The last time I was due to talk to Alan Merriman was March 2020. We had to cancel our meeting at the last minute and switch to a telephone call as Ireland went into its first lockdown. The founder of Elkstone, a multi-family office operating in wealth management, venture capital and real estate, Merriman and Elkstone had been thriving before the pandemic. But then came Covid-19 arrived, causing businesses to freeze temporarily. A “huge intervention” was needed, Merriman told me back then, adding: “It needs to be done in a way that gets the money to the right places as quickly as possible because otherwise, it collapses on itself… I don’t want to be too negative, but it would be imprudent not to recognise how serious this particular black swan is.”

Thirteen months later, and Ireland is emerging from another prolonged lockdown, and while certain sectors have had a torrid time, others have shown remarkable resilience. Some have even thrived.

Once again, Merriman has reason to be upbeat when we speak. After all, two firms backed by Elkstone became unicorns this month after achieving a billion-dollar valuation.

His firm is also active in the property sector with a pre-planning application recently submitted to An Bord Pleanala to build 702 apartments in Walkinstown, Dublin 12, and a £20 million plan for student accommodation in Belfast.

Plus, Merriman’s firm has also just invested in Pi Labs’ new $75 million prop-tech fund, the details of which we have arranged to talk about on a video call, along with that fund’s founder Faisal Butt. Merriman credits the Elkstone team including cofounders Ruairí O’Neill and Ciarán McIntyre with helping him get there.

But first, we talk about LetsGetChecked, a virtual care company that Elkstone has backed from its first seed round of €1 million to its most recent $150 million series D round earlier this month. That round valued the business at $1 billion, making it a rare Irish unicorn. We also discuss a second American unicorn that Elkstone has seen take off in the 18 months since it invested.

Finding unicorns

Elkstone first invested in LetsGetChecked in 2016, the year after the firm was founded by Peter Foley in Dun Laoghaire, Co Dublin. It led its first €1 million seed round and has invested further in the business in every round it has raised from series A to D – with a few bridge rounds in between. Merriman, who sits on the company’s board, has watched LetsGetChecked morph from a small start-up into a rocket ship that last year provided remote care to more than one million people. It dealt with all types of ailments and chronic conditions via telehealth services, pharmacy capabilities, and at-home tests.

“I met Peter (Foley) and Ronan (Ryan, chief operations officer) back in 2016 when they were at a very early stage. We loved the idea, and we loved their ambition,” Merriman said. “They were talking to a lot of people at the time, but we stood up and made it happen.”

Merriman declined to state how much Elkstone has put in all together, but he said its investments usually ranged between €250,000 and €2 million.

“In the most recent round of $150 million, Elkstone put in $8 million. It is indicative of our confidence in where the company is going, and the quality of its team,” he said.

When LetsGetChecked raised its series A and series B rounds it came under pressure to move its headquarters to the United States. And while LetsGetChecked has offices and a team centred in New York, it has stayed committed to Ireland. “We fought to keep it in Ireland,” Merriman said. “It is one of the things that I am most proud of about them – that they’ve done it from here.”

Today, LetsGetChecked employs 650 people, and while primarily dealing with consumers, it is also building a big corporate business too with 300 clients including American Airlines, Kayak, and the PGA.

“We’ve shown an ability to spot talent”

LetsGetChecked is the second company backed by Elkstone to become a unicorn in June. The other firm it has backed is Thirty Madison, a healthcare start-up that specialises in treating chronic diseases, which raised $140 million on June 2. “It is a phenomenal business,” Merriman said. “It is the biggest player in the hair loss market in the United States, but it also works in areas like migraines and stomach illnesses. We only went in about 18 months ago, but it has really accelerated since.”

“It is important to diversify.”

In 2020, Thirty Madison’s revenue tripled, and in the first quarter of 2021, sales surpassed an annual run-rate of $100 million. “I am very confident that it is a company that will become a household name in due course,” Merriman said.

Elkstone, he said, has invested in over 70 start-ups to date. The firm invested in LetsGetChecked and Thirty Madison as part of its venture club for clients. Elkstone also invests as a firm, and Merriman also takes stakes personally in businesses.

Merriman has invested in other notable unicorns including Revolut, a digital bank, and Brex, an American financial services firm. He is also an investor in Japanese entrepreneur Daisuke ‘Dice’ Sasaki’s accounting and HR company Freee, which later listed on the Tokyo Stock Exchange. Elkstone has also invested in successful Irish start-ups including HealthBeacon and Flipdish.

“We’ve shown an ability to spot talent,” Merriman said. “But you have to be careful. We would advise the type of clients we work with to allocate capital to alternatives, private equity and venture. Disruption is not going away. It is only accelerating, but it is not easy.

