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Molten Ventures
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== Feedback from Molten’s 2022 investor day == Molten held its annual investor day on 3 March 2022, showcasing the range of companies in which it invests. Presenters included founders and CEOs across a range of c 15 companies and funds, from early-stage seed funded start-ups, to Graphcore, a Series E stage market-leader and Molten’s second largest holding at H122). Graphcore, a UK chip designer, announced the launch of a new machine-learning computer, based around its intelligent processing unit (IPU), capable of 10 exaflops (10^18 calculations per second), with 4 petabytes (PB) (10^15 bytes) of memory and bandwidth of over 10PB/s. The ‘Good’ computer (named in honour of British mathematician, Jack Good), based on the Bow IPU, is expected to be able to handle neural networks with 500tn parameters, and can be trained 5x faster than the leading NVIDIA chip at half the cost, so offers a 10x cost advantage. Graphcore will be one of the first users of 3nm wafers, working with TSMC in Korea to deliver its first ‘Good’ computers in 2024, at an individual cost of US$120m per unit. This is a step on Graphcore’s road to ultra-intelligent ‘brain scale’ computers. Highlighting the range of investee companies, other presentations ranged from Clue, a female health app, to Form3, a real-time, cloud-based payment technology platform, ICEYE the owner and operator of the largest constellation of synthetic aperture radar (SAR) satellites, Lyst, a leading fashion shopping website and Aktiia, a digital health company monitoring blood pressure and hypertension, to allplants, a leading brand in vegetarian ready meals, with its new Walthamstow kitchen, the largest vegetarian kitchen in Europe. '''Introductory comments by Martin David, Molten’s CEO''' In his introduction, Molten’s CEO, Martin Davis highlighted that although there has been some softening of valuations following falls in the public markets, hot assets remain in demand with valuations for leading technology companies largely holding up. The European venture capital market remains a competitive market, with a surplus of cash, so investment opportunities are largely decided on relationships, brand and track record, rather than price, which surprisingly tends not to be a key decision factor. Molten’s portfolio remains well funded, with companies having topped up their cash reserves through fund raises in 2021, meaning most are funded for at least the next 12 months. As 2021 was such a strong year for seed funding, Molten’s forward pipeline for FY23 also looks robust. The company will remain selective about where it invests, only targeting segments of relative advantage, and choosing not to invest in areas including battery technology and robotics, amongst others. Management’s approach to the carrying value of portfolio companies is highly conservative, with exits having all been realised at a premium to historical carrying value. In this respect, the widening discount to Molten’s NAV seen in Q122, on top of conservative carrying values, does not appear justified. The carrying value of Molten’s assets already allows for a discount to the market price. Despite the European venture technology market having developed to the point where it is able to stand up against the US market, Martin Davis highlighted that a tangible valuation gap still exists between the US and Europe in earlier-stage Series A/B funding rounds, but this gap has almost entirely closed in (the more international) later-stage Series C/D rounds. For now, European investors see the potential for better returns than their US counterparts from earlier-stage investment. The co-investment growth fund that management is intending to launch in CY22 (c £400m fund targeted) would allow Molten to stay invested in companies for longer, increasing the group’s influence over, and its ability to lead, later-stage rounds. Looking ahead, the European technology market remains buoyant and, despite inflation concerns, the rotation out of technology and the war in Ukraine, Europe offers a deeper investment pipeline than ever before, presenting a great opportunity for the European ecosystem to catch-up with the US over the next three to five years. There is no reason why European venture capital returns should not hold up, with Molten on track to deliver targeted NAV growth, cash realisations and PBT in FY22.
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