Molten Ventures Plc (GROW) Earnings Call Transcript & Summary

Good morning, and welcome to the Molten Ventures Plc Full Year '23 Interim Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. Have the company review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand it over to Martin Davis, CEO, and Ben Wilkerson, CFO. Good morning.

Good morning, Paul, and good morning, everybody. We really appreciate your time I think this is a really important opportunity for us to engage with our retail shareholders. We think it's very important to be able to communicate with all of our shareholders what's going on in the business, and we see this vehicle as an opportunity for us to get the message out to all the groups. So we really do welcome it, and we very much appreciate your feedback as to what you find valuable and whether you'd like us to communicate in this form more frequently. We are just on voice today but for those of you who want to know what we look like, it's myself and Ben Wilkerson and myself CEO, and Ben the CFO. And we will be giving about a 30-minute presentation, give or take, and then we will open up to questions. We're very happy to take whatever questions you may have. So these are the -- obviously the interim results halfway through our financial year. And I think the key message here is that the numbers that we announced yesterday very much follow the trading statement issued 6 weeks ago. As far as the performance ever since slightly better as far as the numbers go, but we do try to get out the trading numbers as quickly as possible at the end of the period to give investors and shareholders an indication where we are. And then we follow it up with more detailed numbers, the final numbers once they've been audited and also an opportunity for us to go into a little bit more detail about what we saw in the first half. And so as far as the numbers go, Ben will talk in more detail about that in a few minutes. But as far as numbers go, the gross fair value reduction of 17% remains, as we said, before. It's a net downward movement of 12%, taking into consideration currency headwinds that we explained in our trading statements. The valuations really have come down very much as a result of us calibrating to public market peers. Public markets have been down over the last period. And we have -- particularly with our later stage companies, we felt that it's appropriate for us to mark ours down, not quite in line with public market peers, but to reflect the downward movement of the public markets. Despite removing 35% from the EV of the core, the fair value reductions for us are obviously much smaller than that, and that is really because of the downside protection that we have in our preferred share structure. And Ben will talk a little bit about that in a few minutes, but I think it is an important part of our model, and it's important to understand that despite the risk inherent in these early-stage companies that we invest in, the reality is we do have the opportunity to go in at a preference, high up on the preference stack, which does give us downside protection. The portfolio remains well funded, 75% of the core with 18 months plus of cash runway. We're working very closely with the portfolio, with portfolio companies to extend that as far as possible because we do understand the importance of preserving cash in this current environment. Revenues in the core though, and this is, I think, one of the things that we do get a great deal of comfort from continue to grow at an impressive rate and across the core average of '22 were nearly at the end of that year, they are growing in excess of 60%, and they are forecasting to grow in excess of 70% next year. We're also continuing to build third-party assets under management, which is an important part of our strategy, particularly with EIS and the VCT strategies, which continue to grow very well. As far as our liquidity and available cash goes, we have a reasonably strong cash position of GBP 28 million. We have -- as you know, we completed the debt facility earlier on in the first half, and we have GBP 60 million of that undrawn. But we also have over GBP 20 million of lifted stock -- listed stock at market on the 30th of September. Market price has been a small improvement on those across the board. As far as deployment goes, we have deployed GBP 112 million in the first half which is all of our investments, and we're still very much targeting for the GBP 150 million at the end of the year. So we do expect a slowdown, and we've seen a slowdown in the second half already, and we do expect that to continue. But the resilience of our numbers today that are smaller than their public market comparators is really because of the resilience that we have in our model. We have a very consistent way of valuing. We haven't changed that. We take a conservative approach to valuations. We have a very broad set of companies, over 70 companies across a number of sectors and at different stages of development. And it's that portfolio approach enables us to manage the downside, but also the risk profile. And finally, and very importantly, and we'll talk about this later, I suspect, is we continue to build our ESG -- continue our ESG journey, and that is both about us as a business, but also about us helping our portfolio companies to run a more sustainable and high levels of government model than possibly you would expect from a start-up. I'm not going to spend much time on this slide, but I'm conscious that not everybody will be as familiar as others with our model. I think really, I'd probably just say a couple of things. The first thing on the top right-hand side is that we do have the ability to invest across different stages. We don't do seed. We do that through our Fund of Funds program. And we don't do pre-IPO, that's really where we can add value by helping our shareholders to get access to pre-IPO markets, where we really operate is in the Series A, B and C. And as you can see in the bottom right-hand chart, this is where there is substantial growth over a relatively short period of time. And this is where originally drops free, now Molten Ventures has been investing for over 20 years. And we understand this space very well. It has very specific characteristics. There are very specific criteria that you need to see in order to win. And that's where we've operated. And I think the last point I'd say on this is that within that growth stage, when companies are growing that rapidly when they have the gross margins that they expect -- that we expect to see our average is over 65% gross margin. The companies very rarely go to 0. They do because that's life. But the hit rate and the success rate at that stage is much, much better, particularly considering the growth potential within that structure. I think now I will hand over to Ben to talk through the results and maybe talk a little bit about the attribution about where we've got our results and where the numbers are.

