Seraphim Space Investment Trust Plc (SSIT) Earnings Call Transcript & Summary

Without further ado, I'd like to hand over to Chair, Will Whitehorn to begin. Will ?

Good morning, everybody, and welcome to the first set of interim results for Seraphim Space Investment Trust. In the year-end to December 31, we've really had a very good start to the business. Our share price increased by 25% for the year-end. Our NAV per share increased by 7%. We have made 12 transactions that closed during the period at a total cost of GBP 135 million, and we increased portfolio from 15 to 21 companies. And after the period ended, we've made another new investment and 2 follow-on investments in existing companies. So it's really been a very, very busy time for us. And I'll be talking later with the rest of the team about the specifics of Seraphim and Mark Boggett will be going through those. But I thought I'd just set the scene. This has been not only a very interesting and investment-rich period for the launch of Seraphim, but it's also been an incredibly busy period in the space industry as a whole. Some of you will have seen it on TV and radio, heard about the stories of the launches that have been going on, the activities that are taking place in space. And governments have really been upping their game with the amount of money they're now diverting to what is being called the new industrial revolution in space. In the case of the British government, we have seen a national space strategy launched for the commercial sector and we've also just recently seen a national defense space strategy launch with real budgets and increased budgets behind both. Also, the budget to ESA from the U.K. has increased. The ESA is not part of the EU, and therefore, we are still a part of ESA. And we've seen the same thing happening around the world. Australia has now got a space agency for the first time, has increased its budget. Japan has increased its budget dramatically. France, Germany, Italy, the United States and then there's a commercial sector. We've seen nearly GBP 14 billion of investment in space companies in the U.S. alone in the past 18 months. I myself in another role was at COP26, which was being hosted by the SEC in Glasgow. And the space section there, which had a number of Seraphim companies it's presence at it, was one of the busiest areas. The interest in governments in understanding climate change using the data from the space, which is much more accurate. Now there are a lot of data that could be gathered by inspectors on the ground. They are looking to find out about CFCs in the atmosphere, methane being released on from oilfields, what's happening underneath the oceans, on top of the oceans at every level in the atmosphere and space is the way to do it. In addition to that, we've seen the big commercialization of broadband from space taking shape in the last year. We've now got over 8,000 satellites in orbit around the Earth. That's been a huge increase in the last year alone and my colleagues will be showing a chart on that later. But that and the commercialization of broadband will really take off this year with OneWeb and Starlink both launching their commercial services, and that's just the beginning. I see a future of solar powerful space, server farms and data centers in space, pharmaceuticals manufacturing space. And that is the kind of future that Seraphim plans to lock into. So it's an exciting time ahead for us, and I'll now pass over to Mark Boggett who will tell you more.

Great. Thanks, Will. Hi, everyone. I'm Mark Boggett, CEO and one of co-founders at Seraphim. Let me introduce my other partners, James Bruegger and Rob Desborough. So we've all worked together since 2006. So we're genuinely pioneers of SpaceTech investing, having launched the world's first SpaceTech Venture fund in 2016 and then the world's first listed SpaceTech vehicle, the Investment Trust that we're here to talk about today. So over the last 6 years, we've established ourselves as the go-to investment team for any space business globally. We've got a strong track record of delivering shareholder returns. We've built a portfolio of some of the highest profile emerging SpaceTech businesses around the world. So before I jump into the quarterly results, James is going to provide us with a brief educational overview, particularly for those who are new to the space sector as to why this is such an exciting and long-term growth opportunity.

