Augmentum Fintech PLC

Operations

What's the mission of the company?

Augmentum Fintech PLC's mission is to support ambitious, high-growth fintech companies that aim to transform the financial services industry​.

Offerings

Augmentum Fintech PLC operates as a venture capital investor with a focus on the fintech sector. Here's a breakdown of their mission and operations based on various sources:

1. Investment Focus: Augmentum is dedicated to investing in ambitious, high-growth companies that are in the process of transforming the financial services industry. They particularly focus on fintech businesses in various verticals including digital banking, asset and wealth management, and financial services infrastructure​​.
2. Stage of Investment: They invest in both early and later-stage fintech businesses that show promise in disrupting traditional sectors like banking, insurance, asset management, and other financial services sectors​​.
3. Geographical Reach: Augmentum is one of Europe's leading venture capital investors in the fintech sector, with an outreach extending across Europe. They are also the UK's only publicly listed investment company focusing exclusively on the fintech sector​​.
4. Support to Portfolio Companies: Besides providing financial investment, Augmentum appears to be deeply involved in aiding the growth of its portfolio companies, offering insights into fintech and scaling, and partnering with these companies as they navigate through their growth phases​​.

In essence, Augmentum Fintech PLC's mission revolves around backing high-growth fintech companies in their early and later stages, aiding in their rapid growth and disruption of traditional financial sectors, while extending its investment reach across Europe.

Investment policy and guidelines

Investment objective

The Company’s investment objective is to generate capital growth over the long term through investment in a focused portfolio of fast growing and/or high potential private financial services technology (“fintech”) businesses based predominantly in the UK and wider Europe.

Investment policy

In order to achieve its investment objective, the Company invests in early or later stage investments in unquoted fintech businesses. The Company intends to realise value through exiting the investments over time.

The Company seeks exposure to early stage businesses which are high growth, with scalable opportunities, and have disruptive technologies in the banking, insurance and wealth and asset management sectors as well as those that provide services to underpin the financial sector and other cross-industry propositions.

Investments are expected to be mainly in the form of equity and equity-related instruments issued by portfolio companies, although investments may be made by way of convertible debt instruments. The Company intends to invest in unquoted companies and will ensure that the Company has suitable investor protection rights where appropriate. The Company may also invest in partnerships, limited liability partnerships and other legal forms of entity. The Company will not invest in publicly traded companies. However, portfolio companies may seek initial public offerings from time to time, in which case the Company may continue to hold such investments without restriction.

The Company may acquire investments directly or by way of holdings in special purpose vehicles or intermediate holding entities (such as the Partnership).

The Management Team has historically taken a board or observer position on investee companies and, where in the best interests of the Company, will do so in relation to future investee companies.

The Company’s portfolio is expected to be diversified across a number of geographical areas predominantly within the UK and wider Europe and the Company will at all times invest and manage the portfolio in a manner consistent with spreading investment risk.

The Management Team will actively manage the portfolio to maximise returns, including helping to scale the team, refining and driving key performance indicators, stimulating growth, and positively influencing future financing and exits.

Investment restrictions

The Company will invest and manage its assets with the object of spreading risk through the following investment restrictions:

• The value of no single investment (including related investments in group entities or related parties) will represent more than 15 per cent. of Net Asset Value;
• The aggregate value of seed stage investments will represent no more than 1 per cent. of Net Asset Value; and
• At least 80 per cent of Net Asset Value will be invested in businesses which are headquartered in or have their main centre of business in the UK or wider Europe.

In addition, the Company will itself not invest more than 15 per cent. of its gross assets in other investment companies or investment trusts which are listed on the Official List.

Each of the restrictions above will be calculated at the time of investment and disregard the effect of the receipt of rights, bonuses, benefits in the nature of capital or by reason of any other action affecting every holder of that investment. The Company will not be required to dispose of any investment or to rebalance the portfolio as a result of a change in the respective valuations of its assets.

Hedging and derivatives

Save for investments made using equity-related instruments as described above, the Company will not employ derivatives of any kind for investment purposes. Derivatives may be used for currency hedging purposes.

Borrowing policy

The Company may, from time to time, use borrowings to manage its working capital requirements but shall not borrow for investment purposes. Borrowings will not exceed 10 per cent. of the Company’s Net Asset Value, calculated at the time of borrowing.