Thank you, Martin. Hello, everybody. I'll talk us through the headlines of the results first, and then we'll go through some slides which give a little bit more detail on the breakdown of how those numbers came together. So just starting with the highlights of the period to the end of 30th of September. We have a gross portfolio value. The gross portfolio is the main measure that we use, and it demonstrates the value of all of the assets we have in the portfolio. We take off from that number, carry value and deferred taxes that might get there and then it's a net number that goes on to the balance sheet. So you see a difference there in terms of the gross portfolio number and then what is reflected on the balance sheet is the net investments. And it's the net investments that make up the majority of our net assets and to get from those net investment number to the net asset number you have on principally the cash and the debt. Those are the main items on the media and on the balance sheet. So for this period, we've had a movement down, which we talked about in the gross portfolio. We have a due standard end user to companies, principally reflecting those movements that Martin highlighted in the public markets. The assets have moved down fair value of 17%. The opening gross portfolio of GBP 1.5 billion and the 17% was offset with currency benefits and one of our companies are denominated in dollars or euros. And therefore, the weakness of sterling in this period has been a benefit to our portfolio value and that's offset by approximately 5%. And that leads us to this 12% gross portfolio value decrease that you see on the highlights here, as well as the movements in the value of the portfolio, we have the additions of cash being invested. We have GBP 112 million added to the portfolio value in the period from the investments that we've made. And then in a similar way where we've realized investments, we have GBP 13 million of cash returning back to the balance sheet, which comes out of the investments and then sits into the cash flow. So those are the key movements that we've had from the portfolio perspective that nets down to GBP 1.28 billion of net assets. And if that number divided by our number of issued shares, which is just under GBP 153 million, that gives us then a NAV per share of 8x37. And it's that now per share, of course, is therefore reflected in the market and what we reflect our current share price against, which is currently trading at a discount. But that's the headline number that people will use and that will be the reference point for roughly the next 6 months until we put out the next iteration of our valuations for the end of March, which captures our full year position. The other highlights that we mentioned here are in relation to our cost base, we always target to have less than 1% of operating costs. On a net basis, this is income less expenses. And for this period, we'll show some charts on the trends that were about 0.1%, so well below that target. And then finally, we've talked about the expanded debt facility. This was something we put in place in the 6-month period, a new facility of GBP 150 million. has broken down between GBP 90 million of term debt, which we've now drawn and GBP 60 million of our revolving credit facility. And that means that we can repay that debt back and then redraw the debt games that stays available to us. And as it stands at this point in time, we haven't gone that revolving credit facility. So that GBP 60 million is available to us as additional liquidity on top of the GBP 28 million of cash that we have. So just moving along to give you a little bit more detail. It's quite often easier to look at this graphically. The GBP 1.5 billion on the left-hand side is the opening portfolio, as I highlighted, you can then see the addition of cash and the reduction of realized cash and then the net of those fair value movements that I talked about, the -- so the downward movement of GBP 262 million on the fair value being offset by the currency gain of GBP 82 million, which gives us a net of GBP 180 million. And that leaves us with our gross portfolio value of GBP 1.45 billion. And then just showing on the right-hand side, that progression over time. This really demonstrates how we've grown the asset base. Obviously, that's reduced in this period, where we've had reductions in the value of the portfolio, but you can see the trend over time and how that's been reflected in the NAV per share. The next slide is giving a little bit more additional color and detail. The valuation is a key part of what we do, and we're trying to ensure that you as investors and potential investors can see how these valuations are pulled together. Again, starting on the left-hand side of the chart, you have the March position, the addition of the invested cash and the reduction of the realized cash coming out. And then the next bar really break down at GBP 180 million of net fair value movements between the component parts of how we value those businesses. The first is the foreign exchange, which I've already highlighted, that's movement in currency in the period principally dollars and euros against sterling, which we -- sterling is obviously the currency that we're reporting. And then you move into the different components of valuation from the technique of valuing these companies, we follow the IPEV Guidelines, vis-a-vis International Private Equity Venture Capital Guidelines. The best source of evidence for valuing the private companies where they raised capital with third-party investment coming into that business, that will then form the strongest point of evidence for the value of that company. But crucially, what you also have to do is take that last brand value and then calibrate the movements in the company from their own performance, but also the movements that have been reflected in the market since the round. And you can see here, GBP 101 million of movements down is principally where we've reflected last round values and then taking the market movements for each of those technology subsectors since. There is a headline view that NASDAQ moved down roughly 25% in the period between March and the end of September, but we've had some technology subsectors, which have moved greater than that and semiconductors is a good example of that, where that's moved in fact, in about 45% in that period. And then moving along for the different valuation techniques that we've applied. We've got loss on listed assets, that's the stock that we have that's traded and has a daily traded price. We mark those assets like Trustpilot and UiPath and Cazoo to the -- that the balance sheet date that will be reflected with prices as at the 30th of September. And then looking at the net loss fair value in assets valued at NAV, this is where we have LP positions that we've invested in a limited partnership and that's essentially somebody else's fund, a third-party manager and that principally reflects the Seed Fund of Funds, where we don't invest directly in those companies, we go through managers that we know across Europe when we've built up a program across Europe, with 67 managers now with about GBP 72 million of own capital on a program with GBP 130 million of committed capital. And what we're reflecting here is the movements in value in the period. And this also will capture the Earlybird assets where we're an LP in German partnership with Earlybird across 7 of their funds. And that gives us access to the German-speaking parts of the market in the Series A slightly earlier stage late-season Series A opportunities. And then just finally, to finish on this slide, the last valuation technique that we have is looking at comparable peers. Comparable peers is purely taking the revenue of the underlying portfolio companies and reflecting against some previously agreed last year of comparable companies in the public markets. and therefore, reflecting again a reduction in multiples that we've seen in this period. And so that gives you the summary of the key movements that bring us back to that GBP 1.45 billion on the gross portfolio value.

