Molten Ventures Plc

So first of all, a little bit of a reflection. Many in the room have shared this journey with us. And so I thought it'd be useful to highlight the growth that we've had from an AUM perspective, so that encapsulates the balance sheet, but also the AEIS VCT co-investment funds and other funds that we co-manage. We've grown that from our 2016 IPO, 350 million over four times to 1.8 billion as of the last September period. The underlying portfolio on the balance sheet has grown from 100 to 1.3 billion. And the NAV has grown alongside. And that growth has been a feature or a factor of reinvested capital that we've had from realizations. So the 640 million of realizations that we've delivered over that period, and we've had a degree of consistency about doing that, has been recycled into new investments. And those new investments have led to the value in the portfolio today. Six of those realizations at 5x plus multiples on invested capital. And we'll talk a bit about some of the successes over the past year in that respect. Activity over eight, nine years obviously comes in waves and cycles, as we've seen with the technology market in terms of valuations, but also the capital markets. And so as an investor that's publicly listed, but also investing in private markets, we have quite a lot of different trends that play into those periods. Over the last year, though, we have continued to be very active. And you can see that we've deployed from the PLC balance sheet over 100 million of capital and alongside that the EIS VCT capital. So the aggregate investment is larger than just coming from the public pool. And what you see with the team here is the team that's delivering that aggregate pool of capital. So when we invest in an early stage UK qualifying deal, we'll have capital coming from balance sheet, but also co-invest capital. And the reason that I'm going to labour that slightly is because that's important to how we think about scaling going forward as well. We've continued our secondary investment strategy as we look at all the different cycles that we've had over the eight, nine year period. But if you look more broadly than that, secondaries is a way to get access to good underlying companies that are more mature. And you can play a discount play with those those investments by buying. acquiring companies or entire portfolios at a discount to their holding value. And what the discount is reflecting is periods of liquidity mismatch. So you create the pricing arbitrage. And what that means in practice for us is that we bought out Connect Ventures in this last year. Their fund won. That allowed their limited partners, their investors to get liquidity and recycle that into their new fund. And so you're driving liquidity into the market and we're picking up assets that we can price and we have good visibility of their future journey. And those are companies that are already at scale. And those returns blend with our primary investments. So the investments we do at the earlier stages, they blend with those secondary returns and the PLC balance sheet gives us the ability to play in different ways and a lot more flexibility. As I say, realisation is something you'll hear a lot about today, but 220 million just in this financial year, so the period from 1st of April last year, 150 of that in the PLC public vehicle and a further 70 of that for EIS and VCT investors. Recycling of capital is very important, one for liquidity, two for improving the value of the underlying portfolio and selling those companies as we've done above our holding values is a key metric of demonstrating the value that we hold them at. As we then get capital coming back to the evergreen PLC vehicle, we have stated a capital allocation policy. And within that policy, we talk about creating new vintages, new investments, and we talk about taking advantage of secondaries where there's disconnected pricing. And then the final pillar is supporting our shares. So we started a buyback program in the summer of 24, and we've added an additional 5 million to that when we announced a further realization that took us to 150 million of realizations. So in total, we said we'll do a minimum of 10% of the capital that comes back. And then this morning, we just announced a further 15 million to be put into that, recognizing effectively that buying our shares is a secondary in our own portfolio, buying at a steep discount. So taking those numbers and putting them into slightly prettier logos, you can see that the light blue first bar that's on the screen, those are the new deals that we've invested in. So there's seven new investments that we've made in the year. We usually have a cadence of maybe six to 12 new investments and a similar amount of follow on capital. The follow-on capital is something we're very disciplined about. And you can see in the blue boxes, those are the companies that have received capital. But in aggregate, that will be around 20 million. So actually putting limited amount of capital to get companies to the next stage of their journey, be that a corporate finance type event, is an important feature. But there's also the positive aspects of trading off your existing portfolio versus a new deal. So some of these we would consider to be new investments where we can feel we can make our target returns better. Connect Ventures secondary I've mentioned and then the realizations in the period we've had four