Cash management

The Company may hold cash on deposit and may invest in cash equivalent investments, which may include short-term investments in money market type funds and tradeable debt securities. There is no restriction on the amount of cash or cash equivalent investments that the Company may hold or where it is held. The Board has agreed prudent cash management guidelines with the AIFM to ensure an appropriate risk / return profile is maintained. Cash and cash equivalents are held with approved counterparties, and in line with prudent cash management guidelines, agreed with the Board, AIFM and Portfolio Manager. It is expected that the Company will hold between 5 and 15 per cent. of its Gross Assets in cash or cash equivalent investments, for the purpose of making follow-on investments in accordance with the Company’s investment policy and to manage the working capital requirements of the Company.

Changes to the investment policy

No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution. Non-material changes to the investment policy may be approved by the Board. In the event of a breach of the investment policy set out above and the investment and gearing restrictions set out therein, the Management Team shall inform the AIFM and the Board upon becoming aware of the same and if the AIFM and/or the Board considers the breach to be material, notification will be made to a Regulatory Information Service.

Investment characteristics

In order to capitalise on the significant market opportunity, Augmentum Fintech believes its investment strategy should not be one dimensional. Therefore the Company invests in four different areas of opportunity:

• Series A
  • Augmentum can use its propriety network to gain unique access to exciting and fast growth businesses in the sector before valuations inflate
• Series B
  • This is where the current equity gap is the greatest, and where the Company sees the least competition for deals

• Value / Down Rounds
  • Augmentum can capitalise on companies that have not yet achieved expectations despite early raises of capital at significant valuations, and who may now need to restructure their capital base to crystallise their long-term growth potential

• Secondary
  • Lack of liquidity in the market can create a need for founders, angel investors and funds to seek return on their investment before the opportunity has reached maximum potential. Augmentum’s fund structure allows it to buy secondary in exciting companies where other traditional Venture funds can’t

Augmentum’s investments, whether primary or direct secondary transactions, typically:

• Secure a significant minority stake with board participation and rights in portfolio companies;
• Allow the Company to participate in later follow-on funding rounds in order to minimise any dilution where possible; and
• Potentially require the Company to invest £5 million to £15 million of equity over the course of several funding rounds in primary and secondary transactions.

Augmentum is an active investor and believes resolutely in adding value to its portfolio companies. The Company takes an active non-executive role in its companies and works hard to exert positive influence while still maintaining the distance necessary to keep perspective of the greater goal of value enhancement. There are number of key areas where the Company believes it can have most impact:

• Helping scale the Management Team
• Refining and driving the key performance indicators
• Organic growth and acquisition
• Business development and market entry
• Managing underperformance
• Investment exit review

Portfolio

Portfolio

	Fair value of holding at 31 March 2022 £’000	Net investments/ (realisations) £’000	Impact of foreign currency rate changes £’000	Investment return £’000	Fair value of holding at 31 March 2023 £’000	% of Net assets after performance fee
Grover	42,415	–	1,833	(1,098)	43,150	15.5%
Tide	28,221	–	–	7,471	35,692	12.9%
Zopa	25,577	4,000	–	516	30,093	10.8%
Cushon	13,584	750	–	8,456	22,790	8.2%
Volt	5,608	–	–	8,608	14,216	5.1%
Monese	13,225	–	–	(1,542)	11,683	4.2%
BullionVault	10,023	(564)	–	2,106	11,565	4.2%
Onfido	15,393	–	1,198	(6,349)	10,242	3.7%
AnyFin	9,870	2,709	57	(3,331)	9,305	3.4%
Intellis	4,003	–	232	4,177	8,412	3.0%
Top 10 Investments	167,919	6,895	3,320	19,014	197,148	71.0%
interactive investor	42,797	(42,797)	–	–	–	0.0%
Other Investments	58,091	11,532	2,325	(14,801)	57,147	20.6%
Total Investments	268,807	(24,370)	5,645	4,213	254,295	91.6%
Cash & cash equivalents	31,326				40,015	14.4%
Net other current liabilities	(4,929)				(186)	-0.1%
Net Assets	295,204				294,124	105.9%
Performance Fee provision	(15,265)				(16,819)	-5.9%
Net Assets after performance fee	279,939				277,305	100.0%

Team

Management

Partner and CEO

Tim Levene is CEO of the UK’s only publicly listed, fintech-focused investment company Augmentum Fintech. After launching the first iteration of the fund in 2010 with the backing of RIT and Lord Rothschild, Tim and Co-Founder Richard Matthews launched Augmentum Fintech plc on the main market of the London Stock Exchange in 2018.