Thanks, Ben. And just before I go to the poll, I can see the questions coming in. I might just deal with one or 2 of them as they're relevant. First one is this a question on independent valuations. And our valuations are -- and we'll follow, as Ben said, he's explained how we do them. They are subject to audit. In fact, we have 2 independent checks on them first by PwC, which is entirely independent. And then the second is our independent Plc Board. So we do have 2 independent reviews of our valuations, ensuring that we're not just market here and homeworking that we are doing exactly as been explained in the valuation process. We have considered whether or not we should look for third-party complete separate valuations for a small number of our companies if the market feels that would give greater comfort. The reality is we know these companies better than anybody, third-party. And so therefore, we're not 100% sure we'll get anything a better result. But we do understand that there is a -- that some people think that's better. So it is something we're considering. It's not something we do at the moment. As far as deployment goes, our deployment has remained relatively consistent and exactly as we said, I think at the -- as we went into this year, it has slowed significantly. We are expecting to deploy GBP 150 million this year. A lot of that -- so we are GBP 112 million so far and a few more million between the 31st of September and now. But we are still targeting GBP 150 million. We think we're fairly confident to hit that number. The mix is not that different from historically, it certainly as far as the percentage of primary versus follow-on, which is relatively standard and consistent. We have probably been deploying, as you can see bottom left, a little bit more into the slightly earlier stages as the markets got tougher and later-stage assets have been probably hit harder by the market comps. And so we've seen better deals slightly earlier. And so I think we've seen an increase in that in the first half, and we'll see how that develops in the second half. But when you look at overall capital deploying, this is at the bottom right hand and the splits by the various, whether it's primary follow-on or secondary with the other categories. If you were to take out last year, which I think we all accept was an exceptional year, then by the year-end, we do think that we will be showing a relatively consistent trajectory upwards, consistent and relatively smooth upward movement as the business has scaled. And as I said, I think if you take out last year, which was an exceptional year, then I think we will probably see that, that onward trajectory is pretty much consistent as you'd expect with the growing shape of the business. I think the only other point on deployment that's worth highlighting is that the percentage of Fund of Funds, our Seed Fund of Funds program is higher than it has in the past. That is because that program has continued to grow, whereas our overall deployment has slowed right down. And so therefore, the percentage is larger. But some of you may remember that we have decided that we would syndicate that program and we are very close to getting our first cornerstone investor into that program. And I think that will help us to manage our flows, but also to be able to grow that program, which is something that's very important for us to be able to spot these early companies at an early stage. As far as our investments go, a draft in April have made really a bit of a hangover from a relatively busy end of last half of year. It can take anything from 3 to 4 months to close deals once we've signed term sheets. And so that's what we might expect. We've obviously slowed right down through the year, and that is reflected. There was also a question about the various merits of investing in the PLC versus the VCT. and I'm not going to give anyone financial advice, but obviously, they're very different as far as the tax treatment is the first thing. But I think the other thing is that when you invest in the PLC, you get the whole access to all of our investments. whereas when you invest in the VCT, there are only VCT qualifying deals, which for a start, will always be in U.K. and secondly, much earlier or generally earlier stages because of the rules. So I think on investing in the PLC, you get the full access to all of our companies are likely to exit earlier probably than the EIS and VCTs just because they're probably slightly bigger when we invest in. And so I think that's one of the primary differences certainly as far as the proposition, investing proposition. But we do continue to invest in EIS and VCT assets. And as I said, we're expecting deployment to be still relatively flat over the remainder of this quarter. As far as income and cost progression go, those of you who've been on these calls before will be familiar that my view is though that we're very keen to build third-party income and to constrain our own costs, our overheads, so that we can get to a position where our income exceeds our overheads. And that's a position that we hope to get into. Ben has explained that the traditional measure of operating cost net of fees as a percentage of NAV, which is the gray line is exceptionally low to this sector. And we see that continuing to get smaller. But certainly, by the year-end on the right-hand column, I would hope that, that blue line and pink line are much closer together as we continue to increase fees and demonstrate cost restraint in our overheads, which I think is very important. Next, I think it's important to talk about returns and also, I think, then maybe we'll spend some time talking about the resilience and what we mean by the resiliency portfolio through the preference structure.