which have closed already and we've had the cash come through and then two free trade and Ravelin which were announced recently. So great activity in the year, great activity over eight, nine years. And I thought it'd be useful to point out the breadth of where we invest. Obviously, we have a focus on the London market and in Ireland in terms of the presence of our team, but our reach expands across Europe. And the Seed Funder Funds Programme has solidified some of those relationships we have with underlying seed funds where we've become an LP and that's given us great access and breadth to underlying companies. There's about 2,500 plus underlying companies that we see quarterly reporting on coming across that ecosystem. But if you take it over a snapshot of eight, nine years, our investments fairly closely matches actually where the depth of capital in the European markets are. So 40% in the UK will reflect the amount of deals that tend to get done in the European ecosystem. And then majority of the rest of the capitals into Germany and into France and then spread around hubs around the Nordics and Southern Europe. But that breadth of what we can put to work and the access to those investments that we get is important to keep in mind as we think around the opportunity set for investors into Malton. So moving to VC as an asset class, this has shifted and I would say has been changing. As we've been scaling molten, the ecosystem has been scaling alongside. So there's an element of us and the size of our vehicle reflecting a larger market. VC is recognized as delivering long-term returns that have outperformed over cycles. And these are outperformance net of costs, outperformed public markets, but also other asset classes in private markets. And so you invest in VC for an underlying return. What you also invest into VC for is innovation. You're getting close to the innovation that's driving productivity. And as we talked about this generational shift in technology, you want to be close to what's disrupting existing markets, but also creating new markets. And then the final pillar that is a rationale for investing in VC is the pure diversification. It's an asset class in its own right, and therefore it behaves differently from a fund manager's portfolio allocation approach. Having some VC in the portfolio makes entire sense. And when I think around Molten as a listed vehicle to access these underlying VC asset class in a growing market of Europe, you look at the scale that Europe has moved even over the last 20 years. So we have investments from 15 to 24, which are over six times in terms of the capital that's been deployed. But importantly, that's still a third the size of the US. And I'll make some comparisons to the US market to demonstrate why that gap doesn't really make a lot of sense. Europe, like most IP generating hubs and hubs that generate entrepreneurial flair, has a strong developer base and actually from a number of developers, it's ahead of the US if you take Europe as an aggregate. At the same time, there's more than half of the world's science clusters in Europe and you aggregate those two things together, we're clearly good at driving IP and innovation. What has shifted over the last 10 years is that we've been adding capital to that IP and the culture of entrepreneurship that's been coming through. And as you see on the right-hand side of this chart, we have been developing outsized returns from European companies. What that is now starting is a flywheel effect of the employees at those innovative businesses starting off their next business and driving that knowledge that comes with the first iteration but also driving capital returns that come back through. And clearly, looking across to the US into Silicon Valley, this has been a phenomenon that's been in play for around 50 years. And Europe is catching up to that with those same characteristics. As I mentioned, London, the largest hub for capital, then it has been centered around Paris and Munich and Berlin for other hubs. But we're seeing that start to become more fragmented as well as the entrepreneurs create their companies in different locations, not necessarily just moving to where the capital is. In terms of company creation, the EU has outperformed the US in the past year because the governments have done a very good job at investing in seed funds, which have then done a good job of investing in underlying companies. We're starting to see that company creation, which is equivalent to the US and actually in the past year ahead. What has been missing has been the capital. And so funding companies through every stage of their cycle has been missing, which means that the US capital has been bridging some of this 150 billion gap that's been identified. And therefore, from a capital standpoint, European IP and European entrepreneurs are missing out and having to go to US markets and US investors to achieve the next stage of their growth, which means that Europe isn't keeping those companies through to the IPO stages that we all would like them to be able to stay in our ecosystem for. So with forecasts for EU to be, as an ecosystem, two and a half times in size from where it currently is, that's great growth that we're investing into. And it will show the depth of the ecosystem that Europe can create. But it is just catching up to the US, so there's further to go. And what we believe is that institutional capital, particularly