reading everyday news, we live in a world more and more uncertain from a geopolitical point of view. In this context new technological fundamentals are going to open new strategic angles, where value is going to be found at the crossroads in between financial services and other industries - crossroads that are evolving very rapidly as we speak (mobility, e-commerce, identity, etc.).
Big thanks Manuel for sharing your views with us!
Big thanks to you, reader, for your time and interest!
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