Thanks very much, Mark. So the investment opportunity that Seraphim is focused on is really underpinned by a paradigm shift in the economics of space. We've already seen in the last handful of years, 100x reduction in the cost of accessing space. So there are 2 key drivers between these massive reductions in the cost of accessing space. Firstly, the advent of Elon Musk's SpaceX that some of you may be familiar with, and it's use of reusable rockets, is dramatically reducing the cost of launch. You can see here on the left-hand side of the chart that we've seen more than a tenfold decrease in cost over the last decade or so. On the other side of the equation, on the right-hand side of the chart, there's equally been a revolution in the satellite manufacturing industry itself. Now whereas a few years ago, satellites used to be the size of a car or a bus, weighing tonnes potentially costing hundreds of millions, if not billions of dollars each. Now it's possible to use the same components that go into your mobile phone to build satellites that are small enough to fit in the palm of your hand and can cost as little as $100,000. So it's those 2 things combined that are driving dramatic changes in the cost for space. And by combining these, it's now possible for the first time to deploy constellations of hundreds and even thousands of satellites that are creating a digital infrastructure in the sky that's illustrated by the picture on the right-hand side. Now it's this digital infrastructure that is going to deliver enormous unique global data sets and universal, abundant connectivity. It's these capabilities that, in our opinion, are going to go on to define societal change over forthcoming decades. So I think a critical thing to understand here is that space isn't just about rockets and satellites. It's about space as a platform that is going to catalyze some of the mega trends that will change our world for the better. So think about sustainability, the role that Will has already alluded to of how this platform in space can help combat climate change and learn and enable us also to live more sustainably. Think about connectivity, the fact that today still nearly half of the world's population can't reliably get online. It's only from space that we're going to be able to bring those billions of people into the Internet economy to enable them to connect, to educate -- to drive education, health, commerce, entertainment. This is going to have a massive global impact and help to hopefully alleviate our Internet quality. Likewise, mobility, if you think about the changes that are going to come over the rest of this decade, the advent of drone deliveries, driverless cars, flying cars, all of those exciting new technology areas are fundamentally enabled by the type of data and connectivity from space that these constellations are enabling. Likewise, the revolution around the Internet of Things. So there is broad consensus from some of the leading investment banks supported by some of the world's most successful entrepreneurs in their own space [ shuttle ] initiatives with the likes of Elon Musk and Sir Richard Branson and Jeff Bezos of Amazon, that this represents an enormous multitrillion-dollar opportunity where Seraphim's are now focused. And our approach is really to look to identify the emerging category leaders that are going to define these new markets as they develop. Really, we're at now very much the critical inflection point in terms of the sort of drivers that I've alluded to, now translating into real traction. So just to explain this chart. This chart represents the total number of satellites that have ever been launched in the history of the space age since Sputnik first went up. And what this chart shows is -- in the ensuing 60-plus years, a little over 11,000 satellites that ever been launched. Now nearly 1/5 of all of those satellites have been launched in the last few years by just 4 companies. And those 4 companies, which have been predominantly private financed, themselves have plans as a minimum to put up another 10,000 satellites or more in the next few years. So 4 companies putting up in the next few years, almost as many satellites as have ever been launched before in the history of the space age. But for us, behind -- what's really exciting is that behind those handful of companies is the -- more than 100 companies that collectively have plans to launch hundreds of thousands of satellites over the forthcoming decade. Now many of these companies are already privately financed and have already started to build out their constellations. So what we're really seeing is a flourishing ecosystem of privately funded SpaceTech businesses emerging. Now I'm going to hand over to Rob to help explain how Seraphim operates to capitalize on all of these exciting opportunities that are emerging from the space tech ecosystem.

Seraphim has a unique playbook comprised of 2 essential elements as the leading player in space investment globally, we receive a massive amount of deal flow. We are receiving between 50 and 100 opportunities every month and have been for over 5 years. We're seeing deals from seed stage to growth, turnaround and pre-IPO, equating to more than 75% of all the deal flow globally in the sector. This gives us a privileged position as within each category we're seeing tens of competing companies. Our information asymmetry gives a significant competitive advantage as we compare them against each other, ultimately backing those we believe will win out with the strongest teams and technology. This information asymmetry is key. The second component of our unique proposition is our accelerators run by an affiliate organization. Let me explain how they operate and how this uniquely benefits the Trust. We select companies from our proprietary deal flow, which are too early stage with a fund invest into. However, they demonstrate strong potential. We run 2, 3-month global programs per annum. We're selecting upwards of 25 leading early-stage companies every year. They are availing our mentorship with our partners, including world-leading space entrepreneurs, space corporates and us, as the leading investors. The program initially focuses on working with global space corporates who help us assess the company's technology and potential with a view to engagement. The second part focuses on helping develop our investment pitch and showcasing them to our friends and peer group of 300 investors globally. We look to syndicate investments into the companies. The elongated date has raised $129 million in early-stage investments. Through this program, we enjoyed option to invest for the last 2 years, and we regularly monitor the company's performance before considering to take that up. This platform has enabled us to become a most prolific investor globally. This was recognized by Amazon last year, who asked us to deliver their own AWS space accelerator. So it doesn't compete with our own. It's focused on later-stage companies. These accelerator platforms act as a proprietary feeder into the investment trust. And this is a snapshot of the leading companies globally we chose for accelerators in 2021 across 3 programs with between 6 and 10 chosen for each. They represent a broad cross-section of the Space [ U.K. ] system. And as you'll see later, companies were already investing into.