Thank you. Next slide that we look to is the track record since IPO. We've shown this in different formats over some previous reporting periods. But here, we try to consolidate it into a few key messages. I think what this demonstrates is a chart and in terms of the low dose and the split of returns is very much a traditional venture capital portfolio returns where the returns are skewed to the winners. And you can see on the right-hand side where you have 3x plus multiples. That's where the majority of our returns proceeds will come from, and it's about 45% of our invested capital. So that demonstrates that those will be the companies that as they scale and grow, we should be holding on to those businesses to the extent that we can and growing our states as they scale so that we can maximize our returns. If you look at the other end of the spectrum where we have had some zeros in the portfolio, that's been about 8% of our invested capital. And also looking at the next bar, less than one has been about just under 20% of our invested capital with some returns proceeds, but obviously less than the originally invested amount. This is a risk business, and this is, therefore, important from a model perspective, to reflect how those risks are demonstrated. But it's an asset class and it's run right, and it demonstrates returns above what have been returned in the public markets through our portfolio management approach. And therefore, because it's a risk business and you can lose money on certain assets, you need to have a broad portfolio of investments. And there's other aspects, I'll talk about preference shares in a moment that is part of the model of how we demonstrate these returns as well. And I'd just finally say that in that 1 just 3x bar, that's where a lot of the management time we spent realizing companies which have an inherent value and have inherent underlying technology that won't necessarily go on to be the big returners and therefore, we will work with those companies to find solutions and exits and make sure that we're returning capital back to the balance sheet. So moving on to resilience. It's important, obviously, in the downside. And so we're giving more focus on this as the market has shifted. I've touched on the top left-hand side, the different methods of value in the companies. These bars really show you the breakdown of the gross portfolio value for each of the component parts from the valuation technique that's been adopted. Just looking at a few of these and picking out some underlying numbers for the investments we've valued using revenue market multiples, those bars on the right and GBP 282 million for this period reduced multiples in a range of just under 1x up to 11x. And the weighted average of those multiples is important, just under a 7x multiple. And that's a broad range of businesses in different technology subsectors, and that's being reflected by the multiples that have been applied. Looking at the next bar, which is the calibrated last round of investment, this is the largest for the period in terms of value. And this is where we've taken the last round investments and applied the movements that we've seen in the market that with applied discounts ranging from 4% to 82% with a weighted average discount of 27% being applied. And crucially, here, looking at the time horizons of the rounds just under 80% of the rounds were done completed in the last 12 months. So normally, those rounds would be relevant market valuations for a longer period of time. But given the volatility in the markets, we've moved them away from those round values very quickly. And just on the right-hand side, we're demonstrating that if we had taken those last round values, there'd be about GBP 270 million of uplift in value just on that those 80% of rounds that were completed in the last 12 months. And so we really wanted to demonstrate that level of discount that's been applied into these companies already to reflect where the public markets are trading. And then finally, on the quoted valuations, I've mentioned already that we have those as at the share prices at 30th of September, there has been some small uplift since that period end, but the daily traded price is, of course, the most relevant for those 3 companies. So just moving to the next slide, which is our continuation of this resilience point. One of the key features I mentioned about triaging and managing risk in venture capital is the portfolio management approach. Another in our model is the stage of investment. We will invest a small amount of money at the early stage. And then as we see companies develop and progress and derisk their model, we'll add more capital to grow our equity stake to reach those proof points. Thinking back to that track record side, we're obviously trying to skew our capital towards the winners in the portfolio. But another key feature of the model is how we invest. And by buying share in a company, we will often go into preference shares. In fact, the majority of our business is 90% plus are benefiting from a preference share and preference shares are legal rights within the shareholder agreements. And what that essentially provides us with this downside protection. It doesn't limit any upside for us because we can choose to be in the ordinary shares in the event of scaling and growth. But in the downside, we will retain our preference share right. And what that means in practice is just to use a worked example is if we invest, let's say, GBP 50 million into a business that's valued at GBP 200 million pre-money valuation. The value of that business could fall all the way down to GBP 50 million before we start to lose value on our original investment. And that's because the preference share behaves very much like a debt instrument, where we will be the first money out of that business in the event of realization. And it's, therefore, because of this as we flex the enterprise values of those businesses in the valuation process, we have downside protection such that the enterprise values we've moved on average, 35% in the core in this period but the movements we've had in the fair value downward trajectory is only 17%, and that's really reflecting where those preference stacks coming to value and coming to use. The other aspects of resilience that we'll just highlight is liquidity in the portfolio itself. The companies have raised sufficient capital over the last 12 to 18 months, and that's given them enough runway such that over 75% of the core portfolio have 12 months plus of cash runway, and that's reflecting their current models and current expansion plans. And a key part of valuation is reflecting the commercial traction in those businesses, and that's being reflected here as a summary by the revenue growth. You can see Martin highlighted already greater than 60% growth in calendar year '22 and expected or projected growth of greater than 70% for the following year. And just on that top right chart, you can see how that breaks down in terms of revenue growth by cohort across the core portfolio. This final slide on the portfolio is demonstrating where the valuation movements have fallen by individual company. I won't go through all of them, but we've obviously gone through how it comes together as a summary. The key ones probably to pull out what we think like Graphcore where the peer group, the semiconductors moved substantially in the period over 40%, and we therefore reflected that in our downward valuation of graphical in our portfolio. And in a similar way, we've seen movements with some of the neo banks, and we've reflected that into revenues valuation in the period. Those would have been the largest movements by value that we've seen. But we've also seen downward movements in companies like ledger general comps and compensate list, which is a fashion marketplace, direct-to-consumer, which has also suffered from a comparable peer perspective. And the one notable uplift probably to mention the period is Ivan, which have raised capital in the April, May period, a valuation upgrade, a significant uplift. We've taken some of that uplift but still retain some reduction relative to that round, reflecting movements in the market since the round occurred.

