Augmentum Fintech PLC (AUGM.L) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Augmentum Fintech plc Final Results Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Tim Levene, CEO. Good afternoon to you, sir.

Good afternoon, and a warm welcome to everybody that is listening in. This is always one of my favorite meetings of the results road show. We get some fantastic questions in the second half. So do look forward to those and please do put them on the Q&A tab, and I'll do my very best to answer as many of them as possible. I'll spend first half of the hour just talking you through some of the highlights of our results. This is a presentation that has been uploaded to our website. So for those of you that want to look at it in more detail, then it's open for you to download. But without further ado, I will kick off with the results detail from yesterday's announcement, which so far has been received positively by the market. Some milestones really for us. And over the next hour, hopefully, I'll take you through the progress of the portfolio, which now numbers 25. We talk a lot about our top 10 and why do we do that? Because despite the fact that there are 25 companies and a lot of emerging businesses in there in terms of the net asset value, the ultimate valuation, 81% of the portfolio is driven by that top 10. So we do focus on that. The growth -- underlying growth has continued to be strong, 65% year-on-year. And as importantly, we'll talk about the shift over the last 2 to 3 years, not just with ourselves, but more generally across the venture capital community in terms of focusing on a path to profitability businesses that can be less cash consumptive than perhaps they were in 2021, where raising capital was more freely available. We'll talk also about the discount present in the market, we'll give you a bottom-up approach as to why we think it represents very compelling value and talk a little bit about the underlying valuation process, where we're coming out, how that has presented itself historically. And of course, the true test of a fund is the delivery on results, not just in the growing NAV but also in the realizations as well. But as you can see, cash reserves are in a healthy position, a touch under GBP 45 million. So we are active in the market, and we'll talk you through what we're seeing from a deal flow perspective, the deals that we've invested in, why we have invested in them. And in the last 24 hours, we have announced new investments in a FX spot institutional trading, institutional provider called LoopFX, and we'll talk a little bit about our thesis on that. But it's hard to ignore what has been happening in the market over the past 4 years. And I was reminded when presenting this slide yesterday to one of our larger investors that it reminded him of his recent ETG report. And I think it has been a pretty hair-raising few years. You can see the orange line is that listed index, global fintech index. And you can see up until the end of '21, it really was tracking quite nicely the NASDAQ, even the NASDAQ without the Magnificent 7. And I think where you've seen that recovery to record highs in the NASDAQ from a listed fintech point of view, we've not seen a recovery. It really went on a strong rerating downwards since the end of January -- well, I should say, the end of '21 and really kind of drove down towards the start of January '22. Yes, we've seen the start of recovery, and I think there's a lot more optimism to the sector from a listed point of view, but I still think when you see the delta between the NASDAQ and this listed fintech index, there is still a long way to go. So where are we on our journey as a portfolio? Many of you, I know, are shareholders and take a keen interest, not just in specific companies, but how the portfolio construction has developed over the last 5 years. And I think it's fair to say it is really well diversified across a number of subsectors within financial services, where we want to have exposure. Of course, you're going to see the percentages ebb and flow over time as companies exit and other companies start to develop and their valuations appreciate. But it's really important for us to be playing both parts of the industry. And what we mean there is, yes, we want to play a part in backing disruptive businesses that are truly disintermediating some of the traditional players in the financial services space, some of the lenders that we back, digital banking platforms, the wealth management initiatives. But also at the same time, you see an increasing focus from financial services incumbent hugely challenged by their own digital transformation despite massive spend over the past decade. And there is a much greater level of engagement partnership with a number of B2B fintechs. And it's really important that we play on that side of the fence as well. So we're going to back businesses that are disrupting the traditional players. But at the same time, we're going to back businesses that are helping some of the traditional incumbents navigate the number of challenges that many of them face as part of this ongoing digital transformation, which we know will continue over the coming decade as well. One point to note, if you look at this chart 2 or 3 years ago, we would have -- you would not have seen too much on the insurtech side. It was an area where we've had a long-term thesis. The challenge for us, of course, is to try and get our timing right. We've been less excited about what we've seen on the business-to-consumer side. But again, on the business-to-business side, we think there are some interesting propositions there. And I'll talk a little bit later on about our recent investment in Artificial as well. If you look at the progression since March '20, you can see that on the right-hand side of the chart, despite the fact that we went through a very significant re-rating in the overall market, we have continued to ensure that the NAV ticks up. I think that's one, a reflection of the approach that we've taken to valuation. And 2, the underlying growth of the portfolio as multiples have compressed quite significantly in terms of valuation approach. Despite that, the strong growth in the overall underlying portfolio has allowed the total NAV to grow, despite the fact that there has been an overall re-rating in the market. And what does that look like over the last 