 “When you are allocating money, it is tricky in a low interest rate environment and where the stock market currently is,” he said. “Venture is a high-risk space but it is a smart allocation if you can afford to allocate to what can be an illiquid market. That’s why, we think you need to take a portfolio approach to minimise risk. If you are only in three or four companies you are playing the lotto to some extent. It is important to diversify.”

When property meets technology

As part of its strategy to locate the next generation of start-ups, Elkstone has invested in Pi Labs’ third institutional fund. Pi Labs is raising $75 million to invest in about 50 property tech companies over the next five years. Led by Faisal Butt this fund has also raised money from FTSE-listed Great Portland Estates, Indian commercial property giant the Embassy Group and European real estate fund manager Revcap. On a Zoom call, Butt and Merriman explain how the two teamed up.

“Just before the pandemic we were approached by one of Elkstone’s team who’d been tracking prop-tech,” Butt said. “One conversation led to another but then things were slowed by the pandemic, but over time we got to know each other, and they came on board.”

Faisal Butt of Pi Labs

Merriman said Elkstone had been tracking Pi Labs’ investment in some 55 companies, and they had a shared investment in an Irish architectural façade design software firm called FenestraPro. “We do a lot of venture investment,” Merriman said. “We are a believer in the generalist model of investing, but we are not wedded to that single view. We also think it makes sense to specialise in areas like prop-tech.”

He said Elkstone tended to find deals through its own network, but that it had also invested in other venture funds. “We do that so we can learn from these funds and build our network,” he said. “It is a good way to source deals to co-invest in. Real estate is a space that we know and feel we should have an edge in, so we think there is a natural marriage by working with Pi Labs.”

Pi Labs’ first fund in 2015 raised $1 million, while it’s second raised $10 million. “We have been pioneers in this space,” Butt said. Pi Labs estimates its portfolio has a gross value of £450 million. “We feel the pandemic will be to prop-tech what the global financial crisis was to fintech,” Butt said. “The financial crisis provided clear space for new fintech innovators. We don’t think that real estate is failing since the pandemic, but it has accelerated the pace at which the sector is digitising.”

“LetsGetChecked is an amazing business, but we need the right set-up to help more start-ups come through.”

 “We are playing in a serious way in the real estate market so we can see that,” Merriman said. “As a venture player, we are very conscious that real estate is behind the curve [in terms of technology.] There hasn’t been enough disruption… but that means we have a huge tailwind in this sector.”

“Elkstone the firm is making this investment because it is strategic. We didn’t bring it to our clients because we prefer to build a relationship first, get very comfortable and then bring in our clients. That’s been typically our model to-date.”

“The model is such that there will be co-investment opportunities along the road. We think prop-tech is an attractive space both for Irish individual investors and Irish property developers and players.”

Butt said Pi Labs third fund was going to especially invest in start-ups bringing greentech and sustainability to both the construction of property and its management. “There is a huge amount of work to be done to meet our 2030 climate targets,” Butt said. “There is no way of doing that without new technologies. That is one of our central themes with this fund.”

Investing in Ireland

When I spoke to Alan Merriman last year, Covid-19 had created a very uncertain time for investors. “Risk appetite disappeared in the Irish market,” Merriman says now. “There was no interest in real estate. Venture was uncertain. It took a little bit of time for people to settle and reflect that the worst thing you could do was nothing.

“The whole world is forcing people to allocate capital towards investment, as it is costing money not to do so. It is pushing people along the risk curve, but that makes it tougher in terms of judging how to build the right portfolio.

“We believe there the shift to alternative investments is accelerating, and there is a big move more and more from public into private markets.

“We see a very different outlook today to 12 months ago. There is a lot of activity and a lot of opportunity at the moment.

“There is a big challenge around the supply side for housing in the Irish market. Covid has exacerbated that. It is a huge challenge and not going away. In student accommodation, an area we are active in, there has been good progress but in terms of apartments, affordable homes, social housing there is a huge need to build more and it is a problem that won’t be solved anytime soon.

“The market is really heating up, and prices could spike even more. It is a very important space for the government to get right – and Elkstone wants to be part of it.”

Venture was another area where Elkstone felt it could help, he said. “Despite the success of companies like LetsGetChecked the Irish ecosystem needs more angel funding,” he said. “We need the right government policy to encourage people to allocate their capital towards venture.”

A year ago, Elkstone was close to launching a €50 million venture fund to invest in tech start-ups, but it had been delayed after the Revenue Commissioners queried its structure which was innovative.

Merriman said Elkstone had engaged with the Department of Finance to discuss what to do since then. “We’ve had very positive soundings,” he said. “There has been some progress, and we have been very encouraged by the Department of Finance’s engagement on the subject to date.”

Merriman said Elkstone had invested in start-ups that supported about 1,500 employees in Ireland, and part of its argument to change the way investors back start-ups was based on this broader impact on the economy. “We are just part of these companies’ success, but we are very proud of helping Irish international businesses to scale. LetsGetChecked is an amazing business, but we need the right set-up to help more start-ups come through.”