Éric Larchevêque: "It's when you face the abyss that you see who you are".
More discreet since his departure as head of Ledger, Eric Larchevêque is nonetheless a major player in crypto. For over two hours, we discussed all the issues with him.
Since 2019 and your departure from Ledger's operational management, we've seen a bit less of you. What are you up to?
A lot of things! I support entrepreneurs as a business angel and I also have more personal activities. I look after my estate in Vierzon, I enjoy my family...
You're still involved in crypto though?
I'm mainly still involved by sitting on the boards of Ledger and Coinhouse. Now, I'd be lying to you if I told you that I no longer live by the crypto markets because 90% of my assets are still in cryptos! I'm still very exposed. If cryptos collapse tomorrow, I'll lose a lot.
In a recent interview with Les Echos, you explained that you were still very optimistic on these subjects...
I haven't changed my opinion in over 10 years. I'm still convinced by cryptos.
The headline in Les Echos about "the man who still believes in cryptos" was a bit excessive because it gives the impression that I'm the only one who believes in them, which obviously isn't the case, but it was fun, that's the game.
In the end, what counts is that the interview came at the right time. It serves to remind us of certain obvious facts.
You've been in the ecosystem for more than 10 years. Were you surprised by FTX's collapse?
If you had told me the day before that it was such a scam, I wouldn't have believed you. I followed the project from the beginning, I was one of the first investors in FTT.
I remember, at the time I invested 50 bitcoins in FTT, really at the very beginning, it was in 2018 or 2019. I'd followed the launch of the project, chatted with the team, who seemed pretty solid. They had developed their own technology, which was working very well. It was square.
Were there any warning signs?
With hindsight you might say yes, but it was impossible to imagine such a scam.
Did you lose any money in FTX?
At one point I had a lot of FTTs, and I gradually "de-stocked" by selling some of them, but I still had some of them staked (immobilised to get a return, ed. note) on FTX.
When things went sour in October, I had the opportunity to de-stake my FTTs against a 10% penalty. I thought that was very expensive. I looked at the articles, the tweets from FTX and Alameda Research team members who said everything was fine, until the next day... Then everything exploded and the price of FTT collapsed.
I sold everything for bitcoins, but it was too late, the funds were frozen on the platform.
Did you lose a lot of money in the operation?
At one point I had a lot of FTTs, and I gradually 'de-stacked' by selling some of them, but I still had some that were staked (immobilised to obtain a return, ed. note) on FTX.
When things went sour in October, I had the opportunity to de-stake my FTTs against a 10% penalty. I thought that was very expensive. I looked at the articles, the tweets from FTX and Alameda Research team members saying that everything was fine, until the next day... Then everything exploded and the price of FTT collapsed.
I sold everything for bitcoins, but it was too late, the funds were frozen on the platform.
Did you lose a lot of money in the operation?
I lost about fifty bitcoins with the FTX crash, but I had made money selling FTTs before the collapse, so the overall operation wasn't financially negative.
On the other hand, what was negative was FTX's impact on the rest of the industry players such as Coinhouse and even Ledger, because while activity increased sharply (find the interview with Pascal Gautier), the context, on the other hand, has not improved.
Everyone is affected.
Can we quantify this impact? Coinhouse has €15 million blocked at Genesis, which itself used FTX...
It's hard to know. Nicolas Louvet (CEO of Coinhouse) and his teams have taken the necessary steps to compensate customers (find his interview).
Beyond the impact, this case is a real lesson in the concentration of a market and the resulting risks.
What is really very frustrating is that an episode like this devalues an entire sector. No one can believe that we are serious enough. Let's face it, we all look like clowns, I feel like I'm back in 2016. All the educational work done with the general public and institutional players has taken a big hit.
How long will it take to turn the page?
It's going to take time. Is it a year, two years, or more? No idea, but the damage is done. In fact, you've seen it clearly over the last few weeks with the great return of editorialists and economists who tell you every year that bitcoin and cryptos are dead.
Do you think the sector is immature?
Things have changed a lot, and for the better. There has been a real appropriation of crypto topics and this can be felt particularly with companies.
I recently had lunch with members of the executive committee of a major bank and they were all quite positive on the subject, even though I know full well that banks are not very pro-cryptos.
I felt a real change on the issue, even on their approach. The proof is that they were talking about "cryptos" and no longer "blockchain". Anyone who has been in this world for years knows what progress that represents. And then there was FTX, and then it was a cold shower. Those who were pushing crypto topics in companies now have to raze the walls a bit.
The fall of FTX has also had a major political impact with the authorities wanting to tighten regulation...