12 months? Well, you can see it's really been a tale of 2 halves. For those of you that joined the call 6 or so months ago, it was a steady period in terms of realizations. We saw a strong realization with the likes of the exit of Cushon to NatWest, but not a significant amount of uplift. And we've seen some of that growth really flow through to the second half of the year to give us that growth in the underlying NAV, and of course, in the NAV per share as well. I think a really important measure in the test of the venture fund is to really keep an eye on what is that rolling internal rate of return. What are you growing on an annualized basis? What does success look like? For us, our internal target has always been that the true measure of the venture fund usually takes 10, 11, 12 years to really go through those stages of maturity, but at the same time, you should be seeing early progress after 4 to 5 years. And I think for us, it's important that we maintain that IRR in the low 20s or the high teens to demonstrate that we can really be a top quartile performer amongst this asset class. So this really is a measure for us alongside a number of other KPIs that we keep a close on, and it is important that we continue to measure ourselves against the benchmark, not just in the listed markets but across many of our peers who are more traditional GP/LP funds, so privately structured funds as well. So what's been happening on the capital deployment side? And if you really look, it should come and no real surprise that over the last 18 to 24 months, we have turned down the dial. There has been an increasing focus certainly second half of '22 and throughout '23 on the existing portfolio. Yes, there has been a significant amount of opportunities in the pipeline, but we have been very focused on ensuring, one, that the existing portfolio was well funded, where it made sense to really encourage them to move to a path to profitability. At the same time, that is not the prime focus for a lot of our early-stage assets that have significant growth opportunity ahead of them. But at the same time, it is ensuring that you have visibility on when that next funding round is going to happen. Will there be interest externally in the market and to ensure we have sufficient capital to be able to back our winners? And that's kind of been a continued theme that we are very focused on. And if you look over the reporting period, it's a touch under GBP 16 million of deployment across the lifetime of our time in the public markets, it's averaged around GBP 30 million. So for us, we certainly have been having a very, very rigorous look at our pipeline. Our conversion rate from entry into our CRM system and to ultimate conversion has gone down as well. We've always said, we say no 99% of the time over the last 12 months, we've been saying no 99.9% of the time, perhaps a touch less than 99.5%. of the time. So that's very much been a feature of the market. We're very focused on the entry valuation. We often say it can be a great business, but it could be a poor investment if we get the entry price wrong. We're really focused on that as a result of having real awareness to where the market has gone. Some of the missteps that many of the market made during 2021 with the wrong entry price, and we're very kind of conscious of that. Since post period end, we have made some further investments alongside a new investment in LoopFX, which isn't included here for the purposes of this chart. This was to the 31st of May 2024. So continued focus and investment in the existing portfolio alongside making sure that the bar remains exceptionally high for any new investments coming through. I'm often asked and have been over the past 12 months by a number of investors. At what point do I see us returning to that historical norm, the mean of capital deployed? I think it's important, one, that we have a strong balance sheet; and 2, that we don't set ourselves any artificial targets as to how much capital should we deploy in any single year. We are seeing a significant increase in the quality of the pipeline in Q1 versus Q4 was up 45%. That's in the number of new opportunities, leads entering our pipeline. But at the same time, we recognize that the bar does need to remain high. I think we have a much better sense, 6 years on since IPO of the type of exits that the market will be receptive to. But not only that, how the market is really valuing them. And I think when you think about the most likely routes of exits for a lot of fintech despite the fact that we hear a lot about the IPO market fundamentally is going to come down to M&A where strategics and key are looking very closely at the sector and have been very active. One can't ignore or hide behind what has been a really disappointing period over the last couple of years in terms of share price. There has been a recovery recently, which is pleasing, but I still believe there's a long way to go. We have spent a lot of time over the past 12 months, in particular, talking to prospective shareholders, talking to existing shareholders, really building a bottom-up approach as to why we think the discount is significantly excessive, why we think we should be trading at par, if not a premium, which we did, as you can see, back in '21. And it's something we're very much focused on because yes, it's all well and good, improving the NAV. And yes, I recognize many of us are long-term holders of Augmentum and the proof will be over the coming years. But at the same time, it is important to show continued progress in the share price, and it's something that I'm very conscious on as a significant personal shareholder amongst many others that I know are supportive, but do want to see some improvement there. So what does that mean in real terms? And we've been working with this top-down and bottom-up approach. If you look at the NAV, you take the discount as of 31st of May. That gives you a market cap, you strip out the cash reserves. And that gives you an employee -- implied portfolio value of GBP 130 million. When you look at the implied portfolio value and where we are today, so this is stripping out cash, you are trading at a 50% discount as well when you take that cash level out. So it's even more pronounced to the headline numbers that we're seeing reported. So let's take that GBP 130 million, and let's apply it to the 25 companies