coming from pension funds, can support that growth. It's the depth of capital that's going to be required. If we put that into context of where the US market went through its own reforms and iterations, it was in the 70s that in the US they deregulated the pension schemes to allow that capital to invest into private markets. And what you see from that is roughly a 10x increase over every 20 years subsequently. And so the number's gone from 4 billion, 40 billion, over 450 billion going into that ecosystem. So that flywheel effect of adding more capital in is the stage that Europe can move through now. But it does require pension funds to be able to access private markets. And of course, there's been a lot of talk in the UK, but also in Europe, in terms of unlocking those funds of capital. and giving the growth to the pension members that are currently struggling for that returns because at the moment the pension funds are incentivized to put all that capital into treasury shares. In the US, if you're just looking at the public pension funds only, they invest about 14% into private markets. So that's not just VC, that's entire private markets of which VC will be a smaller percentage. The UK local government pension funds are investing about 6% currently. But actually, that's a slightly flattering stat because there's plenty of funds in the UK that have zero allocation to private markets. So our opportunity to unlock this capital is very real. There's good momentum behind that and there's an importance to do it, but it can be a way for the European ecosystem to better support that IP generation that's happening. And now is the best time to be doing it because we're having this generational shift in technology, which is disrupting existing markets and it is creating new markets. And if we look back, just reflecting on those technology waves, the time between those waves has been shortening. And I think we can all agree that AI and the underpinning of use cases that will come with AI is one of the most consequential shifts in technology that we've seen in the last 20 years, in the last 40 years probably as well. So if we look at what will be driven off the back of this generational shift, the company creation, the use cases, there's a whole suite of innovation and productivity driving solutions that are coming here. And thinking around where Molten plays in this space, we're covering most of those themes from quantum, climate tech, autonomous vehicles, they're all playing into our investment cases. We have characterised our investments across four broad areas. It's called consumer, digital health, enterprise, hardware and deep tech. But that belies the subsectors that we're investing within. We're investing across financial technology, climate, space, healthcare, IoT. And all the companies in our portfolio are giving our investors the access to that innovation and that growth, which has always been important. And managing that through cycles has always been important. But arguably now... That vintage creation of new investments is even more important as we see those shifts in technology. So if I bring us back to an investment rationale, we're a listed vehicle at what I would call relative scale because it is clearly further to go. with 100 plus companies in the portfolio currently. And it's the core of those companies that have matured, which drive the majority of the value, but the emerging portfolio, which will be the growth engine of the next iterations of our portfolio. And thinking through cycles and over time is an important feature of managing venture portfolios. Being able to do that with an evergreen balance sheet means that you can run your winners. We'll talk about the importance of that, but your companies that continue to grow and scale in your portfolio, you can continue to back them through the long term. And having those co-investment pools of capital is important to manage through different market cycles, but also to give different investor pools with different strategies access to the same growth. We've mentioned turning them into cash. Clearly that is the litmus test. That is the important factor, selling them above where you're holding them and making sure you can recycle that capital back to our investors, but also back into new growth and that vintage creation we'll talk about in a little more detail. So European ecosystem scaling, generational shifts in technology and a listed liquid vehicle, which gives you access to diversify growth in private markets. Feels reasonably compelling to me. I'm obviously excited about it. But then there's always a but for these stories. So what's the but? Our shares are trading at significant discounts to the value of the assets. This is a feature of public markets currently. We're not the only vehicle that this is affecting, but we should dig into what we can do about it. Why is this happening and what are the things that are within our control? If you can see here, in the period where interest rates were lower, we were actually trading at premiums to NAV, close to NAV and premiums. In the COVID period, as we all got the jitters, we were trading at a discount and then COVID was actually quite positive for technology businesses, so we saw an improvement. But then as interest rates increased, we saw technology valuations and multiples reduce, decline. We took value out of our portfolio. And then as every time in the public markets