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232. Bull, Bear & Beyond – Molten Ventures: executive interview
12 Plays2 days ago
In this interview, Molten Ventures CFO Andrew Zimmermann discusses the company’s FY25 performance, highlighting 13% gross portfolio value growth and 26% growth in the core portfolio. Growth was driven by holdings across multiple segments, including Revolut in fintech, Ledger in crypto and blockchain, ICEYE and Isar in space, Aircall in enterprise technology and Riverlane in quantum computing. This performance demonstrates the benefit of Molten’s diversified investment approach. On AI, Zimmermann outlines the company’s focus on the AI ‘middle layer’ rather than capital-intensive foundation models, with c 75% of the direct portfolio considered a net beneficiary of AI. He also explains how Molten supports portfolio companies beyond capital, uses fund-of-funds and secondaries to strengthen the pipeline and realisations, and is growing third-party AUM. The discussion closes with Molten’s approach to capital allocation, balancing new investment with NAV-accretive share buybacks.
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Transcript
CFO Discusses NAV Growth and Investment Trends
00:00:07
Speaker
Hello and welcome to Edison TV. Today I'm joined by Andrew Zimmerman, who is Chief Financial Officer at Moulton Ventures. Moulton are a London-listed VC investing across Europe across a range of structural trends such as artificial intelligence, fintech, quantum, space, health tech and energy transition.
00:00:27
Speaker
Andrew, many thanks for joining me today. Pleasure to be here. Thank you, Dan. You've just reported your full year results and shown really good growth, 13% in NAV across the piece, um particularly growth particular growth in call portfolio. But interestingly, that's been generated across a ah broad spectrum of thematics. Can you discuss the progress in the year? Yeah, we were really pleased with our results today, so thank you.
00:00:53
Speaker
That gross portfolio value uplift of 13% across the whole portfolio, but 26% in the core in particular is really pleasing. But I think the the best aspect about that for us is that it's across the breadth of that portfolio.
00:01:07
Speaker
And we're a diversified venture capital investor, so we're not just in one sector specific. We're playing across all the different thematics. And I think that's a really important differentiator for our model because it gives you different shots that go across the different sectors.
00:01:23
Speaker
In terms of our portfolio today, you know you you saw the growth from Revolut, Ledger, IceEye, ISAR Aerospace, Aircall, you know really really good positive returns across them, Riverlane and Quantum. So it's really pleasing for us to be able to call those out and with the space thematic in particular, ISAI had an announcement about a funding round today which is a significant uplift and ISAR Aerospace have also announced a funding round in which we are participating. So really exciting times for us with the portfolio and I think ah a real vindication of why we have that diversified investment strategy.
00:02:03
Speaker
Thank you and obviously off to a strong start with ISAI and ISAI now as well.
AI Investment Strategy: Middle Layer Focus
00:02:07
Speaker
um Looking across the different thematics, obviously artificial intelligence is one of the major thematics and one which you've put quite a lot of thought into in terms of how you how you're exposed and how you communicate that. Can you can you discuss that?
00:02:21
Speaker
Yeah, Ben, our CEO, talked about this today and there'll be some material in our investor presentations and we've done some thought pieces online. So I would encourage people to have a look at the website. The investment team have put some interesting and thoughts there.
00:02:35
Speaker
Really, our approach to AI is about investing in the middle layer. So not the big LLMs, you know, which are massively capital intensive and not so much the end applications, but that middle layer that is there to build the connections and gets used across them. So we see some really great opportunities in there where the applications have, you know, proprietary data or their systems of record or there's the piping, things like Thought Machine, which is core banking software, you know, which an LLM is not going to replicate. but but you can use it to connect the data and the customer data.
