Transcript
Speaker: Hello and welcome to Edison TV. Today I'm joined by Ben Wilkinson, Chief Executive Officer at Malted Ventures, one of Europe's leading venture capital companies focused across a range of growth verticals such as space, artificial intelligence, health tech, software and technology and so on.
Speaker: Ben, many thanks for coming in. Morning. today Good to see you. um Can we start with your recent ah fundraise, your you the closing of your growth fund? um Can you talk about that and where that fits in with the overall modern strategy?
Speaker: Yeah, absolutely. So this is a ah fund focused on Series B plus companies, which has always been where we've invested and therefore aligns very clearly with our investment thesis. This is high growth companies at the stage where they will have five to 10 million of revenue plus. And obviously in the case of venture capital, you're backing innovation and you're backing businesses that can scale to be global champions. So that hasn't changed in terms of the thesis. What has ah changed is that the focus of this fund is to allocate public capital from our balance sheet. The listed vehicle is about 1.5 billion of capital. We currently manage about 500 million additional capital from third party sources, from which are non-public. And then this is about growing the non-public capital portion of that. So we've created a fund. There's 100 million commitment from the listed balance sheet to make sure the PLC shareholders still get access to the same deal flow. And then we we're allocating capital alongside that. And we're attracting capital in the first instance from the British Business Bank, who have committed 75 million as a cornerstone to that strategy.
Speaker: And in terms of the stage of capital that you're coming in at, and how does that compare to the rest of your you know the the the rest of the the group? So we have some earlier stage investments. We always think about Molten as a platform to access venture capital as an asset class. And to do that, you want to access at different stages of a company's growth journey. So at the very early stage, we have the funder funds program where we take an LP position and investment position into funds. And we have about 80 funds across Europe that we've invested into. That gives us access to data and and and being able to track those early stage companies as they come through and and scale and mature. We then look to put capital to work at the Series A stage in the first instance directly. And that's when businesses will have
Speaker: some commercial traction, maybe 2 million plus of revenue. And the key difference between an A and a B investment really is about a proven go-to-market strategy. So at the B stage, you have more repeatability and in what's already proven in the company.
Speaker: Great. And then you initially said that you're targeting 200 to 300 million size for the for the new growth fund. you You're 175 million now of of initial commitments. How do you see this fund evolving over time?
Speaker: So if I think about the shape of the European market for Series B investing, the average ticket size will be something like 20 million of capital going in, where businesses are raising maybe 40 to 50 million of capital.
Speaker: And so you need ah a depth of capital to make sure that you can be investing consistently and you can build the right portfolio size. For a portfolio in a fund at the Series B stage, we probably want 10 to 15 investments in that structure. And so that gives you a sense of the initial capital being 200 to 300 million.
Speaker: But you then also need follow on capital of maybe, say, 40 percent of the fund to make sure that you can continue to back the winners in in that strategy. So ideally the fund size of 350 million that we're targeting, ah pounds, this is what we're discussing, but 350 million that's what we're targeting. So we're already halfway there. We want to attract institutional capital such as the same institutions that are already PLC investors, for example, and but those that want to come into a private structure. And of course, pension capital coming from DC pension funds, DB funds or local government schemes will also be appropriate for that strategy.
Speaker: Great. And now turning more to more towards events in your portfolio, both space and sovereign tech has been a key sort of focus ah of the group. In space, you recently, ah well, you a while ago, you announced a 450 million Series F round for ISAI. And then more recently, ISAI Aerospace has as um completed its first successful launch. Can you tell more more tell us more about what's going on there?
Speaker: Yeah, so I think a few parts we've invested in ISAI, which is a Finnish satellite business, has a distinct technology called Synthetic Aperture Radar, SAR technology, and they have a constellation now of 76 satellites in low Earth orbit that can take images of the Earth. We first invested in iSci in 2018 and we were backing them at the point where the technology was clearly distinct and they had to go on and prove that they could get this constellation of satellites and they've executed that very, very well.
Speaker: The first use case for their product was a commercial use case looking at floods and fires and the incidents of those and then taking the data from those images and selling that into insurance and and and using that to make sure that insurance can pay out quickly and efficiently, for example. The other use case would be on the environmental side, monitoring things like the Amazon as another good example.
Speaker: In the last couple of years, we've seen an inflection in terms of defence spending, particularly in Europe, and relating to the theme of sovereignty and resilience. As European countries recognise, they need their own access to data and communications, and they need their own ability to to see what's going on on their own borders, for example.
Speaker: Of course, a significant use case has been in Ukraine over the last couple of years as well. And that led to an inflection in their valuation, which led to a subsequent fundraise, which happened over the over the summer period.
Speaker: That's one of the companies we've invested in, but we've obviously seen space as a thematic linking to our general technology investing thematics. ah The other that we invested in was ISAR Aerospace. We first got exposure to ISAR through the German VC who invested at an early stage, Early Bird, and that's a partnership that we've had for many years. And again, it's very much in the mode of us tracking businesses as they mature.
Speaker: And then as we saw that maturing of the company, we co-led their most recent investment round, which we announced again just ah at the start of the summer. And we invested 30 million into that round ahead of this most recent launch.
Speaker: And what we liked about the ISAR is the fact that it's a rocket launch company. and It's giving Europe access to low Earth orbit. There's a significant constraint in terms of the ability for satellite businesses to get to low Earth orbit.