in the portfolio. And let's just take our top 5 and use them as the proxy to say, if you only bought into the top 5 and you use that implied portfolio value, then again, you will see that the implied portfolio value is a 21% discount. And then if you just use the top 10, then you see that go to a 38% discount as well. So arguably, if you just take the top 5, you're getting the other 20 for free or the top 10, you're getting the other 15 for free on top of the 38% discount as well. So this has really been important for us to kind of bring to life what we think is further transparency, but really kind of articulating from a bottom-up approach of where we think once the future growth is in the portfolio, but we are valuing for today, not for tomorrow. Yes, we believe many of the companies in the portfolio have significant growth potential. But this is very much where we feel the portfolio is valued today. And as I have said many times over the past 12 months, we think the discount isn't warranted. And fundamentally, we're working hard to articulate why we think that way, and hopefully, we can continue to narrow that gap and move back to a premium in the coming months. But what about that top 5? What's in there? How have they been growing? In many respects, these are substantive businesses, businesses that collectively have grown very nicely, 78% year-on-year. If you look at the CAGR, the annual growth rate of each of these businesses since investment, they've all shown really healthy growth rates, different stages of evolution, some more mature than others. But in Tide and Zopa and BullionVault case now, profitable, cash-generative businesses and Tide's case, reinvesting that into international development as well. But these are businesses that are established and growing at 86% year-on-year. If you look at that forward revenue multiple, again, that's another really important sense to check. Do I feel that business is growing 70%, 80% year-on-year are priced fairly, using a 4.5x forward revenue multiple. And I think if you look at that benchmark, if you look at history and look at SaaS businesses in the listed space, those top Tier 1s growing north of 40%, they would be trading within the range of 8x to 10x. So we still believe that these are prudently valued. Yes, it isn't like-for-like. These are different types of businesses. But at the same time, hopefully, this gives a sense of: one, fast-growing businesses that are valued prudently, still growing, generating real positive contribution to the market. In particular, there's a lot of U.K. growth in terms of number of jobs as well. And on top of that, there are another 20 assets in the portfolio, I think in many respects that I think many of you will get excited about some of them. So what about the portfolio? And we talked a little bit earlier about portfolio construction by sector within financial services. Equally for us, it's always about looking at the portfolio construction by maturity. We need to make sure that we have this recycling effect going on in the portfolio. So yes, we want to be adding new companies, more often than not at the early stage. They need time, they need capital, they need patience. And inevitably, not all of them will succeed, but we need to have enough at the top of the hopper, where we can have a good level of confidence that over time, over the 3 to 4 years, they will start to flow through to the mid and for those that really breakthrough, get to scale and get to that late stage. But we need to be able to ensure that we have enough of the NAV in that late stage where there is a plausible path to liquidity to realization where we can continue that recycling as well. And so when we talk about a late-stage company, what does that typically mean? Usually, it's a business that will be generating a good amount of cash or has reached real scale at top line. So GBP 50 million plus of revenue in many of our businesses case here in the late stage, they're trading now well north, in fact, almost all of them in this list north of GBP 100 million, in some cases north of GBP 200 million of annualized revenue, which is really pleasing. But just because the business is late, it doesn't mean that it's stopped growing. You can see here that there is some healthy growth rates amongst many of those later-stage businesses. But from our point of view, we would expect a path and opportunity to realization for some of these businesses. It doesn't mean that we absolutely want to exit or the opportunity will present itself. But when you have a pool of 6 or 7 businesses, then inevitably, over that 2-year period, we would expect one to exit, and we saw that in the past few months with Onfido, selling itself to Entrust, a large U.S. listed player as well. I'm not going to dwell too long about the ups or downs in the portfolio, but more to give you a sense of where the movements have been amongst the top 10. And again, for you to kind of look at in more detail and perhaps if there are specific questions, I'm very happy to answer those in the second half. So I will continue, I think, to always show this chart, both at the interims and the full year results because I think it's incredibly important to show how our approach to valuation has continued to remain consistent and how the market has come back to us rather than the other way around. So when perhaps we were criticized back in '21 for erring on the side of conservative with our valuations and hence, we did move to a very hefty premium. I think one of the highest, if not highest premium in the market, 40%, 50%. There was some criticism ironically saying, we think the sandbagging your numbers. I think what we said was we felt that the market was overheating from a forward revenue multiple point of view. We wanted the value to value the portfolio for today, not about the hope for tomorrow. And as you can see there, we've really kind of retained that forward revenue multiple between 4 and 6 over the last 4 years. Now what is that comp there in the orange line? This is the high-growth listed fintech index. This is a group of globally listed fintech companies growing north of 40% a year. And as you can see, that has kind of tracked down to us. So again, we talk about our top 10 growing at 65%. We talk about the top 5 growing at around high 70s, low 80s as well. So that gives you a sense and hopefully, a good level of