Great. Okay. Thank you, Rob. With the education and background piece now behind us, we can now turn to the results for the 6 months for the Seraphim's Space Investment Trust since we IPO-ed in July. So I'll kick off with the highlights. So we've built and maintained a strong premium since IPO on the 14th of July. The share price was GBP 1.25 as at the 31st of December, representing a market capitalization of GBP 300 million. NAV per share was GBP 1.05, which is 7% up on the initial 98p cost after expenses. The portfolio is now valued at GBP 183 million, with net assets of GBP 250 million including GBP 70 million of cash as of the 31st of December. So headline performance is that the portfolio value increased by 11% against cost during the first half of the period. This attribution table provides a breakdown of how the portfolio developed to reach GBP 183 million by the end of the period. So let me break that down for you. So our IPO in July, the Trust acquired holdings in 15 businesses from the Seraphim Space LP Fund, our venture fund for a total cost of GBP 28.4 million. They were acquired by the issuance of new shares. At the time of the IPO, 4 businesses were going through sizable transactions. And as such, we made a binding commitment to acquire these holdings from the Seraphim Space Venture LP fund pending the anticipated completion of the corporate activity that was underway. So I'm pleased to note that we have now acquired these 4 additional retained assets during the period for a cost of GBP 62.9 million. So the holding in Spire Global in August '21, and in Arqit Quantum in September '21 were acquired following the completion of their respective SPAC mergers. So worth noting that these were valued on a 5-day weighted average share price post their market debut. The third holding in a company called ICEYE was in December 2021 and that was acquired following the conclusion of its D-Series funding round. So we acquired that at the same share price as that round. And then the final asset, D-Orbit, that was slightly different. Its transaction had not concluded by the 31st of December. So this asset in accordance with the terms agreed at the time of the IPO was acquired at the price of the May 2021 valuation, i.e., the price before the IPO. So alongside these 4 retained assets, a further GBP 28.1 million was invested into 2 new portfolio companies, bringing the overall additions during the period to GBP 90.9 million across 6 companies. Another GBP 44.9 million of follow-on investment into 6 portfolio companies was also completed bringing the total value of all transactions completed during the period to GBP 136 million. So fair value increase in the portfolio was GBP 17.2 million noting this was largely driven by 2 of our portfolio companies, Arqit and Satellite Vu and some favorable FX movements, an increase of GBP 1.4 million. So that resulted in the value of the portfolio reaching GBP 182.8 million as at the 31st of December. Now let's look at the NAV bridge. So this table sets out the growth from the GBP 150 million of fresh capital invested at the IPO to the GBP 250.6 million closing NAV as at the 31st of December 2021. So the opening NAV of GBP 175 million consisted of GBP 150 million cash plus GBP 28.4 million, which was the acquisition of the initial 15 assets acquired from the Seraphim Space LP fund less GBP 3.5 million IPO costs. The GBP 61 million of share issuance relating to the acquisition of the retained assets and then GBP 18.6 million of fair value increase, which included those FX movements. The GBP 3.7 million other category consists of the management fee, GBP 1.2 million, operating expenses of GBP 0.6 million and a performance fee provision of GBP 2 million. All of this was partially offset by GBP 100,000 of interest received during the period. So GBP 61 million shares were issued during the period, increasing the company's issued share capital by 34%. The NAV increased from 98p after IPO costs to[ 104.7p ] over the period. So next of all, I'm going to talk in some more detail about those 4 retained assets. So first of all, both Arqit and Spire were both covered in detail during the last quarterly update post them completing their respective SPAC mergers in Q3. So I'm pleased to say that Arqit has performed very strongly on NASDAQ. So to remind you, this company is deploying a constellation of laser communication satellites that utilize Quantum technology to distribute quantum safe, encryption keys for securing any data center or any end device. This company has announced a series of commercial contracts since going public with a broad range of customers, including Juniper Networks and Virgin. Contracts signed amount to over GBP 130 million. Another key point to note is that the trust returns were also enhanced by the issue of 277,000 additional shares as part of an earn-out in Q4. This is as the company met it's share price performance milestones that we, the Trust, were given these additional shares. So that's Arqit. Conversely, Spire Global, their shares have performed poorly since they listed on the New York Stock Exchange. So to remind you, this business has more than 100 shoebox sized satellites in orbit, which collect weather data as well as tracking all of the boats on all of our oceans, and all of the airplanes in our skies. So despite the share price performance, we've got strong conviction about this business, which we first invested in, in 2017. And as you'll hear later in the presentation, post the period, we added to our holding in Spire, doubling down at the current valuation. So now I'll turn to the 2 assets that we acquired during the last quarter, starting off with ICEYE which we acquired in December for GBP 20.8 million. So let me explain what ICEYE does. So existing satellites for Earth observation use a camera-based or optical based technology. And as you all know, from living in the U.K., most days, the sky is covered with clouds. And as such, optical satellites simply can't be relied upon to observe the earth. This is due to bad weather and indeed the fall of night. So in order to address this, satellite radars have been invented, which are able to see the ground in high resolution regardless of day or night and regardless of weather conditions you can see through any type of weather conditions. ICEYE has built the largest constellation of radar satellites for a fraction of the cost and size of incumbent systems. And through this constellation, ICEYE is aiming to provide actionable information about every square meter of the planet, every single hour. Its customers include the insurance industry, as well as maritime, disaster management, finance, security and intelligence. D-Orbit, next. So D-Orbit agreed to term sheet with a SPAC in April 2021. Well, by Christmas 2021, this transaction had not concluded. So under the terms of the IPO and an [ SPA ] would be Seraphim shareholders, as no transaction was concluded, this asset was acquired by the trust for GBP 7.3 million, which is the May valuation, the fair value at May before the IPO. So D-Orbit as a business takes some explaining. So let me start. So what they operate is a Space Taxi service, whereby they sell positions in their rocket for up to 12 satellite operators. So you can see the picture of their Space Taxi in the screen there. So D-Orbit space cargo vehicle is then put into a huge rocket like a SpaceX Falcon 9, which is capable of taking tons of capacity into space. Indeed, it's not unusual for 100 satellites to be launched from a single rocket. Consider this like a bus dropping off all of its passengers at the bus terminus. The problem is for the satellite operators that it can take up to 6 months to subsequently maneuver their satellites into the desired orbit and the position within their own constellation. Now that's a problem given that many new satellites, only have an operational satellite -- operational life of 4 to 5 years. So once deposited in orbit, D-Orbit vehicle then starts its own engines and then flies around the planet, delivering its customers to their desired orbital locations, very much like a taxi dropping off its paying customers. So what's interesting about this business and one of the reasons why we originally invested is that once empty, the D-Orbit vehicle then transitions to a secondary business model. It stops being a taxi and it turns into a tug. Think of it like an AA or an RAC van in space. Satellite operators can call upon D-Orbit to remove broken satellites or to move working satellites from one location to another. So with a growing fleet of crafts in space, and worth noting that D-Orbit has already successfully undertaken 4 of these space taxi missions and has delivered more than 70 payloads into orbit. So D-Orbit is able to offer these high-value services from vehicles that have a 0 marginal cost to being in space effectively their customers have paid for these vehicles to be in space. So expect this business to become very valuable and profitable over the coming years. So now I'm going to provide an overview of all the investments that we've undertaken during the last 6 months. So here's a summary of the activity since IPO. And as you'll see, we've been seriously busy. GBP 136 million of investment in the period, plus GBP 4 million invested after the period end, as 13 companies in total, 3 in the U.K., 6 in the U.S., 3 in Europe and 2 in the rest of the world, that's Japan and Israel. 