Give us a brief introduction to your fund.
Marshall of Cambridge is a 106-year-old automotive and aerospace engineering company with revenues of around $2bn, employing 4,500 people throughout the UK, and run by the third and fourth-generation family members. We spent six months planning and launched in April 2011. We invest relatively small amounts – equivalent to a super angel – in five to 10 new deals a year, following on where appropriate. Over the past four and a half years, we have done 60 rounds in 34 companies, having invested around $4m in total. We have just launched MarQuity to invest larger sums – $300,000-$800,000 – in later-stage Martlet portfolio companies. We have had one exit and three failures.
What key drivers caused you set up your group?
We expect a financial return, but are also running Martlet to promote the Marshall brand, support the Cambridge entrepreneurial ecosystem and to introduce innovative technology concepts to the group.
You act more like an angel direct investor?
Correct. We generally invest in very early stage – before VCs, with valuations of $1m to $3m. We are commonly the largest or second-largest external investor in an early round.
Describe the dealflow – the number of deals you review and invest in.
We receive 500 to 750 investment opportunities a year, of which perhaps 10% are warm – recommended by a trusted investor. On average, we close one investment round a month.
You are speaking at the Corporate Venturing Board Roles Academy. What are the key roles and pitfalls when you are sitting on a board?
Key roles:
- Investor director – representing not just Martlet, but five to 50 other investors.
- Acting as lead on future investment rounds.
- Coach or mentor for the founders.
- Sometimes chairman of the company, adding gravitas for high-level customer or supplier discussions.
- Governance.
- Selecting key hires.
Pitfalls:
- Not getting dragged into a semi-executive role – handling needy founders.
- Handling the inevitable conflict between the founders, the company and the investors – for example, overvaluation of upcoming rounds.
- Ensuring the founders grow with the business and step aside or down if needed.
- Handling investor and founder alignment on exit.
- Knowing when to step down and be replaced on the board.
How is being employed by a corporate different from being a VC investor or board member?
VCs’ core driver is return for their limited partners, carry for themselves and usually protecting and building a reputation to attract investment for the next fund. Corporate venturers have a strategic element in their philosophy which may vary from 0% to 100%. VCs almost always have fund cycles. Corporate venturers generally do not and thus can afford to be patient. Although I have not met the problem, brand damage from a bad investment – whether it is financial or otherwise – would have different consequences for VCs and corporate venturers.
There is another discussion to be had about angel versus venture capital director roles.
How do you manage the connection between your group and the core business units to ensure the transfer of technology and capabilities?
Primarily via the family members who run the group, but also by having close relationships with key senior managers. We have been cautious about defocusing operational management from their core roles, by too much information being disseminated.
Illustrate what you have described with a couple of examples of recent investments or collaborations?
Vantage Power – retrofittable hybrid engine systems for double-decker buses and, in time, other commercial vehicles. Founded by engineers from Imperial College in their mid-20s. We led an angel round – now three rounds – and have been on the board since the first investment. This is not just my value add, but Marshall connections – for example, the CEO of a diesel engine supplier – processes and experience. Robert Marshall is now chairman
Arachnys – founded by a late-20s Oxford graduate, a know-your-customer, anti-money-laundering fintech business. My value-add was in building the board, mentoring the founder and raising over £3m ($4.6m) from angels.
Are you seeing new products, services or business models being brought together in different ways to the current business – what I would term innovative new value chains?
Not really. That was never a driver for forming Martlet and few of the investees are relevant to the Marshall group, although almost all are in sectors understood by the investment committee – three Cambridge engineering graduates and one with a Cambridge economics degree.
What do you see as the key challenges in corporate venturing?
Convincing boards and shareholders that very risky and very long-term investments are worthy of senior management bandwidth and cash, and that the soft, barely measurable benefits have value. Being patient.
What do you do to relax?
Catch up with emails. I am lucky enough to have created a life that is full of intellectual interests and challenges, through interacting with passionate bright people, companies, markets and technologies. Our kids are in their 20s and 30s, so skiing, mountain walking, real tennis and squash, travelling, bridge, and a house in the French Pyrenees.
You can listen to this and other interviews on a podcast available at gaulesqt.podomatic.com
Andrew Gaule leads the GCV Academy, developing the capabilities and expertise of organisations leading open innovation, venturing and corporate venturing programmes to drive strategic benefit. He also supports innovation programmes and collaborations in innovative new value chains in global organisations.
To contact Andrew Gaule and for future interview ideas, email andrew.gaule@aimava.com or Toby Lewis tlewis@globalcorporateventuring.com