Yes, and that's not surprising. The most problematic thing about this is that these initiatives, as we've seen in France, can give the illusion that it's going to change things, which is absolutely not the case.
After that, we'd be wrong to blame politicians. The crypto ecosystem doesn't need politicians to be in trouble. Many players in the sector have developed on this idea of "yield". And now, services that offer yield are simply finished.
There's staking, isn't there?
Of course. But a lot of companies jumped headlong into yield because the markets just kept going up. But you can't just change your business model.
What is the ecosystem lacking to take a real step forward?
I think that the sector still has an amateur feel. There's a general lack of rigour, even in the way we speak and present ourselves. There's a kind of 'cool' culture that's nice, but when it's more than a veneer, it becomes a handicap.
What are the subjects that interest you most in crypto?
There are lots of them! Overall, what appeals to me most is this idea of Web3. The promise of putting users back at the centre of the model via new governance and data ownership is a radical change.
Web3 can have the same impact as mobile apps did in the 2010s. They gave new impetus to the digital economy and reshuffled the cards between businesses. There's a fairly strong groundswell of interest in Web3. We're still in a state of stupor, but things will pick up again.
However, we still don't know many applications...
It depends on the projects and their structure. On applications, things are moving forward: look at what's happening on decentralised finance, NFTs. Obviously things aren't "mainstream" yet, but it's progressing.
That's more complicated... Honestly, I still haven't understood everything about metavers. There are as many definitions as there are people talking about it, it's a bit of a catch-all word.
Which Web3 projects have interested you most in recent months?
Hard! I'm going to ask ChatGPT (laughs).
More seriously, I'd say it's around decentralised finance. That's where you find the most promising things today.
I'd also say that a project like Sorare is a good example of a good Web3 project. It's the promise that you can distribute unique cards that players own, that they can trade with each other. On that basis, you have a whole new economy being created.
Did you invest in Sorare?
No, that's a bit of a regret of mine. I still remember Nicolas Julia coming to see me during 2017 to tell me about Sorare.
At the time, I was still CEO of Legder and managing our fundraising, so I was quite busy, and I had also just invested in several projects. I believed in it and said to myself that I'd look at it later, but things happened very quickly. In the end, I was able to invest in Sorare, but via an investment company.
Speaking of investment, a lot of people know you from television and the programme "Qui veut être mon associé" on M6. You seem to love it!
I even love it!
What do you like?
Many things. Firstly, the fact that it highlights entrepreneurship, I think that's a very positive message in France. Then there's the show itself, we do real deals, it's quite stressful, it reminds me of my career as a poker player where I often had important decisions to make and quickly. Lastly, I've discovered the world of TV, which is really nice. I take immense pleasure in doing it.
You don't put too much emphasis on crypto on the show. Is this deliberate?
The production team asked me if I wanted to talk about it, but you have to be lucid, talking about investment is already not easy, so if on top of that you talk about cryptos...
Last year, I signed a deal with the creator of a dishwasher start-up and he said on air "I want you to help me make a cryptocurrency"! Everyone wondered what he was talking about (laughs).
The funny thing is that when people recognise me in the street, most of them talk to me about Ledger and cryptos.
Are you known more as the co-founder of Ledger, and less as the co-founder of Coinhouse? Why is that?
Most of my media appearances have been as CEO of Ledger.
Are you still active at Coinhouse?
Nicolas (Louvet, editor's note) manages the company, but I'm still present. I see him often and we talk a lot, particularly about strategic decisions.
What do you think of Binance?
I don't know, it's difficult. What strikes me the most is the company's hyper-embodied side, everyone knows their CZ boss! In itself, that's a good thing, but it's also a big weakness, particularly in terms of governance.
The fall of FTX has reignited the debate around digital asset retention. What do you think of the MPC technology used by some of Ledger's competitors?
The big advantage of MPC is that there's no hardware, so it's simpler. Its disadvantage, and it's a big one, is that it's a technology based on mathematical research work that still has very little experience. There is no guarantee that it will be totally secure.
What is Ledger's vision for the next ten years? What is the goal?
Ledger's vision is that the entire financial infrastructure will migrate to one based on blockchain technologies.
Once you have that in mind, you've got it all figured out. Ledger allows you to protect and store your private keys and therefore your assets, bitcoin, cryptos, NFTs, on this new financial infrastructure...
Today, our main challenge is to make progress on the user experience while maintaining a maximum level of security. In this ten-year vision, the challenge is not to sell 2 million Nano or Stax, but to sell more than 100 million and equip the whole world.
We are going to support the development of Web3. In fact, that's why people with such a strong reputation for user experience, such as Ian Rogers and Tony Fadell, have joined us.