6 follow-on investments into existing portfolio companies during the quarter, and then we did 2 further follow-on investments post the period end. And it's important to note that the Trust was the lead investor in 4 of those transactions. Then there were 2 new investments that we made in growth stage companies where the Trust led $145 million D-series and participated in a $112 million F-Series. So the final point to note on this slide is you can see some gray highlights on 6 of the portfolio companies there. Those are the 6 companies out of the 13 that participated in the Seraphim affiliated accelerator program. So you can see how important a feeder that, that platform has been over the course of the last 6 months. So this slide demonstrates the thematic focus of the investment activity during the last 6 months. So our overriding strategy as James laid out, is backing the companies that are taking leadership positions in the development of the digital infrastructure in the sky. We invested in 3 companies: Isotropic Systems and Arqit that are developing communications technologies and then Xona which is focused on mobility. Climate and sustainability is another key theme where we backed 4 companies. These companies were addressing weather prediction, illegal fishing, carbon monitoring. And then finally, space sustainability, where we've invested in the 3 leading companies that are addressing the problems of debris in space and trying to create solutions that can avoid future debris in space. So we're now going to talk about the 2 new growth investments that we made during the period. So I covered HawkEye in detail at the last quarter's update. This company is the world's largest constellation of radio frequency satellites. Through signals intelligence, HawkEye are able to focus upon a whole range of industries that are undertaking illegal activity in our oceans, such as illegal fishing, people trafficking and drug running. We led there are $145 million D-series. So now I'm going to focus on Astroscale. So Astroscale, we invested in November 2021, investing $12.5 million of their $112 million F-Series round. So we've followed this company through its previous time and through the previous rounds and decided that now is the right time to back this leading business. So Astroscale is on a mission to make space operations more sustainable with a long-term view to enable a vibrance in space economy. So to enable this, the company has developed a set of capabilities around satellite monitoring, refueling, upgrading, repairing and disposal. So you can think of them as the quick fit of space, ongoing and planned missions are focused on demonstrating capabilities around end-of-life disposal of low earth orbit satellites, active removal of space debris and life extension of satellites. These activities are a necessity if we're going to have a sustainable commercialization of space. So regulation is also one matter worth noting. Within a few short years, we anticipate that global regulators will introduce rules to limit space debris. Regulators will require satellite operators to have advanced contracts with companies like Astroscale and D-Orbit before they launch so that their satellites can be repaired or removed if they reach the end of their economic life or they're broken. Alternatively, regulators will insist that satellite operators have insurance to remove defunct satellites and those insurance will in turn have contractual relationships with companies like Astroscale and D-Orbit. So we're very excited about the outlook for these new businesses. Next, I'll highlight the 5 follow-on investments, but in the interest of time, I'll zero in on the 2 largest investments. So you see ICEYE here again. So that's because we've doubled down on our GBP 20.8 million stake that we acquired as part of the retained asset acquisition, making a further investment of $25 million. Now we first invested in this business in 2017 before they put their first satellite into orbit. They're now the world's largest constellation of radar satellites. And it's our view that this business is the breakaway market leader in this field. It's aiming to build out their constellation to be able to image every square meter of earth every single hour. Then they'll be able to provide change detection on that point of earth, how it's changed in the last hour, the last 3 hours, the last day, the last week, the last month, the last year and used that information to infer changes for the future. We believe that this data set will be hugely valuable, and it's applicable to virtually every single industrial vertical. So next of all, I'll talk about Isotropic where we led that B Series investing $25 million. So Isotropic Systems is aiming to create a mesh network of satellite connectivity by developing an antenna that's capable of connecting to any satellite in any constellation in any orbit. So this is unique. Each satellite, each antenna can connect up to 5 satellites simultaneously, including geostationary orbit satellites which provides a high degree of confidence for connectivity, and this is especially important in mobility. Think about boats, planes, cars and trains that will be users of this type of antenna technology. Okay. So next, I'm going to share a summary of the portfolio as at the 31st of December. So this table shows that 70% of the NAV is in the top 10 companies. However, we really consider that there's a huge amount of future growth in the 4.6% of NAV that represents the rest of the portfolio, in particular, companies like Spire, AST and Xona. So we've already invested or committed a decent proportion of the 27.9 [ million percent ] cash holding that we have GBP 70 million. Next of all, I'll talk about the doughnuts on the right-hand side of the picture that try and present the diversity of the portfolio. So I'll start off with stage. Just 2% is invested in Seed, 7% invested in Series A. So the bulk of the portfolio, 91% is invested in B+ series growth stage companies. It's also worth noting that the 3 listed companies account for 20% by value and only 14% by volume of the portfolio. And then finally, only 6 companies in the portfolio are pre-revenue, that's 30%. The rest are generating revenues and growing robustly, albeit none of them are profitable at this stage. So now I'm going to talk about post the period where we've had a range of developments, most importantly, D-Orbit. So let me explain. On the 27th of January, D-Orbit announced that subject to a number of outstanding conditions, it will become publicly-listed through a SPAC combination with a listed company called Breeze Holding Acquisition Corp. So this proposed transaction, which is expected to occur in the second or third quarter. And this combined entity will be listed on NASDAQ with an implied enterprise value of $1.28 billion. So this proposed transaction envisages that the D-Orbit shareholders will account for 84% of the combined company. So the point that I want to draw out here is that the Trust currently has 9.3% fully diluted holding in D-Orbit that we acquired GBP 7.3 million. And this will be worth when you look through the combined entity, just over 7% of the entire enterprise value of that business. So that's around $100 million. So we have to wait until this proposed transaction concludes and obviously, we can't have any insight into how the shares will trade relative to that implied value, but we wanted to draw out this important asset and this important event that's happened post period. So 3 other transactions closed post the period, including our doubling down on Spire Global after they announced their year-end results for 2021, where they demonstrated that their ARR was at $70 million. So this is a business that we hugely believe in the long-term growth potential. So there are 2 additional transactions that are imminently about to close. So finally, I'm going to hand over to my colleague, James, who's going to wrap up with a summary of our activity levels. He's also going to provide some additional information about the outlook for the rest of 2022.