00:03:11
Speaker
and So that that's how we like to play the space and we see great opportunities there. And even in the application layer, SASmageddon, you know, SASpocalypse, whatever you want to call it, the the companies that um are going to do well in that software space are incorporating AI into their offering and using it to really expand their addressable market. to expand and their revenue and to really embed their clients and one I would maybe call out as an example of that in our our core portfolio is Aircall which is like voice telephony and customer service management um and they've been acquiring, they've been actually out acquiring AI companies to incorporate that into their model
00:03:55
Speaker
And that company is still growing 25% plus a year, more than 200 million ARR, over 25,000 different sort of small managed businesses. So really sticky, you know, like these businesses are not going to go and build their their own no-code CRM you know tele telephony solution. They want the existing product. to have all of that there for them. So we think that that's exactly how these companies should play that and build on it. And then it's an opportunity for them rather than a threat.
Value Beyond Funding: Strategic Investments
00:04:28
Speaker
and So turning towards management of the portfolio, can you talk now about the value that you add to your investing companies ah up ah ah beyond the capital? and then And then also how you balance investment in those core businesses that have been performing so well versus the rest of the portfolio?
00:04:47
Speaker
Yeah, great question. So we don't just write a check and and walk away. Venture is very much about helping the companies and the founders to grow. And we obviously have a 20 year track record and in venture capital. So that's really important to founders.
00:05:01
Speaker
We tend to get a board seat. So we'll take a 10 to 15 percent state. Usually you get a board seat so you can be there advising the company as they grow and scale on their journey. A big part of what we do as well is is plug them into the right networks. So we'll know other founders in the same space. We'll know strategic partners. We'll know their market, go-to-market experts as they grow and scale and maybe head towards time for an exit.
00:05:29
Speaker
We can help them with that. If they need a new CFO or a CTO, you know we have the right networks for that. So we're continually adding value you know beyond the capital.
00:05:40
Speaker
And then that kind of leads nicely into the other question in terms of follow-on capital. we we look at We just want to do good deals. So it's a very high bar for quality. um So the follow-on capital in our existing portfolio is competing with new deals.
00:05:57
Speaker
ah So if the follow-on company is really good, we'll want to double down on that. We you know we want to back our winners to grow in scale. If there's a really exciting new opportunity, we'll have to weigh up against that. So it's like a really good competitive tension so that we're continually looking to allocate capital. to the most nav accretive, the most beneficial investments for our shareholders. But it's really all about that high bar for quality as opposed to whether it's a follow-on or whether it's a new investment or whether it's a specific sector or a different sector.
Balanced Investment Strategy with Fund Integration
00:06:30
Speaker
And in in addition to your primary investments, you know you've, I guess, been putting increased emphasis on your fund-for-funds investments and your secondary investments.
00:06:40
Speaker
um Can you talk about that and and how those businesses, how you get synergies between those different approaches? And then secondly, can you sort of, I guess, shed some light on your recently announced secondary fund? Yeah, sure.
00:06:54
Speaker
So venture direct investment is the core of what we do. So that's still obviously the biggest part of our portfolio. And that those you're making direct investments into series A, series B type ones. So series B we would say is our sweet spot.
00:07:08
Speaker
um Obviously we do more than that. So that holding period for an investment could be eight to 12 years. So we compliment that with a pipeline. So the early stage investments we are seed.
00:07:24
Speaker
There's a huge universe of those companies out there, so rather than try and cover that ourselves, we invest through our fund of funds program, where we have about 50 managers across different funds, right across Europe, different sectors.
00:07:38
Speaker
And that's almost like a scouting network, if you like. So we we invest smaller tickets of capital in there, but we can see the the companies in there that are growing really well because we get reporting from the managers.
00:07:51
Speaker
And we have really good relationships with these managers so that they can kind of help us in terms of a heads up for the ones that are maybe growing a bit faster or could be thinking about a series A. So that's really an important part of our pipeline.
00:08:05
Speaker
And some of those will then come into the into the core portfolio, the emerging portfolio at that smaller scale and grow. ah At the other end we have secondaries where we can identify assets through our network. we are These are all venture companies and we have a good network with the different managers as well as the founders.
00:08:26
Speaker
And these are companies with a proven go-to-market. They're they're and maybe 30 million revenue, they could be profitable, but they're you know they're proper established businesses that have ah really know what they're doing and have proven their model out.