An experienced entrepreneur and investor, Tim has sat on multiple fintech boards including interactive investor, Tide and Zopa and is highly active in cross-industry initiatives working to boost the UK fintech sector such as the UK FinTech Strategy Group and Innovate Finance. Tim was a founding employee of Flutter.com, which became one of the highest profile digital businesses in the UK after it merged with Betfair.com in 2001.

A World Economic Forum Young Global Leader, Tim was elected in the City of London as an Alderman in the Ward of Bridge in 2022.

Principal

Ellen Logan is a Principal at Augmentum. She previously worked at OC&C Strategy Consultants and at HR analytics startup Bunch, after studying Economics at the University of Edinburgh. Ellen has a particular interest in emerging technologies such as the digital asset economy and alternative payment methods.

Outside of the office she spends her time practicing yoga, experimenting in the kitchen and exploring the art galleries of London.

Partner and COO

Richard Matthews has 23 years of venture capital and private equity experience in the technology, retail and leisure sectors on both sides of the fence.

Richard started his career at PwC before joining Tim at Flutter.com (now Betfair) as CFO. Richard joined Benchmark Capital Europe (now Balderton Capital) in 2002, where he worked on early stage technology investments both in the investment phase and assisting investee companies post-funding, then spent five years investing globally at Manzanita Capital from 2005 before co-founding Augmentum Capital with Tim Levene.

In 2018 Richard and Tim successfully launched Augmentum Fintech on the main market of the London Stock Exchange, in the process becoming the first fintech focused public VC in Europe.

Away from the office Richard enjoys spending time with his family, watching Arsenal and playing golf, though in the case of the latter 2 the word “enjoys” is used in its loosest sense.

Director of Marketing and Operations

Georgie Hazell Kivell heads up marketing and operations at Augmentum, which involves supporting portfolio companies, engaging with investors and the wider fintech ecosystem (including marketing and events), and supporting the team internally.

Georgie has worked in a number of startups across people, strategy and growth leadership positions. Following her MBA and a consultancy project with Crowdcube, Georgie moved into venture capital.

Passionate about diversity and inclusion, particularly in VC and entrepreneurship, Georgie co-leads the UK Women in VC community and is a qualified coach, working with women in tech and entrepreneurship.

Partner

Perry Blacher is a fintech specialist with 25 years’ experience in building and operating online businesses, and has spent the last decade as an investor in, and advisor to, numerous fintech businesses.

Perry graduated from both Cambridge and Harvard before starting his career at McKinsey & Company. In 1998 he left to join Microsoft, before later moving to become a founding Principal of Chase Episode 1 Partners.

Perry later followed the route of the entrepreneur when he went on to become founder and CEO of two businesses, both of which sold to public companies (Serum in 2002, and Covestor in 2007). More recently, Perry has been a Venture Partner at Amadeus Capital, and holds advisory or non-executive roles with Barclays UK, Google, Onfido, Transfergo, Clearscore, CDC and other fintech businesses.

Partner

Martyn Holman has nearly 20 years of experience as an operator, advisor and investor in tech and growth spaces.

Martyn’s early career was spent as a strategy consultant with the Boston Consulting Group, consulting to FTSE 50 clients across consumer, energy, financial services and heavy industry. Since this time he has accrued 15 years of experience as both an operator and investor in the tech/VC space. He was a key member of the early Betfair team, the UK’s first true Unicorn, and later co-founded LMAX Exchange which has since featured as the number 1 Times Tech Track Growth Company.

Most recently Martyn spent nearly 5 years as an investor and partner in UK venture capital where he helped raise a £60m early seed fund. Martyn is a graduate of Jesus College, Cambridge University, from where he graduated in 1996 with a first class degree in engineering, and has an MBA from the Said Business School in Oxford, gained with Distinction in 2001.

Principal​

Reginald de Wasseige is a Principal at Augmentum Fintech. Reggie started his career in private equity in Belgium (his home country), at Cobepa, and went on to explore entrepreneurship through founding a software company focusing on document security for large organisations. Off the back of both experiences, VC was a natural evolution and Reggie joined ABN AMRO Ventures, the venture capital arm of the Dutch bank, and relocated to Amsterdam. This first VC position introduced him to the world of fintech and was also the start of his international adventure.