Thanks, Ben. And so I'll talk a little bit about the market. I'm not going to spend much time on this because in many respects, other than the tightness of public markets and therefore, the restriction of capital in certain areas, the actual VC market in the tech market itself continues to grow at an impressive pace. The top and annual growth rates are still very impressive. We think those will continue. When you look at the number of deals and the size of deals, it's still a significant increase year-on-year. And as I said, I'll come back to what I said earlier on with our deployment, if you take out a slightly exceptional year last year, then I think what it shows is the trajectory for European VC is still consistently upwards and an interesting place to invest. It is still only 40% -- less than 40% size of the U.S. market. It's growing faster. The returns are better. And so therefore, European VC is still a very, very interesting space. And we're still seeing a lot of activity, and we are still very confident that despite the -- some of the macroeconomic and some of the geopolitical issues, that have affected the economies, the opportunity within European VC, we still think is both considerable and exciting. As far as the tech businesses, and I know that there are a different -- a number of different ways you can view tech. People look at the big tech plans, and they obviously are in a different space, and then they take a look at innovation generally and certainly at the early stages, there is a lot more pressure. But where we're operating, the companies that we're investing in continue to make the changes that people need and to apply technology, but principally to enterprises, but also to how we live and how we work and how we build products and services, and we don't see that changing. But the interesting thing is if you look at the last 2 downturns, whether that's DotCom Bubble burst or the global financial crisis, tech and innovation has created a large substantial long-term winners. And we see no reason to believe that this won't be the case this time around. We do think that there'll be some fragmentation from some of the larger players that will throw out a lot of youngsters and a lot of people who potentially are very entrepreneurial, who will then get funded for the best businesses and then we'll grow those businesses. Quite often, it takes a very sharp shot and a very tough environment for the best businesses to really flourish. And we believe that there's every likelihood that when we come out of this coded directed downturn, that winners will be identified, and winners will be created. And clearly, our model is to make sure that we continue to stay in the market and that we continue to be able to identify those potential winners. So as far as outlook goes, for the second half of the year, we don't see any dramatic change to the level of uncertainty, macroeconomic factors, the geopolitical tensions that we're seeing across Europe, we don't think those are going to change significantly before our year-end to 31st of March. However, we would hope by the back of end of next calendar year, that we do start to see some improvement in the -- certainly the stability of the environment. We do believe that we will remain on track for GBP 150 million of deployment. And that really reflects where we are and we are preserving capital, both in our own overheads but also in how we deploy capital and we do think that, that we're continuing to look for realizations, and we do think that there will be an uplift in realizations in the second half from the first half. We don't assume potentially that there'll be many IPOs that certainly won't be before 31st of March, but we are hoping the IPO market will come back next year, calendar year at some stage. But certainly, the M&A market should come back next year. And 70% of our exits historically have been through trade sales, so we do think there will be opportunities for us to look for realizations. We're going to be continuing to focus very closely with the portfolio, help them to extend their cash runway, but also make sure they don't inhibit their ability to grow because keeping those growth rates up is absolutely critical to our model. We'll continue to build third-party assets and income. And I think most importantly, we're still in the market, we're still out there looking for the best companies to invest. We are being slightly more cautious, we are being slightly more judicious about targets. We are looking at the route to profitability for these companies, but they are already stage companies, and I think we have to accept that as Ben said earlier on, there is risk in this business. But our job is to make sure that we use our capital in the most risk-adjusted approach that we can. It is a portfolio play. It is across the whole portfolio that we think we can add value and deliver returns. And so I think it is important for all of our investors to understand that we may have 1 or 2 companies that don't do well, but as long as the majority of our companies are well run, they are good cash, they're showing traction in the critical proof points for the growth of the business, then they will turn out to be good companies, and we will be able to deliver good returns. So we're very confident that high-growth tech companies will continue to flourish in the current environment, what these tech companies are doing, the solutions they're providing predominantly to enterprises around reducing costs, reducing risk, improving ability to deliver and develop products. All of those solutions are as relevant now as it ever been. And the technological advantages we've seen over the last 5 years continue to move very rapidly. And so therefore, we're very excited about the prospect of tech and about European tech. And we're also very excited about the prospect of the portfolio despite operating in a very difficult environment. So those are the -- that was the presentation. I know we've got some questions. I probably -- should I hand back to you, Paul, or should I go straight into Q&A?