Thanks very much, Mark. So to summarize, there have been very high levels of investment activity since IPO with, as Mark has explained, a total of 12 investments having closed, including the 4 retained assets that we committed to acquire at the time of the IPO. That activity has seen Seraphim demonstrating its ability to deploy capital on a truly global basis and with a distribution in both the U.K., U.S. and Europe and our first foray foreign into Asia. We've likewise demonstrated our ability to lead growth-stage transactions. So the likes of the ICEYE and Hawkeye transactions that Mark has alluded to. And we've also delivered on the objectives that we set at the time of IPO of looking to really double down on those existing portfolio companies that we have the highest conviction in. So the likes of Isotropic and ICEYE being great examples. And as you've heard from Rob, our associated accelerator activities have also been an important contributor with 5 of the investee companies in the period, having participated in one of the accelerators that is affiliated with Seraphim. So we really feel like we have delivered on all measures against the objectives that we set at the time of the IPO and are very much in line with -- and the targeted cash deployment. And looking forward, we expect our positive momentum to continue. As of today, we have a qualified investment pipeline of nearly another GBP 100 million worth of opportunities and notwithstanding the ongoing volatility in the broader SPAC market, which as Mark has described, has adversely affected several of our listed holdings. We continue to be long-term patient investors in those businesses and that we continue to believe in the fundamentals of those opportunities. Excitingly, as Mark has just described, the prospects of D-Orbit potentially completing, its own transactions become public, could translate to a very considerable increase in the NAV of the Trust over the relative near term. Notwithstanding some of the broader challenges in the macroeconomic environments. Fundamentally, as I described earlier, the drivers that are really catalyzing the space sector and which we're looking to exploit are as strong as ever, and we expect to continue to translate into a very healthy pipeline of compelling investment opportunities. Last couple of points to really draw out, that Mark alluded to with the thematic element of our investment. But just to really reiterate that environment, social and governance, ESG, is very much at the heart of the existing portfolio and our investment activity, which in turn is really a reflection of the strong conviction that we've got, that space in this new digital infrastructure in the sky really has a unique role to play in helping to address some of the world's most pressing problems, most pertinently climate change. So bringing that all together, we feel that we've got off to a very strong start, have very positive momentum and are very much on track to deliver over the long term, the targeted annualized NAV increase of 20%.