confidence that we are not over-egging the underlying valuation, and that there is a sensible approach and consistent approach to what we've been doing. Now of course, the proof in the pudding is delivering realizations, delivering cash. And I think there's 2 important aspects here. One, a portfolio that's 4 or 5 years old, are you starting to deliver that cash back into the portfolio? Now, this is not private equity. This is early-stage venture capital. Often you start to see the delivery of realization 6 to 7 years after inception. It started for us a little bit earlier. We think that's encouraging. We have built the portfolio with one eye on that as well to make sure that we do have the opportunity to demonstrate realizations. And since IPO, that's nearly GBP 100 million now of realizations, GBP 93 million in total that has been delivered back into the fund. And alongside that, how have those realizations exited? So at the point in which we exited relative to the last reported value, were they at the value, were they touch under? You can see here that on average, they've been 30% above the last reported valuation. And again, that's important to give investors confidence that, one, you're not valuing for tomorrow, it's about what we think the value is today and if something gets exited 6 months, 3 months after, then more often than not, you hope that it will be at or above that valuation. That doesn't always happen. But I think Cushon is a really good example of -- it wasn't a proposition where we were actively looking to sell. A strategic buyer in NatWest came in to a close look at the business and felt that they wanted to acquire the business rather than invest as a minority, and that really took a healthy premium to where we were holding it in order to be comfortable that we were going to be rewarded for that investment, even though we only held it for a much shorter period in time than we would have ideally liked. So what about the approach to valuation? And I know many of you who are shareholders, I talked to a lot of accountants in particular. And it's surprising how many auditors as we have as retail investors amongst our shareholder base, have talked about kind of the shift from the price of a recent transaction relative to really looking to the market, looking at public market comparables taking that basket and applying a number of different methodologies alongside that price of recent transaction. And I think the sector as a whole, the private equity and venture capital sector as a whole has rerated over the past 3 years as a result of the healthy skepticism from external commentators, say, are you really reflecting what has been happening in the public market? And I think if you really look at the approach and you look at the underlying methodology that we're taking, that our auditors are taking and in our case, it's BDO who have done the audit, there has been that shift from the price of a recent transaction to a more market approach, looking at that basket of public market comparables alongside a number of other methodologies as well. And that would be probably the distinct change. If you looked at this chart 2 or 3 years ago, you would have seen a lower -- much lower bar in terms of the market approach. And hopefully, we are really reflecting what's happening in the public markets as well as what's happening in the private markets as well. Notwithstanding that, it is important to emphasize again what is our downside protection. We are early-stage investors. We're taking calculated risk. These businesses aren't always going to go the way that we hope if we're not taking risk, if some of our businesses don't fail, the argument might be that we're being a little bit too conservative. We are in the business of trying to find that outlier case that can deliver an outsized return, investing GBP 4 million, GBP 5 million and ideally, over time, delivering GBP 100 million, we're looking for those opportunities. At the same time, when you are taking that risk and you are paying at times a higher headline price, you do want to have that downside protection. And we do structure all our deals at the early stage with that downside protection. So what does that mean? Well, that would mean we would come in with a preferred share class. So using the example of investing GBP 5 million at a valuation of GBP 20 million, so your post-money valuation is GBP 25 million. You own 20% of the business. The business goes on a journey, it invest your GBP 5 million, it doesn't really deliver but there's some residual strategic value. It goes to the market. The market value is at GBP 5 million. We were the only -- if we were the last money in that GBP 5 million would come back to us. In a situation where that same business didn't raise -- didn't sell but wanted to raise more money, albeit at a much lower valuation, let's say, GBP 10 million, then we would more often than not have an anti-dilution provision in there that would issue us a number of shares in order to compensate us for the company raising more capital at a lower price. So of course, we don't go in thinking that these businesses fail, far from it. We have strong conviction and a lot of enthusiasm and there's a lot of hard work before we come to that. But of course, there are times where the asset is worth something, perhaps not worth what you thought it was going to be and where we can, we want to be able to defend our shareholders' position and return money where possible. And we have had to use and deploy our liquidation preference in the past in order to get some money back and be able to recycle that. So it is a really important feature for venture investing and something often quite different to what we see in more traditional late-stage private equity. So what about the underlying performance of that top 10 that represents north of 80%. As always, these move around. I think what this shows you is the journey that they're on in terms of where we look at these as an investment team, We'll do quarterly reviews of the portfolio, what's performing well, what's performing as expected, what's not performing. Sometimes there can be market conditions. You will -- if I give you an example of an Iwoca, which was a business that had a very challenging COVID. There were some external market conditions that made it's very difficult for the business. The government brought in the bounce-back