[Operator Instructions] I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q&A can be accessed via our investor dashboard on the investor company platform. Martin, as you say, we have received a number of questions throughout today's presentation. If I could ask to just a click on that Q&A tab, more appropriate to do so if you could just read out the question and give your response and I'll pick up from you at the end.

Okay. So the first question is what exactly is a structure of companies and they'll be in the various funds? How is it structured to participate in the returns from the fund? So very simply, we're a PLC, we're a balance sheet we invest our own money. We are only third-party money. We invest at the moment in scale of the EIS and VCT, but we are looking to build new funds where there will be a traditional GPLP relationship and that is, for example, the Fund of Funds that we're syndicating that will be that GPLP type relationship. So predominantly, it's the PLC, it's the balance sheet money that we are investing in and the only third-party money that we're investing in any scale at the moment is we are EIS/VCT. I do think that will change as we start to launch new funds and building tens of sources of income. I think the next question is quite juicy, how to do valuations for new deals that you're working on prepared with those 12 to 18 months ago? And while I think there are truly a number of questions. I think the first one is how to do valuations? Well, the valuations are smaller certainly than 12 months ago. I think some of the founders have got the memo about the world's changed. Some of them haven't. So we are still seeing some very hot companies with very high valuations. And obviously, we're avoiding those. But the reality is that the valuations are much more realistic now than they were 12 to 18 months ago. We talked about the cadence. Funny enough, it's partly because of lower inflows from exits but also partly because we're just being more cautious in this environment. In an environment where it's hard to know what the cost of capital is going to be 2 to 3 years down the line, you've got to be very careful on your valuations. Your in price is very important. So part of it is about not bad exits dropping, but I would say it's more about us just being much more cautious about where we invest in. And I don't think we're being frustrated that we're seeing good deals for the lack of funds. We -- every week, we go through with our whole investment team, all of the European deals every week that have been done. We identify whether we've seen them and whether we've missed them. And there are very few that we look at and say, really wish we've got into that, and it isn't because of lack of funds.

The other things we're adding is that the current market that we see there is a cautiousness that's supplied across the whole of the VC market at the moment. And so you'll see Tier 1 companies getting funded and a lot of capital going to those, but a lot more cautious approach to new deals across the sector, but also from a valuation perspective that you will find, new deals will be a function of how much capital is raised, and therefore, part of that caution it is reflecting the cost of capital and people are investing less and companies are raising less because they've been a lot more capital efficient.

Citizen report, do you want the [indiscernible]?

I believe the next citizen report should be out in the coming weeks, and they're just doing a refresh on the back of the interim results.

I think we've dealt with the difference between investing in the shares between PLC and VCT. Loan facility.

Yes. So I'll touch on the loan facility.

Sorry, I should read the question. Loan facility seems to contain a covenant regarding gross portfolio value and reference is creditors' ability to do quarterly independent portfolio valuations. If there is still a degree of overconfidence in the valuation [indiscernible] 100x revenue, does this not create a vulnerability. Is the covenant based on the creditors' valuation? Or is it dependent on the results delivered by the company?