00:08:41
Speaker
they may be looking for liquidity, the manager maybe is about to raise another fund and they they want to help get liquidity for their LPs or it could be a single asset where the founder and the staff are looking for some liquidity. You know you could be a paper millionaire but that doesn't really buy you a house so if you can release some liquidity to another venture partner like us who knows the asset and can write a ticket for varying amounts, then you can we get access, you get cash, you get access to really great asset that we understand and we can price and we can value and has a shorter time horizon. and So that kind of complements the really longer time horizon from seed to that middle bit with a direct investment to the secondary holding, which might be shorter, much shorter period
00:09:31
Speaker
And then that helps to just get really good cadence of realizations because we have an evergreen balance sheet model. So it's really important we keep that cadence going.
Attracting Co-investments and Increasing AUM
00:09:42
Speaker
Get you. And can you talk about your progress in attracting institutional third party co-investments? That's going really well. So our CEO, Ben, um i made an announcement today. So we've talked a bit about this already, but we have a growth fund, a Series B fund that we're looking to launch soon. So we've got a cornerstone investor now secured for that. So we'll be talking more about that in the coming weeks.
00:10:07
Speaker
Our Molten East strategy, which we've referenced before, ah again has cornerstone investors in place. And again, we would look to hopefully to be announcing more about a first close in the coming months for that.
00:10:21
Speaker
And then the secondaries team, which you've hopefully read about online as well, which we've who just joined us not long ago and we see that as a really good opportunity. You know, there's still liquidity issues in private assets. Things are not necessarily IPO-ing.
00:10:36
Speaker
The M&A market is not necessarily fully back there. So there's a lot of private asset transactions going on. And this team have that dedicated expertise and our brand and network to go in and look for these really great assets.
00:10:50
Speaker
And across the three funds, you know we're looking to raise £200-£300 million in the Growth Fund, £100 million for the Molten East Fund and maybe £150 million for the Secondaries Fund.
00:11:02
Speaker
It will take time, so I don't want to set an expectation that you know come the interims we'll have all the funds fully closed. but we're definitely making good progress with them and good traction. So in terms of one of our strategic priorities of really scaling and increasing third party AUM, which gives us more capital to deploy, also generates fee income for the PLC, which offsets the cost base.
00:11:28
Speaker
And essentially you get your investment in the molten PLC pool for you know relatively low TER, or we we call it our net cost of 0.5% just now, well below our target of 1%. But again, with income increasing from management fees, we think we can drive that down even further. So it's a great opportunity for shareholders.
Closing NAV Discounts and Capital Allocation
00:11:50
Speaker
It's great to see the platform strengthening and in lots of different directions as well. um You've closed the discounts at NAV considerably recently, although there's moving parts here with ISI and so on. But can you talk about the initiatives you've taken to to close that gap?
00:12:05
Speaker
and also you know discuss your allocation of capital and how you balance investing in in in your portfolio of new investments versus shareholder returns. Well, first of all, we have to make good investments because those are what's going to drive the fair value growth.
00:12:21
Speaker
So it's really pleasing to see things like iSci today announced and really vindicate that. And I think our results as well showing that breadth of growth across the portfolio, which obviously drives the NAV per share, shows you why you need to be invested in these assets.
00:12:37
Speaker
At the same time, when our discount is wider, um so that between the NAV per share and the share price, we recognise that it can be NAV accretive to buy back your own shares. So we have been buying back shares, not so much recently because the share price has obviously picked up quite a lot.
00:12:55
Speaker
um But of when it's the discount is wider, we recognize that that's one way to return value. and So we've allocated I think a total of 60 million in the the last two and a bit years to buybacks. We still have about 4 million of the current commitment left.
00:13:11
Speaker
But at the moment when we see more value to be generated from investing in the portfolio and in assets, we'll direct to that. But obviously we're open to directing to buybacks if that's the right thing to do for shares, shareholders, because it's always about increasing that NAV per share return, which then should help to close the gap of the share price.
00:13:35
Speaker
Andrew, many thanks for joining me today. It's great to see a lot of good things going on across such a diverse range of themes within the the business. Thank you, Dan. been a pleasure.