scheme, which decimated its core product. And I think through the resilience, the capability of an exceptional management team, they really navigated their way through a very, very tough 2 years and have come out the other side. And I think are a great example of showing not just resilience but a strong underlying core product, the ability to continue to grow great technology stack, the ability to price risk and acquire the right type of customers, and they've kind of really come through that from being languishing, I would say, in that low-growth scaling. They've moved into kind of the high growth there and then really scale very, very helpfully. So yes, businesses will come and go at any particular time, but hopefully, this gives you a sense of the direction of travel of some of the portfolio. So before I wrap up for questions, I wanted to give you a sense of what's happening in the market, and this should come as no surprise. Of course, we have this extraordinary anomaly of 2021, which always shows you quite how extraordinary the market was where we saw a huge amount of capital come into the market from a lot of areas that we haven't seen, whether it was sovereign wealth, whether it was hedge funds, whether it was crossover funds. There was a huge and unhealthy distortion of the market where there was too much capital invested in too many companies at too higher price. In particular, at the later stage, which is not necessarily where we focus, we really are towards the earlier stage of Series AA+, that's really our bread and butter, where we feel we can add the greatest leverage where we have the greatest impact as well. But at the same time, the whole market has really kind of felt the impact, but dramatically at that later stage where you can see those average funding rounds gone down dramatically. The early stage, the seed, the Series A has remained really robust, and we see continued competition in that space from a lot of well-regarded funds. I think for us, what really does stand us out is, one, our specialism, but 2, are increasing relevance in the market of backing businesses that are really breaking through that have navigated a really difficult period where we've delivered realizations where strategic investors, acquirers have taken a look at the underlying portfolio and seen real value. And I think increasingly, fintech founders and entrepreneurs and management teams looked to us as an investor that they would like to get to know and they would potentially like to have us on their cap table. They have a choice. Capital is not a commodity like it was back in '21 and '22 where there was a huge amount of overpaying. But I would say it still remains very, very competitive out there, and it's really important for us to continue to espouse our differentiation where we can continue to leverage our technology as well. We've built a lot of proprietary data information technology under the hood that really allows us to find what we think are those needles in a haystack. But why should you continue to believe in the sector? Why should you continue to be excited? So where are we today? Well, we talk a lot about we're at the end of the beginning, and these numbers really back it up. So where is fintech? Depending on where you cut the numbers, let's call it, sub-5% market share between now and the end of the decade, you're going to see that revenue pool grow to $1.5 trillion. You've got hugely attractive gross profit margins in this industry as well. So you've got $300 billion of profit that's going to see a shift to the industry. Of course, a lot of fintech does is about being more efficient, is about bringing down that gross margin, but at the same time, the ability to serve customers more profitably at a lower cost as well. So there is a huge pie to attack. And I think there is a real inflection point in the market and you are going to see, and I don't exaggerate here, hundreds of very valuable fintechs across Europe over the next few years. And it's our job as specialist investors to really try and get into a handful of those opportunities that are going to deliver those outsized returns over time. And when you break it down a little further to one of my favorite slides, and we always track this data every year. And I think there's a new report coming out in a couple of months, you can see the nature of market share by some of the biggest subsectors within financial services. That just really brings to life how much opportunity there is for the sector for disruptors and it's something which keeps me incredibly excited. It keeps us incredibly busy as a team. But there is a long way to go. And yes, we have come far over the past few years, but I think we're going to see a lot more progress over the coming decade. And I think there's a lot to keep very positive about as well. What does that mean for the incumbents? We spend a lot of time talking to many of them. And I think what is clear and unambiguous and unarguable is that we are seeing a buy-build partner strategy from almost all of the strategic players in the market. These are large incumbents investing collectively hundreds of billions of dollars a year in their own digital transformation. At the same time, they're becoming increasingly acquisitive, if you look at '23 and the first quarter of '24, 85% of all global M&A deals and Fintech were a strategic M&A. And I think that really highlights that. And you can see some of the examples here, the ones in blue are the Augmentum portfolio, Abrdn buying Interactive and of course, NatWest buying Cushon. And that's a trend that's going to continue to persist. They're going to continue to work with B2B fintechs and again, some of our portfolio companies, whether it's the likes of XYB working with HSBC or Baobab working with Zurich on the insurance side, or even in a very young emerging fintech working with Mastercard in their Accelerator program as well. And of course, from an investment point of view, we have the likes of JPMorgan as a co-investor and Wematch as well, and you see that a lot. So this is very much now what I would say is a maturing approach from the incumbents who looked at the fintech market with a sense of suspicion perhaps 5, 6, 7 years ago. And I think there is a much greater willingness of working, collaborating, how they do it, very much depends on the proposition. It depends on the strategic