Thank you, James. So that concludes our presentation. So we're now open to Q&A from the audience.

Thanks, Mark. As mentioned, if the audience does have any questions, please use the chat facility within Zoom. We do have a number of questions that have already come in. First one, the ESG credentials of your portfolio companies appear impeccable. Does sustainability play a large part in your choice of investments.

Yes. Should I take that one, Mark?

Yes.

So yes, as I've just mentioned, sustainability and ESG is a key theme for us and a key opportunity indeed. And we assess every single investment opportunity that we received through the lens of ESG and sustainability. Worth noting that every single one of our existing portfolio companies is addressing at least one of the UN sustainable development goals. And all of those goals are covered by at least one of our portfolio companies. So really and sustainability is by default, intrinsic to us as an organization and space as an investment category. And that's one of the reasons that we're so bullish about this sector. We see phenomenal opportunities over the forthcoming years as the world now really starts to take note, as Will alluded to from COP26 of the unique ability of space to have a really important role in addressing some of these challenges.

I'd just like to add something to that, James, as well, talk about the generality of this issue rather than some of our specific investments now. There is enormous amounts of work now underway at governmental level on understanding the role that space can play in getting to net zero. Not just through -- have helping to understand climate change and also please the activities of governments industry around the world, but also through such things as solar power from space in the future, putting out data centers, which are a huge contributor at the moment to carbon dioxide in the atmosphere and global warming. Putting these kind of industrial activities in space is now for the reasons that you alluded to, by the lowered cost of access to space, it is now a real possibility that we can begin to industrialize these activities outside the atmosphere. And kind of the beginnings of that is what we see in the kind of investments that Seraphim's made so far. But the reality of that, I think, will come within 8 to 10 years.

Thanks, Will. Another question. How far away are any pre-revenue businesses from first sales?

Rob, do you want to take that?

Yes. I'll take that. Thanks, Mark. So only 30% of the portfolio is nonrevenue generating at this point, but if it are not yet, typically just 12 months away from first revenues.

So there's another question that came in. They just asked us whether we're concerned that none of the portfolio is profitable today. So that's really by design, the companies that we're investing in are we invested in from the early stage. They are focused on growing their revenues and they're leading their categories in the first instance, profitability will come afterwards. One of the things that we're very confident about that profitability coming afterwards is because they're building low-cost infrastructure. The cost of their satellites are measured in hundreds of thousands or low millions compared to hundreds of millions or billions for the traditional space industry. And yet the entire [ resources ] that they're providing are much more valuable. So we're very confident about these companies becoming profitable in the future. But it's not -- it's by design that they're not profitable right now because they're focused on revenue and growth.

Thanks, Mark. Another question. You've talked about over 100,000 satellites being launched in the next decade to build a new digital infrastructure around our planet. How easy will it be to ensure that these won't crash into one another?

Will, do you want to take that one?