Where does Ledger Live software fit into this strategy? Will we be able to connect our bank accounts, for example?
I don't think so. Initially, the aim is to integrate payment cards and other financial services. Ledger needs to become this tool that allows you to manage all your transactions because it is the bridge between its private key and other applications.
Have you made any progress on your project to simplify the management of the "seed phrase" that we are still obliged to keep on a piece of paper (12 or 24 words used as the wallet recovery key)?
Pascal Gautier has already said that there would be announcements on the subject.
I think soon. Seed phrase management is a major issue for security reasons.
Are we finding enough talent in Web3?
Not enough! There's a problem overall and we need to do something about it in terms of education. In fact, that's why I co-founded AlgoSup? We train young developers.
How did this project come about?
The school was created by Franck Jeannin, a former Ubisoft employee who moved to Vierzon. He chose Vierzon because Ledger has set up a factory here and other tech companies are also present. Success breeds success, and it made sense to set up there.
What's special about this school?
Everything is done in English, and students learn to work in groups, as well as working remotely.
Currently the premises are the former Ledger premises, and we're going to be moving into the "B3" industrial hall located in the centre of Vierzon. The aim is to be a bit like Station F in Paris. I'm also going to open a start-up incubator, "V3".
When are you going to become mayor of Vierzon?
Never, and I'll tell you why: to change the world, it's better to be an entrepreneur than a politician! So I'm not saying I'm going to change the world, but today I can do lots of things by being an entrepreneur.
And if you were offered the job of Minister for Digital Affairs one day?
I'd give the same answer.
If I were seriously asked, I still think I'd take 5 minutes to think about it, but I'm pretty sure I'd decline because I don't think I'd survive in an environment where we spend too much time making reports and not enough time taking action.
How do you manage all these activities?
I'm no longer CEO of Ledger! I have more time on my hands.
Speaking of which, how did your departure go? Was it a decision on your part?
Yes, even if it's not a decision you make just waking up one morning.
It took some time, it was in 2019, you have to remember the context: we were in a complicated environment, post "bull market" of 2017, and we were a bit overstaffed, so we had to restructure the company, that is to say get rid of a certain number of people, and we wanted to start from the top.
With Pascal (Gautier, editor's note), we decided that the two-headed management team we had was working very well, but that this was an opportunity to simplify things. I thought a lot about it, it took time, and I also asked myself whether I was the best person to manage a company of 1,000 people that was growing all the time. In the end, I called Pascal and told him that I was going to propose to the Board of Directors that he replace me.
It was a very emotional time at Ledger, and everything went very well.
Did you have any regrets?
No, because I think I made the right decision. Afterwards, I may have a few regrets because in the life of an entrepreneur, running a company that becomes a unicorn (a company worth more than a billion euros) is still a very powerful thing! The goal of an entrepreneur is also to experience these moments.
Is the Stax, which is coming in the next few weeks, an idea you might have had?
Honestly no, but it's an excellent product.
What's the point of such a product? What are the benefits?
This product doesn't fundamentally offer anything more than the Nano, but it's aimed at a different audience, one that really likes NFTs and wants to be able to show them off. The aim is not to renew the Nano fleet, but to appeal to a new audience.
Will we be able to do different things on Ledger Live with the Stax?
Not in the short term, but the experience will be simpler, more enjoyable.
Are you happy with Ledger's payment card?
We still need to improve things in terms of the user experience, but the product is great, the banking offer works very well.
Ledger has grown a lot, but is not yet big enough to stop being prey for a few giants like Apple. What would you do if Apple were interested in Ledger?
I'd be tempted to say we'd say no, but it's always the same: it's when you face the abyss that you see who you are. To be honest, it's a question I've never actually asked myself, perhaps because I don't allow myself to, and besides, I'm not the only shareholder. But the aim is not to be bought out by Apple.
And to get listed on Nasdaq?
That's another subject.
Really, things are simple: if you want a good listing you go to Nasdaq, and at some point if you want to continue to grow, you need a good listing. However, we still have a little time, as the market is still immature. As it's impossible to have stable forecasts, it's risky because shareholders don't like results that fluctuate.
In the meantime, are you going to raise funds?
It's not really the right time! Our good fortune is that when we did our Series C (€380 million in spring 2021), we did it on a reasonable valuation, so if we want to raise money we can do it again without any problem.
What do you think of companies that have raised at historic valuations?
Let's just say that it's fine as long as the markets are rising... When you've raised at valuations that are too high, you run the risk of no longer being able to refinance, or else under terrible conditions. That's a real lesson. You mustn't get carried away by excessive valuations!