An exclusive European multifamily office started exploring blockchain investing in 2017. Its head of funds shares how it made early high-conviction bets on big names in crypto VC — and identifies 2 under-the-radar firms to know.

• Lennertz & Co., a small multi-family office, offered blockchain investing to the ultra-rich early on.
• Its fund manager, Oksana Tiedt, used the 2018 bear market to make significant investments in venture capital cryptocurrencies.
• She identified two under-the-radar firms that crypto investors should be aware of.

Lennertz & Co.a small, exclusive multi-family office in Germany, has become a European hub for the ultra-rich to gain exposure to blockchain technologies.

Lennertz & Co. says its alternative investment platform has more than 750 million euros, or about $837 million, under management.

"We're big private equity investors. We're invested in venture capital both in Europe and in the US," Oksana Tiedt, its head of funds and co-investment, told Insider in a recent interview. "And for us, blockchain was a couple of years after we started, a natural continuation of our venture work."

In just five years, the company has grown its client base from just 30 to roughly 400, thanks to its exposure to illiquid alternative investments and its clever early pivot to investing in blockchain technology. Tiedt said word of mouth has been the way most clients have come to her.

"Because we're venture capitalists, there may be someone building a company within this venture fund, we'll meet them at one of the events," Tiedt said. "The next thing was they sold the company, they remembered us, they called back. So for us, it's been a bit of a flywheel."

The company's first blockchain fund of funds launched in December 2020 and offered exposure to some of the biggest names in crypto venture capital, such as Multicoin Capital, Polychain and Fabric Ventures. The first fund received €30 million in capital commitments.

However, the foundations for securing those investments had been laid much earlier.

Placing big bets on crypto VCs

Bitcoin's crash after the 2017 bull run gave Tiedt and his team time to learn who the serious crypto players were without the froth in the market.

“The little problem in 2017 was that there weren't really enough venture funds, or none at all, they were just emerging,” Tiedt said. "So we spent a lot of time in the market meeting people, getting into the entrepreneurs, making initial contacts and meeting all the people who were thinking about starting hedge funds or eventually started hedge funds."

From the start, Tiedt wanted the focus to be on exposure to the underlying technology rather than the digital tokens themselves.

As crypto venture firms began sealing deals, Tiedt was ready to get involved with Blockchain Fund I. His company launched a second fund, Blockchain Fund II, which he said he hopes will become a bigger and better version of the first. .

"If anything, we have more conviction around the strategy," Tiedt said.

"However, we have not been actively looking for very specialized funds," he added. "The reason is that it's an early-stage industry; it's developing very, very fast. What's a very hot topic today could change significantly tomorrow. So putting one cycle on top of another cycle in a pretty risky industry It just doesn't seem very wise at the moment."

Creating a fund of funds

Investing in ventures is a two-way relationship, as ventures also try to assess who they want as limited partners.

"I would say we got that balance really good, so we're seen as a good partner for the funds, that's why we have access," Tiedt said. "And because we've been there for all those years and invested in this asset class, we can pick better funds."

Tiedt said the decision to work with hedge funds often comes down to a mix of hard and soft facts.

"On the hard facts, it's the track record, the history, how they invest, what they believe in. Do they talk? Are they silent? What else have they done? Have they made tough deals?" Tiedt said. "That's all part of the hard numbers, which are analysable to some extent."

Soft facts may be harder to pin down: Tiedt said he's ultimately looking for a mix of "techies" in a venture team that have previously coded or run a blockchain startup and investors from a traditional company or business background.

"What we've also seen, especially in the early days, is that people were solving technical problems, but they didn't even begin to think about how to monetize it or set it up," Tiedt said. "And we think that part of the services that the venture team should offer is to guide entrepreneurs on that journey.

"The last thing is that because we build a portfolio, we spend a lot of time thinking about how different funds and different personalities fit into this portfolio," Tiedt said. "We don't want similar people making similar investments over a similar period of time."

Broad diversification helps protect the company from market shocks. Tiedt said that both the COVID-19 pandemic and the recent Russian invasion of Ukraine had a limited impact on the overall portfolio.

Tiedt acknowledged that while some portfolio companies would be affected by the fallout, "we tried to do this analysis when COVID-19 happened, and just because we're so diversified, at the end of the day the effects just bite into each other." "

But that doesn't mean there isn't a personal impact. Tiedt is Ukrainian.

"I always have the same opening sentence, but it sounds completely different than the last four weeks," Tiedt said. "I am originally from Ukraine and I left in 1991."

"Those were turbulent times back then, less turbulent than now, but I ended up staying in the United States nonetheless," he added.

Tiedt no longer has family in Ukraine, but many of his friends are there.

VC under the radar

The diversification approach has resulted in Tiedt successfully betting on big winners, including Multicoin Capital. Axios reported in December that Multicoin Capital had returned 20.287% since the inception of the fund in 2017.

"They made some very contrary bets," Tiedt said. "And that's what made their name. So I think they're a very strong fund."

But not all successful crypto VCs attract as much attention as Multicoin Capital. tiedt said green field one and Sybil Capital, founded by Alexander Packare two cryptocurrency-focused venture firms that go unnoticed.

"That's our job to find managers who are dedicated and have an incredible sense for investment opportunities and a dedication to the space," Tiedt said. "So we invite them to those agreements and then we endorse them."