Okay. So a few things within that. As an overall point on the loan, we had a loan facility in place that was GBP 65 million revolving credit facility. We bought that in initially when the balance sheet was around GBP 500 million. So we've always tried to keep the loan facility actually around 10% loan-to-value. The new GBP 150 million facilities, just extending the existing arrangements from a size perspective. We've brought JPMorgan as the lead lender in this facility but that's still very much keeping it at 10% of loan to value. And therefore, the value of the portfolio is indicative of where the loan has been set and where we can raise. In terms of independent valuations, the lenders do have a right to get an independent valuation every quarter. We had one at the outset of the long facility. That was a feature of the previous facility as well. And that's something we've worked with for the last few years. And we haven't found any major discrepancies between the independent valuations and Arrow, but that's a process that once we've submitted our valuations as we have to now, then the lenders take our valuations at the next mark on the portfolio. It's only really where this significant potential discrepancy that will ask for that independent valuation. But as I say, it's something we've been through many times before, and it's seen as an important test for us in terms of another reference point to where we value the companies. And quite frankly, we welcome that because it's a broad market, and it's helpful to see different points in input.

Yes. Thanks. So again, important -- really the sort of important to take away from that for those that are -- the previous question as well about independent valuations. We enter a fully independent intent independent valuation in March and then another one at the end of the loan facility process. So we have had 2 this year, fully independent valuations in relation to getting the debt facility set up. The next question is then -- what percentage of the portfolio is valued due to last funding round. I think we've covered that.

I think we've covered that. There's a sort of GBP 904 million. I think it was last round, but that's last round calibrated to the market. So it's not taking the last around price. It's actually moving that and taking those discounts that we've applied with an average of 27%.

So what -- next question is, what's the main differences between the business model of Molten Ventures and IP group? Do you have IP Group as a competitor? I don't really think we see them as a direct competitor. They invest in a slightly different way, obviously, from the outputs predominantly from universities. And obviously, they have significant third-party assets. But we don't really see them in our deals.

No, it tends to be that the university has been up. So they go much earlier we will. So we're coming to deals later. We've had very few cross investments, we've had some. And they will often go for sort of more hardware-focused or health care focused than we will. So ours -- our portfolio is very much focused on technology, later-stage technology enable goes. And we don't tend to see them in deals as a competitor.

So the next question is around headcount reductions. Can you please comment on the extent of cost optimization measures, head count reduction across your core portfolio? I think the thing to bear in mind is the core portfolio tends to be later-stage companies. They tend to be larger companies, and therefore, they've gone through a number of years of growth, and there's always packed in companies that grow very rapidly over a period of time. And so I think pretty much all of our core companies have taken some headcount measures. They've all taken cost measures I can't -- don't think we can stay consistently, there isn't really any consistency because there's such a variety. But generally, with the larger companies, where they've got large cost bases, they have been taking out costs, as you would expect, because if they're not making profit, then if they don't take out cost, then they just going to have to come back to market quicker to rate. So -- but it has been significant, and we've been working very closely. Most of the core companies, we don't have a great deal of influence. They tend to be a bit away from us. When Ben showed the -- talk about the returns, the mid-range companies. They're the ones we're talking to most and that's where we had the most direct impact, and we are helping them to drive cost optimization where they need to. Proportions. The next question is proportion of gross portfolio value is made up of the par value of your preference shareholdings, I think, Ben...

I think we have a bullet on one of the slides, which points to about 90% of our companies having the preference share stacks in the structure and about 45% of those have been utilized in this valuation period.

Next question, if you feel so confident about the underlying value of the portfolio, what would make you consider some kind of buyback. I think a realization of GBP 150 million would probably most certainly lead us to do a buyback. Look, we're very confident in the value of the portfolio. We believe there is a value gap. We would definitely buy back if we had excess cash. We are -- we don't raise debt to buy your own stock, clearly. And so right now, it's not appropriate for us but we would definitely do a buyback at this price. Indeed, we would have loved to 2 or 3 weeks ago. And we still would at this price, but it is about capital and liquidity. We need to keep enough liquidity to make sure that we can support the portfolio and preserve the value in the portfolio. And so at this stage, where we are right now, sadly, it is not an option. But the next question, can you buy your own shares? Absolutely, we can. And we would and indeed, Ben and myself, certainly personally have been and I think we, as I said, that's a matter of capital for the business. How do you get access to the Fund of Funds offering? I think this might be had as an individual access to Fund of Funds offering.

I think you may know who asked the question and they can contact us directly if there's something there, but it's an institutional product. We're looking to syndicate that out to institutions for large checks, and so there will be sort of a minimum check size in the sort of GBP 3 million to GBP 5 million range. But yes, it's something that is available but it's probably not appropriate for most of the retail investors on this call, I imagine. But if people feel that's different then please contact us.