imperative of the company and the desire of the fintech themselves to take in that strategic capital. Do they want to have them on the equity cap table or do they just want to have them as a customer? And I think that's very much a case-by-case basis. So what about that pipeline? And we talked about it before, we're seeing a lot of opportunities. Our CRM system will be tracking probably around 5,500 fintechs across Europe. That pipeline has grown significantly. You can see that conversion rate of 0.1% is incredibly low. And you can see to the right, well, what have we actually been doing? We haven't been sitting on our hands. We're looking at a lot of things. We're meeting a lot of founders, a lot of management teams. We're building our own thesis from the bottom-up, but then really looking to the market. But at the same time, the bar is really high in this market, and we've got to make sure that not only do we feel that the right type of company, we've got to be comfortable with the team, we've got to be comfortable with the entry price as well and with the structure. And so it's not just about valuation, if we have found ourselves when we have said, "Look, we are keen to come in. But here are our terms, they're very plain vanilla industry standard. We do require a preference share." And the answer has been no. We want to have ordinary shares, and that's it, and we won't give you a board seat. And we say, "Look, we wish you luck, but that's not the way we work. We need to be able to have one downside protection, but 2, the ability to influence in a positive way. And you don't just take our money, but hopefully, you take some of the experience that we've been able to leverage over the last 25 years of entrepreneurs, operators and investors. And we really do want to make sure that companies are taking our capital with the right reasons in mind, and it's not just a commoditized approach." So I talked a little bit about what we've built in our origination engine, which is very much proprietary built-in -- built up over many years called ADA. This would give you a sense of what we've been going through in both our last 2 investments in Artificial, which is an insurtech that is really looking to help digitize, bring the reinsurance market at Lloyds very much into the 21st century through workflow management through automation. It is an area that we've been looking at for some time. Actually, it was a business we met several years ago. So it's a great example of a business where we've tracked. We've built a relationship that's been on our watch list. We've checked in on a relatively regular basis. But at the point in which we see an opportunity, either they're raising capital or we feel that the market is ready for a proposition. That's when we really need to come into action. We need to be able to get to the right people to get independent references, but we also need to be able to move quick. And when we're talking about move quickly, it is, you want to be able to get to a decision in a matter of weeks. It shouldn't take months as well. So when we have that conviction and it very much is about coming in, moving quickly, demonstrating your differentiation and ensuring you can craft turns that the companies are happy with and make sense for us as well. So where are we? Before I finish and open to questions on the fabled dry powder? Well, yes, to the left, you can see, unsurprisingly, venture capital funding has dropped. So these are new funds. So the run rate is significantly below where we were last year and the year before, and of course, the heady days of 2021. So that needs to be looked at in context with what is available. And again, investors have taken a more cautious approach. I wouldn't say sitting on their hands, but a lot have been looking inwardly at existing portfolio, have been spending time ensuring that they have sufficient runway capital. They've addressed some of the concerns or issues within their own portfolio before they've been as active as they have been in previous years in deploying new capital. So there still remains a lot of undeployed capital in the global venture space to be put to market over the next 2 to 3 years. So it wouldn't surprise me to continue to see the venture capital funding the new funds plateau over the next few years. But again, there is still that dry powder in the market, and we are seeing it being put to work for those high-quality assets, and we think that will very much continue. So I'm going to pause there and make sure we've got time for questions before I do, just 3 key takeaways. One, we are in a market that has had a very difficult backdrop from a macro point of view, from a valuation perspective, but really does continue to mature. And in many cases, you're seeing a number of breakthrough cases at real scale, not just in our portfolio, but across the industry. And I think we're going to continue to see that over the coming years where there will be that flight to quality. For us, as an investor, each year brings some more track record. Hopefully, you recognize that we're very much moving in the right direction. There's a lot more that we still need to prove. But fundamentally, we think much of the portfolio is really maturing well. We have demonstrated that we have some high-quality assets we've talked about that have strategic value even when the asset perhaps isn't doing what we hoped it would. There is that opportunity to sell the asset and go again and recycle. And the approach to valuation remains consistent, remains plausible and gives investors real cause for comfort that we're not pricing for hope for tomorrow. And for us, differentiation our brand, our brand needs to remain strong in a really competitive market where there are a lot of high-quality investors. We would like to think of ourselves in that same bucket, but we have to continue to demonstrate that we have an exceptional team and where we can get to opportunities often before others. That is really important and what we've been building over the last 5 to 6 years with our proprietary engineer, ADA, that really is giving us an edge alongside some exceptional talent in the team.