Speaker: And using ISAR as a great example, Europe needs to be resilient, it needs to have its sovereignty, it needs to have its own access, but also globally companies need more access because SpaceX is now limited in how many launches it can it can take, the demand is higher than the supply.
Speaker: So that was attractive to us as the one part, but the other part was ISA has this repeatable manufacturing. They are already building rockets three to seven. They have a 40,000 square meter facility outside of Munich. And so we really recognize that we weren't betting on one launch being successful. This is about repeatability and then demonstrating their capability to increase that that launch cadence.
Speaker: Interesting. and And in terms of the next milestones, you talked a little bit about the the pipeline they've got, but what are the key milestones for ISAR now? Well, they're really ahead of where we thought they would be with this second launch. It's been actually very exciting. Saturday evening watching this launch happen, it was equivalent to watching your favourite football team in terms of excitement and nervous at the same time.
Speaker: um We hoped that they would get to max Q, which is the maximum dynamic pressure, really testing the rocket. They went beyond that, went to stage separation of stages one and two, then reached orbit and then actually delivered the five CubeSat satellites that were on the yeah on the rocket. So though they're ahead in terms of where we thought they would be. The next stage for them is that repeatability of launch. So improving um on the speed with which they can execute on the subsequent launches and then delivering on a significant pipeline that they already have of orders.
Speaker: Then that actually moves them to another opportunity, which is if they have the access to low Earth orbit and they can prove it can do that repeatedly, that they can then think about other parts of the value chain in the ecosystem. So we've seen, of course, with SpaceX, most of their revenue actually comes from the Starlink satellite communications. So there are other parts of the value chain like the satellite bus. So you could see some integration there as another opportunity for them.
Speaker: And can you talk more about your overall thesis for investing in space? You mentioned ISAI and ISAR there, you've also got SAPVIEW. How do you see all these businesses fitting together? I think like any other sub-technology thematic that we look at, we look at the value chain of that that ecosystem, we look at where we feel the value will accrue and where we feel the market will develop, how it was going to develop. If you think about the satellite business, the cost of satellites has come down substantially, so ISAI and Satview are both in that ecosystem where they're putting sensors into low Earth orbit and then there's data that comes off the back of those sensors that can be sold to commercial customers but also into defense applications as well.
Speaker: ISAR is about the launch capacity capability and that's giving access to low Earth orbit. There's a real constraint now with the number of satellites that companies want to put into orbit but actually getting their supply is very limited. SpaceX is now and already fall for the next three years in terms of its capacity. So we need to get more capacity into the market. And that has a particular, obviously, relevance for Europe in terms of its own sovereignty and resilience.
Speaker: And now turning towards software and SaaS, we had a big sell down in the sector. um The early part of this year, people were concerned about whether to trade between AI infrastructure and then SaaS.
Speaker: And we've started to see investor confidence rebuild and in in in in SaaS players, in selective SaaS players. Can you talk about um your strategy and your ah your outlook for the SaaS businesses in your portfolio and also how you look at new investments in that thematic?
Speaker: Yeah, absolutely. i think firstly, this really speaks to why we invest across sub thematics of technology. We're investing for the long term in businesses. Our average hold is likely to be maybe up to 10 years. So you don't know which sub sector in 10 years time is going to be performing well.
Speaker: And so you need a portfolio approach. You need a portfolio approach to the stage of the companies in terms of being early stage or later stage or more mature. But you also need that approach across different sub thematics of technology. And I think for Molten, what served as well is continuing to invest in hardware and deep tech, which is now becoming more relevant, more pertinent. but at the same time, we will continue to invest in enterprise applications that are relevant for the next generation of productivity and efficiency in companies.
Speaker: So we would really look at those AI businesses and the infrastructure layers that can power those companies. um And we'll look at those SaaS type products. And if they've got resilience around them in the context of being mission critical to businesses, then that's something that we would spend time looking at. I think where we will avoid companies, it's more where that underlying technology SaaS technology is going to be disrupted by AI because it is maybe more ubiquitous or it isn't as mission critical to an enterprise. um Elsewhere in the portfolio, what are the other interesting things going on?
Speaker: Well, we have another satellite business called Satview, which has launched its own satellites, and that's a thermal imaging sensor, so distinct from the I-Sci sensor of synthetic aperture radar.
Speaker: Very excited about that also. But as you rightly point out, we're investors into fintech companies, and we're also invested in digital health businesses. We're investing in quantum, which we we're seeing a lot of growth and and that market's coming to coming to the boil over the next couple of years. So we see a lot of opportunity there. So we really want to invest across the tech technology spectrum in those enabling layers of technology. And some of that can be semiconductors, for example, or it might just be into cybersecurity as another another example.
Speaker: What we're really doing is thinking about venture capital as a asset class in its own right, giving our public market shareholders, as well as our increasing private market shareholders, exposure to this this growth, which is remaining private for a longer period of time. But now we're also seeing a paradigm where Europe, in terms of its own procurement, its own sovereignty, its own resilience, needs to back these companies more. We're seeing more pension capital, albeit that it's been slow, but coming into this market as well. So I really feel the opportunity for us is linking the generational shifts in technology, the increased capital that we hope will come alongside that thematic of sovereignty and resilience, and seeing that Molten can be a key player in that market.
Speaker: Ben, many sites are coming in. that Fascinating discussion. And it's great to see how you are supporting European tech ecosystem, but also giving public market investors a means to get access to that growth. and Thank you for your time.