Yes, I mean it's an issue which is exercising governments around the world and the British government to its credit has been very forthright at the UN in making sure that we effectively create air traffic control for space. And that's one of the reasons that in America, the FAA, the Federal Aviation Authorities for some years now, managed space launch and the U.K. has just done the same thing and given that responsibility to the CAA. And in terms of managing space, it is going to be relatively easy to do, provided everybody plays by a set of rules that have to be created. We do have the wildcards who will potentially cause accidents in space in the future and allow debris to develop. And that will be an entire market in itself. So the likes of Astroscale that Mark and James mentioned earlier, will be in the forefront of clearing up some of that existing debris. Our other company, LeoLabs, we haven't said much about today, but when the Russians exploded a satellite and upset the new orbit of the International Space Station, which had to be moved around the debris, it wasn't a government or a military organization that first spotted that activity. It was one of our investments, LeoLabs, they can now spot any piece of debris in space up to 1,000 kilometers up, down to the size of EUR 1 or GBP 1 point, quite remarkable work by LeoLabs there. So I think regulatory, pleasing and the kind of things we've got used to in the aviation industry where we can have 1.5 million to 2 million planes in the sky around the earth any one time in a much closer, more densely packed group, and they don't crash into each other. The same is definitely achievable with satellites but it is going to require cooperation by governments. And that's happening between governments of Australia, Japan, Canada, United States, Britain, the European Union. We now have to bring into the fold, China.

Another question. Where do you get most of your deal flow from?

Yes, I'll take this one. From a range of different sources, by virtue of ourselves benefiting from first-mover advantage, having been a pioneer in the development of space-focused ventures fund, we found ourselves in a privileged position of really being at the nexus of this ecosystem. So we get a lot of direct inbound opportunities. We get a lot of referrals from other venture funds and we also get a lot of off-market deals referred to us from our network, which includes some of the sectors most successful entrepreneurs. So worth noting that of the 19 companies that forms the initial portfolio that was acquired from the Seraphim's Space LP fund, a significant proportion of those were off-market proprietary deal flow through some of the avenues that I've just described.

Thank you, James. So how happy are you with your performance during the quarter? Are you on track to produce the 20%-plus return for the year mentioned on your website?

James, do you want to take that one again?

Yes, I think we're reasonably happy. The NAV performance to date on an annualized basis would take you up into the mid-teens. Worth, of course, stressing that the targets that we've set for 20% plus annualized return is over the long term. And this is a sector that will require some degree of patience. So we're certainly not promising 20% per annum return every year. It's the target that we are aspiring to over the medium term. But I think so far, we feel as I've already stated, that we are on track and delivering in line with the broader objectives that we set at the time of our IPO.

I think it's just worth adding to that point that our historical track record is in IRR of more than twice that target level. We think that this opportunity is only really just getting started. We're only at the sort of foothills of the growth of this market. So we remain confident over the medium and long term about our ability to be able to deliver those kind of returns.

Great. And another question. Can you please try to give us an idea as to where you would know, follow with an additional investment that you already hold?

Rob, do you want to take that one?

Sure. So we take a very disciplined thesis stripping approach to considering any follow-on funding opportunities. We're very aware of the rest of very good money after that. This entails reviewing the original assumptions that led us to backing our businesses in the first place. We no longer believe these assumptions are valid where the business has failed to execute and achieve the targeted milestones. We may decide to stop supporting it. Most often, this is due to the management issues. We seek to have a faith in the management team, it is difficult to justify continuing to support a company in the absence of new leadership joining the business. We can evidence examples within the existing portfolio where we've made difficult decisions to stop supporting companies due to a combination of the above access.

Yes. Indeed, 2 companies, which we reported in the interim results, we've decided not to continue to follow supporting because they've not hit technology milestones that we were seeking. So this is the nature of the business that we're in. We can't expect every company that we're investing in to be successful but we can rely on those that are successful to outweigh the losses.

How soon do you anticipate coming back to the market to raise further funds and how frequently might you expect to raise money in the market?

Will, do you want to talk to that one?

I mean the issue of when we come back to the market to seek further funds partly depends on the market. That's one of the first considerations that any organization has to take into account. There's no point going back into a market if the market conditions aren't right. Once we meet that test, we then have to look at what do we need the funds for. There is no point as an investment trust raising funds if you don't have the potential deal flow going forward. And that has happened in the past and then money has been set on and is being regarded by investors as being waste and we do not want that to happen with Seraphim. So when we're ready, we will come to the market for further funds. If we have a deal flow going forward that justifies it. We haven't taken a decision to do that at the moment. But when we do, of course, the market hears first.

And do you have parameters of how much you will invest at each stage?

James, do you want to take that?