So I'm going to try now in the next few moments to answer some of the questions that are on my screen. I will start with -- from the top in order. Can you provide an insight into the criteria and strategy used to decide exit? And how these exits align with the overall investment strategy? That's a really good question. And I think what's really important to articulate is, as a venture investor, you aren't in control of these businesses. Private equity would often have control and can determine often the direction of travel when it comes to exit. We have to be aligned often with management with other investors, which is why when you're going into these businesses, you also need to choose your co-investors carefully. You need to know going in those investors already on the cap table. Are they sensible? Do you know them? Have you dealt with them before? If you don't, can you independently reference them to have that comfort? There is always a temptation when opportunities present themselves to look at them because it will give continued demonstration of track record for the fund. The challenge, of course is, if we don't fundamentally believe that it's the right moment and that we are shortchanging ourselves and ultimately, our shareholders, then that's when you have that conflict. We do not want to be exiting businesses purely to demonstrate the track record. We want to be exiting businesses because we believe they're maximizing the return opportunity to our shareholders as well. I can use the example of Interactive Investor where we had 3 or 4 opportunities on that journey to exit our position. And each time we continue to buy stock, we're actually buying secondary stock from existing shareholders that needed liquidity alongside 1 or 2 other shareholders that wanted to build their position. And even though we haven't yet delivered an exit to the market, we just felt that the business was on such a trajectory and have such strategic value that we really would be shortchanging our investors by taking money off the table at that time. It doesn't mean that you always get it right, but we are going to look at every exit opportunity, partial exit opportunity on its own merit. And that also means taking difficult decisions when something isn't working. Saying, look, it isn't working. We backed, this as a venture proposition. It might be a nice small business, but that's not what's going to move the needle. It's taking up management time. One of us is sitting on the board. We need to find an exit either for the whole business or for our stake as well. And often we need to kind of -- be able to kind of look objectively and take the pain when that happens. Next question from Mark. What led to the markdown of Grover in the latest financial year? And what is your view on its outlook? So we took -- I mean, there are ups and downs across the portfolio. As I explained earlier, there are the approach of one public market comparables underlying performance. I think if we look at a lot of our more established businesses, I think where Grover has done exceptionally well has been to build a strong brand in the DACH markets in Germany, in particular. It is growing that top line exceptionally quickly. But at the same time, the challenge to a lot of our businesses that are in that growth phase is, it can't be growth at all costs. Can you improve the unit economics? Can you get to profitability? Can you get to EBITDA positive? Can you be less cash consumptive? And I think fundamentally, where it's really focusing on at the current time, it's built a really strong established customer base in Germany and Austria. It's got an embedded position. I don't see anyone else coming in with a competing product at their scale, but I think they do have to focus on improving the unit economics. And I think that's been reflected in the outlook. So I think still a lot to be positive about. There's still a lot of growth opportunity. But over the next 12 months, I hope we're going to see continued improvement in the underlying unit economics. A question from Simon. Can you expand on the allocation of the cash reserves and the strategy for deployment? Yes. For us, it's always striking a right balance. How we think about our cash reserves is, one, we'll look at it on a 12-month basis, and then we'll look at it on a 6-month basis. What do we think the existing portfolio requires from a capital perspective over the coming 12 months? We can then push that out another 12 months. Of course, you can't always look into the future, but you do try and model that alongside how much capital do we want to put into new opportunities as well, and you're always striking that balance. So at GBP 45 million of cash reserves, clearly, a large amount of that will be looked to be put into new opportunities while ensuring that there is sufficient capital on the balance sheet to be able to defend our position where needed and also to support our portfolio for future growth as well. So the portfolio is well funded. Increasingly, we're seeing more of the portfolio profitable. So the cash requirements aren't as significant. I think the average cash runway is around 20 months of the top 10, alongside a number of profitable businesses as well. So it is a moving feast. I recognize that some might feel we're overweight on cash, but that's just a result of being prudent in the market and ensuring we are able to capitalize on an improving market as of when the opportunities present themselves. The Onfido exit has generated a modest return in venture terms for an asset you've held for a considerable time. Can you give some more context around the economics of this investment in exit? It's a tough question to answer. I'll give some kind of high-level numbers. I don't think it was a great outcome for us. When we went in, we had expected a better return. I think there are a number of reasons as to why. When we went into that investment, we're excited about the business. We came in almost mid round. So we bought a small position to position ourselves for a future round. As it turned out, that future round didn't materialize where we were able to get in. Valuation really kind of took off and they brought in a very large U.S. investor that came in absolutely in the height of COVID. So I think April '20 when the business was navigating an unprecedented time, I think some of the structure around the terms of that capital that came in, led us to what you would have seen, which on paper look like a big headline number, but it didn't necessarily deliver the return that the investors that had come in prior to that round should have expected. So