that we see a shift, be that positive markets or negative, there's always question marks over the value of the portfolio. So you have to continually prove that you're being sensible in the valuation approach. And driving liquidity in the portfolio has been a key feature in that. So if I look on the left of this chart, interest rates factor, it's outside of our control. But I think we've been through the worst of that cycle and we're seeing central banks bringing down those interest rates. That's important because it affects asset allocation and it affects cost of capital. And that has an impact on venture where the companies are growing and scaling, but not profitable. So cash flows in the future are less valuable and you've got a higher interest rate environment. Having those valuation proof points of recycling that capital has proven the NAF, has proven the liquidity, and I'll allow Richard to go in more detail on that. But the liquidity in the public markets has also been a key factor. I think we've had 40 plus months of outflows into UK fund managers. So even though we have a great supportive shareholder base, they're managing their own portfolios and their own liquidity and they're having to manage that, which has meant we've had thin liquidity in those public markets. So on the right hand side, we think about what are the things that we can do, proving the NAV we've talked about. But the capital allocation policy that we have is important as well. So the importance of vintage creation, I've touched on generational shifts in technology, the opportunity set that we see in Europe and value creation into the future. That's a key pillar of what we do and that's how we're going to drive value for our shareholders. And we'll come into a bit more detail on the importance of these things. Secondaries, creating value, turning those companies to cash in the short term. And then as we've announced today, further buybacks of the shares, supporting the share prices. Before I go into a bit more detail on those three points, I thought I'd just remind everybody about the portfolio approach to investing and why it's important and how that translates into the realizations that we get. If you can see here, we've categorized all the realizations that we've had over the last eight, nine years. And I would say this is probably the slide in our investor presentation which is the most resonant because it shows the importance of the portfolio when we when we talk to our investors we of course talk about individual companies but actually seeing it as a as a portfolio approach and seeing it as an aggregate is even more important on the right hand side these will be the success cases and they drive the majority of the returns so roughly 30 percent of our invested capital goes into those cases where they are the winning companies, they're driving growth, they're compounding that growth that they have, and we get returns that are outsized in terms of multiples and in terms of capital that comes back. And so the key for us there is to identify those and hold your winners, stay in them, ideally double down in terms of capital and exposure to those companies. On the far left hand side, you have companies where they will go to zero. This is a risk business. Not everything goes to plan. And the entrepreneurs that we're backing are taking risks, personal risks, but risk in terms of the markets that they're going into and the opportunity set that they're seeing. If you think about the middle two cohorts, you have somewhere we might not get all our capital back. And then in the one to three X, that's driving some good returns, but not the returns that we're hoping for at the time of our investment. And I'd say it's those middle two cohorts where the majority of the team's time is spent. That's where we really work to actively manage that portfolio. But these are all good companies. And so they're valuable to somebody. And so our job is just to move those companies to the right next stage of their journey. So if I just touch on the importance of vintage creation, we put a slide together here which showed the companies that are in our core now and when we invested into those businesses. And you can see that it's six, seven, eight years ago, we were investing the first investment with our team creating their investment thesis and then finding the best companies that match that thesis and then investing in those businesses and holding them for the long term as their value is created. And so the vintage creation of venture is crucial. You can't time yourself in the market and when you come out to the market, which is the right period to be investing. You need to build portfolios and you need to build them consistently over time. And here we touch on our track record of secondaries. Secondaries, as I said, they augment the returns that we can get because we can buy into assets at discounts and we can turn those into realizations in a shorter two to three year horizon rather than the more like seven, eight year horizon that you tend to have with a primary investment. And so you'll see here lots of numbers on the chart, but all of those secondaries that we've done over the last period while we've been listed, we've actually turned most of those to cash. So that DPI number that you see at the bottom, cash returns, 2.3x versus the return of 2.5x multiple of value. And so that shows the importance of secondaries. And you'll see on