Not strict parameters, no. But I think we can give some degree of guidance based on the transactions that we've announced. So for growth stage opportunities where we've been acting as a lead, we've been willing to write checks as big as $25 million. Whereas more generally speaking, at earlier stage investments, we've typically been limiting ticket size to low single-digit millions of dollars. But it really is on a case-by-case basis depending on the transaction and what role we're looking to take, whether to act as a lead, a follow-up or just a very modest strategic slice of around to buy some optionality over future funding rounds.

Thank you, James. Another question, with so much money being invested in the sector, how are you going to pick the right investments?

James, do you want to take -- sorry, Rob, do you want to take that one?

Sure. So our model is designed to enable us to engage with a large proportion of start-ups in any given category. So when you're seeing 75% of all the deals globally, it is highly likely that we're meeting all of the companies within that category. And we get input from our corporate partners and industry-leading entrepreneurs have been used to this information in asymmetry to invest early with real conviction. The accelerator elements at Seraphim allows us to work with a broad range of companies with an extended period of time. And then only back for months, we are convinced the business has real momentum and potential.

Your growth projections are extremely impressive. How sustainable and viable do you think they are?

James, do you want to take that one?

Yes. I think you've sort of partially answered that already. Our targets are to deliver a 20% annualized NAV improvement at the portfolio level over the long term. So it doesn't necessarily mean every single year. And as Mark has alluded to, our historic track record with our previous vehicle was materially better than that. And in a few short months since our IPO, we're showing an implied annualized NAV increase in the mid-teens. So we certainly believe that those sort of targets that we've set over the long term are achievable and are realistic, albeit with the usual caveats that there's a lot of factors that can influence that, many of which are outside of our control.

You've mentioned Space has multi-decade growth potential. How do you know growth will continue over such an extensive period of time?

Will, do you want to address that one?

Can you just repeat the question, Bob?

Yes, sorry. Yes. You've mentioned space has a multi-decade growth potential. How do you know growth will continue over such an extensive period of time?

Well, that perfectly simple to answer in that kind of economic history sense. There is no doubt now that the lowered cost of access to space, that James mentioned earlier with regards to SpaceX and Virgin Orbit and some of the new launch systems coming on site. Those systems are going to be able to take technology and advancing technology, which is moving pretty rapidly such as AI, into very cheaply. And just has happened with the arrival of the steam engine, the canals and then the railways, and then steam shipping and then the aircraft and the internal combustion engine. We are seeing a revolution that is largely being allowed to happen because the distribution cost of getting access has fallen. That trend is continuing. Also, the trend of the miniaturization of technology going into space is continuing. Those 2 things combined will give us decades of growth. And the most important thing about space and the reason that we are so confident about the future is that space is outside the atmosphere. So the atmosphere is almost like a sealed unit as Professor [ James Lovelock ] once described it. It's like a petri dish. And inside that petri dish, everything we do as human beings will contribute to that warming that is worrying us so much. And as our population grows to over 10 billion to 11 billion before it maybe evens out in the 2060s or '70s, we simply cannot get to net zero without removing entire areas of activity from the atmosphere and putting them outside the atmosphere. Space is radioactive. It's an absolute zero, and it's nearly a vacuum. Even the space closely around the earth. And those things mean that there's an awful lot of stuff using solar panels from that great fusion reactor call the sun, that we can start to do up there very efficiently. If you use solar power in space, and we're going to say solar power was designed for NASA specifically for space originally. You put solar power in space. It operates 24 hours a day, 7 days a week, 365 days a year and is 90% efficient. So therefore, we can power industrial activities up there, the pharmaceutical industry is already looking at manufacturing drugs in the space and certainly using the existing space systems and the newly developing space stations that are going to be developed in the commercial sector. It's looking at using those to actually both create molecules in space where zero gravity means you can do new combinations and manufacture. Solar power coming from space is enormous certainty now within 10 years. Server farms or data center space is almost certainty, certainly backing up both OneWeb and Starlink and others are doing at the moment in terms of creating broadband from space. So it is it is an imperative future as much as a future based on hope. It's an imperative of taking these activities. And the British government itself and its national space strategy has absolutely targeted the kind of activities as ones that the U.K. should be in the forefront of. And the same is happening with other governments around the world. And that's why space budget at a governmental level, level loading the commercial sector are increasing so dramatically at the moment. And that will feed through. And this isn't something I have confidence about. I have as near certainty as it's possible to have because the processes are now underway.

Thank you, Will. Unfortunately, it's all we've got time for. We do have a hard stop prior to 12:00. So thank you very much for your time, everybody. I don't know if there's any further comments you wanted to make before we end?

No, I think that Will, summarized the outlook for the next several decades quite nicely there. So just from me, just to thank you. And everybody who's participated in this call, thank you for your focus and interest on the Seraphim Space Investment Trust.

Thanks all. Thanks. Bye.