I think it's a good example of -- if you are going to invest, you need to make sure that you have influence around the Board table that you can see what's going on under the hood. As I said, yes, it's delivered a return, albeit a modest one, but not a business where we could have the amount of influence and control that we would normally like. So hopefully, that gives you a bit of a sense, and you can read a little bit between the lines as to what happened then. A question from Ben. Can you talk about your investment in LoopFX, the first institutional investor in this company. Is that a normal position to be first? Or is there a particular reason or change in the strategy? I wouldn't say there's a change in strategy. Sometimes we are. Sometimes we aren't. There's been a fair bit of press in the last 24 hours. We've got a pretty fantastic set of angel investors, the likes of [ John Seabright ], Martin Gilbert. So it's a pretty blue chip set of investors. Ollie Jerome, who runs FX for Deutsche Bank. So a real deep domain expert and hugely credible in the financial services sector as well as the fintech sector. So I think if truth to be told, they didn't necessarily need institutional capital. There was a lot of support amongst the investor base. I think for us, the foreign exchange, the spot foreign exchange market, from an institutional point of view, has been an area that we've been looking at for some time. We have a business in Switzerland called Intellis, which has been building a really successful AI-led, neural network-led trading platform. And so we've seen firsthand some of the challenges, some of the inefficiencies in the market. I think, of course, the challenge in the capital market space is we recognize that there are a number of shortcomings, there are a number of problems Often, the question is why hasn't it been solved already? Why hasn't somebody built and succeeded with an institutional dark pool to allow the banks and asset managers to trade their large blocks in effect in private? And often, there aren't good reasons as to why it hasn't worked, but you do need to make sure that you onboard the key customers, you do need to make sure that you've tied up the distribution. And I think what we saw with Loop was a management team, hugely experienced in the market had spent the last 2 years really building and embedding those relationships, tying up what we felt was the critical strategic distribution partnership with State Street's FX Connect. And I think it is one of those where we felt if we didn't come in now, then the boat would have been missed. We think the opportunity was now. We stepped in. I would say probably a little bit earlier than we would normally invest, but at the same time, for me, and I'll come on the board of that business. I just felt it was an exceptional team, an exceptional founding CEO, had huge ambition and really have the potential to build a really big business and deliver a really compelling return. So we'll see. It's certainly one of those that is going to be in that early bucket. And you think -- clearly, we're going to have to give the team the best part of 18 to 24 months to really kind of deploy that strategy. But hopefully, we'll be talking about it in a little bit more detail going forward. Question from Jonathan. When we saw the early slide showing the list of fintechs, it looked like their share prices had improved between March '23 and '24, yet the slide showing Augmentum multiple of revenue and the market. This might be a tricky one to answer, but I'll try it. And the market shows the market multiples continue to decline between March '22 and '24. Why is there a disconnect? So on that theme, I was trying to square how your top companies are growing revenue at 60%, 70%, 80%. Your businesses are valued on revenue, and yet overall NAV only growth at 5%. So a lot to unpack in there. You're talking -- you're actually looking at 2 different indexes. So you have the INDXX, which you saw early on, which is a much bigger pool of companies. And then what we've used for the forward revenue multiple is the high-growth index. So company is growing north of 40% because we want to try and show like-for-like, and that's why you're seeing kind of an inconsistency between the 2. The question on NAV growth. I mean, ultimately for us, yes, top line growth is an important feature. At the same time, I can't speak for auditors. They'll look at a number of benchmarks. They will look at kind of listed market comparables. They'll look at the underlying performance of the company. They'll look at if there was a price of a recent transaction. At times, even if the business is growing at 70%, we might hold the valuation steady. I can give you an example of Iwoca where we've held that steady despite the fact that the business has seen dramatic improvement in trading over the last couple of years. I think the view was it has turned around in a pretty compelling manner. Let's see how the next 12 months trade to see if we take another and a closer look. So just because top line does grow, it doesn't mean you see that reflected. You will have seen multiple compression in our approach over the last 2 years. So if you looked at that average multiple, that has come down and as such, that's kind of discounted. If we maintained the average multiple off the top of my head, probably [ 5.5 ], then you would see a very different NAV. But again, we're continually looking at that. And of course, ultimately, it's down to the auditors to opine. So hopefully, that answered your question. I think that was the last one. We have taken us just before 3 o'clock. So thank you for all of you who have been so patient. Thanks as always for the great questions. For those of you that want to download the presentation, then you can go to augmentum.vc. And we, as a team, are always interested to hear from you, so make sure you have also signed up to our newsletters, which we put out on a quarterly basis as well from the marketing team. So please do sign up for that if you're not already signed up.

Perfect. Tim, thank you very much for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This then take a few moments to complete, [ I'm sure ] it will be greatly valued by the company. On behalf of the management team of Augmentum Fintech plc, we'd like to thank you for attending today's presentation and good afternoon to you all.