The next question, when you talk about portfolio companies like growth [indiscernible] who's output extremely specialized and complex, how do you evaluate their approaches and chances of success as non-experts? Really good question. We've got a mix of skills and expertise in our portfolio group. We do have some technology experts. Certainly, in health care, Inga Deakin, who runs our -- she's our health care lead and she's a doctor. So we do have some specialisms. But the reality is that we're investing in people and models and momentum in most cases. And if we need to do some form of technical due diligence, then we will do that. Our view generally is the best possible form of due diligence certainly in an enterprise software market is large, sophisticated customers buying in scale. And for example, with Thought Machine, when we invested in that company, we're just about to sign Lloyds Banking Group, Standard Chartered and SCB. It's a cloud-sourced retail core banking system. We understand how it works. But for us, the greatest due diligence was that Lloyds Banking Group were going to sell a multiyear contract as they did. And so for us, really, by the stage we come in, most of our -- the technology, the technology risk is probably relatively small because they've already hit certain proof points and already starting to accelerate. So that tends to be the case. But certainly, in Gratkorn Checks and Rivalain when it comes to Quantum, our view with Rivalain and Quantum is that we have an expert who had a thesis around how the Quantum market will develop applications around operating systems around hardware. And then we look for the businesses that are going to operate in those particular areas, whether it works or not, then we will either outsource that or use customer due diligence to prove the technology. The next question is, are there any subsectors you are particularly keen on at the moment. I think for us, when we look at our portfolio, we have a group of companies that have certain things in common. It isn't a particular sector or subsector. It's because they are -- they've got good entrepreneurs. They're in very large addressable markets, European-based, it's because they are doing something that no one else is doing. It's because they have very high gross margins. They've hit certain proof points. It's those sorts of things rather than a particular sector that we are particularly keen on. So I wouldn't say there's any one subsector we are quite heavy in fintech right now. I think that's just the nature of the way things have been. We've done a lot of deals on the culture last year. I think that's just the nature of the opportunities we saw. So I don't think there is any particular subsector. Look, there are some that we stay clear of. We're not into medical devices. We are wary of marketplace opportunities now heavily consumer-driven, as you might expect. We stay away from anything related to weaponry or anything like that from ESG perspective. So I think there are more subsectors that we stay clear of rather than one that we are particularly keen on. And I think that's the best way to answer it. I could spend an hour to talk to you about the particular things we're excited about at the moment, but I'm not sure that was the question, or we can do that at the time. So the next question, which I think is the last one, would Molten look to an investment in a disruptive tech platform at C-phase for less than GBP 250,000 investment? No, we would not be looking at that necessarily, but we would definitely -- we get a lot of those through seed, late seed, and we would direct them towards one of our C-funded parties. So I think those are all the questions. I think that's it.

Fantastic. Martin, Ben, thank you to address every single question we've had through. So thank you for that and thank you to all the investors for submitting those. And of course, any further questions that do come through the team will have the opportunity to review those and then publish responses where appropriate to do so. And Martin, just before redirecting investors to provide you their feedback, which I know is particularly important to you and the team. Can I ask you just for a few closing comments, please?

Yes. Thank you very much. And look, thank you for those who have dialed in. We do think it's very important for us to be able to reach out to all of our investors, and we see this platform there's opportunity to do that. So thank you for coming and dialing in. And also thank you very much for the platform for providing us with this opportunity. As far as the key messages that I think is that I hope you will take away from this call. The first one is that we have seen NAV reduction, but that does more reflect market peers and market confidence than our own direct portfolio. The portfolio is stable, it's well funded and continues to grow very nicely, and we have sufficient funds in the PLC to take us through the end of this financial year and to be able to support those portfolio companies. As far as looking forward, we will continue to preserve capital, our own cash and also that those are helping our portfolios to extend their runway. We will continue to build AUM and third-party -- build third-party assets and to build income, which we think is important for us to be able to do to become a more stable and income-generating business. But I think most critically, is that the opportunity to invest in tech across Europe is as important now as it has ever been. And the technological advances continue and the benefits that our portfolio companies and other start-ups and other early-stage growth companies are bringing to enterprises to help them to deal with the new economic reality is absolutely there. So we're very excited about the proposition and the prospects and our markets, but we are also putting a cautious term because we are in very uncertain times. So thank you all very much for your time. And again, thank you very much for Investor Meet for providing the platform for our session today.

Fantastic. Martin, Ben, thank you indeed for updating investors today. Could I please ask investors not to close the session as you'd be automatically redirected to provide your feedback in order the management team to better understand your views and expectations, it will only take a few moments to complete, but I'm sure it's greatly valued by the company. On behalf of the management of Molten Ventures Plc, I would like to thank you for attending today's presentation. That concludes today's session. Thank you, and good morning to you all.