Advisory

Edward Wray

Co-founded Betfair, which later floated on the London Stock Exchange in 2010 valued at £1.4 billion, and has twice won the Ernst & Young Entrepreneur of the Year award. Having stepped down from his role as chairman of Betfair in 2012, Edward continues to invest in Fintechs and currently holds directorships at Funding Circle, LMAX, Property Partner and Prodigy Finance, and is a trustee of Nesta, TheMix and Mental Health Innovation.

Competition

The main competitors of Augmentum Fintech are listed as follows:

1. Jupiter US Smaller Companies (JUS)
2. Invesco Income Growth Trust (IVI)
3. Gabelli Value Plus+ Trust (GVP)
4. JPMorgan Japan Small Cap G&I (JSGI)
5. Montanaro UK Smaller Companies (MTU)​​.

Market

Total Addressable Market (TAM)

This would encompass the entire revenue opportunity available for fintech services globally. Considering the global fintech market is projected to grow significantly, the TAM would be a substantial figure.

Serviceable Available Market (SAM)

SAM narrows down the TAM to the portion addressable by Augmentum given its geographical focus (Europe) and specific fintech sub-sectors it targets (such as digital banking, asset management, etc.).

Serviceable Obtainable Market (SOM)

This is the portion of the SAM that Augmentum can realistically capture in the near term, considering its current resources, competition, and market share.

Financials

Financials

Year	1	2	3	4	5	6
Period end date	31/03/2019	31/03/2020	31/03/2021	31/03/2022	31/03/2023	31/03/2024
Period duration (days)		366	365	365	365	366
	Historic	Historic	Historic	Historic	Historic	Forecast
Profit and loss
Gain on investment				56,681	9,858
Interest income				3	412
Expenses				2,631	(5,377)
(Loss)/Return before Taxation				59,315	4,893
Taxation				0	0
(Loss)/Return for the year				59,315	4,893
(Loss)/Return for share (pence)				34.9p	2.7p
Balance sheet
Non-Current Assets
Investments held at fair value				254,295	268,807
Property, plant & equipment				297	9
Current Assets
Right-of-use asset				588	750
Other receivables				555	391
Cash and cash equivalents				40,015	31,326
Total Assets				295,750	301,283
Current Liabilities
Other payables				(948)	(5,296)
Lease liability				(678)	(783)
Total Assets less Current Liabilities				294,124	295,204
Net Assets				294,124	295,204
Capital and Reserves
Called up share capital				1,810	1,810
Share premium				105,383	105,383
Special reserve				85,218	91,191
Retained earnings:
Capital reserves				117,740	107,989
Revenue reserve				(16,027)	(11,169)
Total Equity				294,124	295,204
Net Asset Value per share (pence)				168.5p	163.7p
Net Asset Value per share after performance fee (pence)				158.9p	155.2p
Cash flow statement
Operating activities
Sales of investments				44,226	11,263
Purchases of investments				(24,855)	(55,992)
Acquisition of property, plant and equipment				(365)	(9)
Interest income received				326	1
Expenses paid				(5,058)	(3,958)
Lease payments				(153)	(139)
Net cash inflow/(outflow) from operating activities				14,121	(48,834)
Issue of shares following placing and offer for subscription				–	55,000
Costs of placing and offer for subscription				–	(1,363)
Purchase of own shares into treasury				(5,432)	(910)
Net cash generated from financing activities				(5,432)	52,727
Net increase in cash and cash equivalents				8,689	3,893
Cash and cash equivalents at start of year				31,326	27,433
Cash and cash equivalents at end of year				40,015	31,326

Risks

The company’s key risks fall broadly under the following categories:

Macroeconomic Risks

The performance of the Group’s investment portfolio is materially influenced by economic conditions. These may affect demand for services supplied by investee companies, foreign exchange rates, input costs, interest rates, debt and equity capital markets and the number of active trade and financial buyers.

All of these factors could have an impact on the Group’s ability to realise a return from its investments and cannot be directly controlled by the Group. Particular current factors include high inflation, recession fears and sanctions related to the situation in Ukraine.

Strategy Implementation Risks

The Group is subject to the risk that its long-term strategy and its level of performance fail to meet the expectations of its shareholders.

Investment Risks

The performance of the Group’s portfolio is influenced by a number of factors. These include, but are not limited to:

1. the quality of the initial investment decision;
2. reliance on co-investment parties;
3. the quality of the management team of each underlying portfolio company and the ability of that team to successfully implement its business strategy;
4. the success of the Portfolio Manager in building an effective working relationship with each team in order to agree and implement value-creation strategies;
5. changes in the market or competitive environment in which each portfolio company operates;
6. the macroeconomic risks described above; and
7. environmental, social and governance (“ESG”) factors.