the dates of the transactions, there's a bit of a spread because it depends on the stage of the market. Secondaries aren't always optimal in different market cycles. If there's a lot of liquidity in the market, you'll have tighter discounts and then less attractive. The share repurchase program, the final pillar of our investment allocation policy, trading at 50% discounts as we are currently, we're buying back our own assets effectively. And so we're buying back those shares, we're supporting the share price, we're providing some liquidity and hopefully giving the market confidence that we believe in the value of our underlying portfolio. And balancing between those three pillars of vintage creation, secondary opportunities and the share buybacks is what our capital allocation policies is trading off and trying to do. And the board recognised that where the share price is currently is clearly not sustainable as a longer term proposition of value creation for our shareholders. So allocating some capital back into the buybacks has been announced this morning. So to finish up, I'm just going to talk through a few of the strategic priorities. We put these out in an announcement to the market this morning as well. We're refocusing the Moulton team on our core strategy of Series A and Series B investing. Series B investing is where we would consider that to be early growth, where the companies have got traction and then you're adding more capital to allow them to go into new markets. That's where our team have strong depth and track record and where we can work with those companies to achieve their goals. But it does require a deeper pool of capital for those deals. So a Series B in Europe now, a lead check would be around 20 million pounds, for example. If we think about the funder fund programme, that's been a great success. We started that out in 2017. We've now got a cohort of 80 managers that we're an LP into. Most of the capital has gone into those programmes and we should start to see capital coming back out of that. And as we think about a phase two for that programme, it's still important to us, but we want to match that capital to the managers that we have the closest relationships with. So that will be a narrower cohort of managers for the next iteration. And then continuing to closely manage the portfolio is important in every cycle. I think our team are particularly good at doing this. We have knowledge for many years, many cycles, and we have processes in place. And you'll see some of that today about how we support companies, but also how we move those companies to exits at the right time. And then the recycling of that capital allows us to preserve a strong balance sheet. This is the first line of our capital allocation policy. We obviously have to make sure we've got liquidity for the longer term. We have to manage through cycles and we have to deliver on that vintage creation as well as supporting our shares. The building of capital pools with third-party funds is how I envisage that we will scale going forward. So at the moment, we have EIS VCT pools that co-invest with the public balance sheet. That's for UK qualifying deals. If we think about the Series B, arena of the market and if we want to have a cadence of investing in six series B deals a year at a lead ticket price roughly of 20 million pounds you need 120 million. Now clearly when we're deploying around 100 a year across early stage, later stage, seed fund to fund commitments and into share buybacks that isn't going to solve for our ability from this team to deploy the capital that they're capable of. And so having pools of capital, which I envisage to be institutional alongside the public balance sheet will allow us to scale by having a co-investment into a deal. So a series B could be 10 million from the balance sheet and 10 million from those private pools. And that allows the capital to scale alongside the public balance sheet. But it also means that we're investing consistently into the European market, into the best deals. So your PLC shareholder gets access to the best deals because you're leveraging the capital alongside. So I think there's a nice win-win scenario. We've proven that we can manage co-investment pools. We have a track record of doing that. And as we've touched on today, increasing the buybacks, recognizing we need to support the shares at the same time. So hopefully that gives you a sense of the trade-offs, but also the great opportunity that we see in the market. And actually, this is a market that for five, 10 years coming with technology shifts and capital will really drive our ability to grow the portfolio and drive the portfolio returns. So with that, I'm going to hand over to Richard, and he's going to take you into a bit more of the process of realizations. Richard's been with Molten since 2010. Before that, had 10 years as an entrepreneur himself, founded a business, which eventually got sold into Oracle. And since the period where he's been with Moulton, he helped build up the EIS and VCT platforms, and he works as our chief portfolio officer. So he's heavily involved with the journey of our companies and the capital that we put to work in those companies, the allocation of that capital. And one of the areas he'll talk to you about today is the process that he's been putting in place to drive the realizations. So the story behind the numbers, if you like. So I'll hand over to Richard.