Any of these factors could have an impact on the valuation of an investment and on the Group’s ability to realise the investment in a profitable and timely manner.

The Company also invests in early-stage companies which, by their nature, may be smaller capitalisation companies. Such companies may not have the financial strength, diversity and the resources of larger and more established companies, and may find it more difficult to operate, especially in periods of low economic growth.

Portfolio Diversification Risk

The Group is subject to the risk that its portfolio may not be diversified, being heavily concentrated in the fintech sector and the portfolio value may be dominated by a single or limited number of companies.

Cash Risk

Returns to the Company through holding cash and cash equivalents are currently low. The Company may hold significant cash balances, particularly when a fundraising has taken place, and this may have a drag on the Company’s performance.

The Company may require cash to fund potential follow-on investments in existing investee companies. If the Company does not hold sufficient cash to participate in subsequent funding rounds carried out by portfolio companies, this could result in the interest the Company holds in such businesses being diluted. This may have a material adverse effect on the Company’s financial position and returns for shareholders.

Credit Risk

As noted the Company may hold significant cash balances. There is a risk that the banks with which the cash is deposited fail and the Company could be adversely affected through either delay in accessing the cash deposits or the loss of the cash deposit. When evaluating counterparties there can be no assurance that the review will reveal or highlight all relevant facts and circumstances that may be necessary or helpful in evaluating the creditworthiness of the counterparty.

Valuation Risk

The valuation of investments in accordance with IFRS 13 and International Private Equity and Venture Capital (IPEV) Valuation Guidelines requires considerable judgement and is explained in note 19.17.

The Company’s investments are illiquid and a sale may require consent of other interested parties. Such investments may therefore be difficult to value and realise. Such realisations may involve significant time and cost and/or result in realisations at levels below the value of such investments as estimated by the Company.

Valuations are often based on comparator prices and market-based multiples, which can be affected by equity market sentiment and comparators’ situations that may not reflect the individual positions of companies invested in.

Operational Risk

The Board is reliant on the systems of the Group and Company’s service providers and as such disruption to, or a failure of, those systems could lead to a failure to comply with law and regulations leading to reputational damage and/or financial loss to the Group and/or Company.

Key person risk

There is a risk that the individuals responsible for managing the portfolio may leave their employment or may be prevented from undertaking their duties.

Appendix

Relative valuation approach

As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.

What's the expected return of an investment in Arctic Shores using the relative valuation approach?

Stockhub estimates that the expected return of an investment in Arctic Shores over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below.

What are the assumptions used to estimate the return figure?

Key inputs

Description	Value	Commentary
Which type of multiple do you want to use?	Growth-adjusted EV/sales	For the numerator, the Stockhub users believe that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, the Stockhub users believe that because it expects Arctic Shores to reinvest almost all of its revenue back into the business over the five year forecast period and therefore its earnings are expected to be abnormally low over the period, it's best to use sales. Accordingly, the Stockhub users suggest valuing its company using the EV/sales ratio. However, the Stockhub users think that to take into account the different business lifecycle stages of its peers, the most suitable valuation multiple to use is the growth-adjusted EV/sales multiple, rather than the EV/sales multiple.
In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use?	Year 5	Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.
In regards to the growth-adjusted EV/sales multiple, for the sales growth figure, which year(s) do you want to use?	Year 6, from now	Stockhub suggests that for the sales growth figure, it's best to use Year 6.
In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use?	0.18x	In Stockhub's view, Arctic Shores closest peer(s) is Sova Assessment Limited.
Which financial forecasts to use?	Stockhub users	The only available forecasts are the ones that are supplied by the Stockhub users (the forecasts can be found in the financials section of this report), so Stockhub suggests using those.
What's the current value of the company?	£21.98 million	The Stockhub users calculate the valuation as of £21.98 million (for the calculation, see the 'Arctic Shores Series B valuation calculation' table in this report. However, according to Dealroom.co estimates, the firm valuation is between $30m and $46m ($38 million mean) as of January 2023. The valuation is based on either of: the publicly disclosed value, or an estimate that is based on the last funding round amount, using similar rounds as benchmarks.
Which time period do you want to use to estimate the expected return?	Between now and five years time	Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.
Which valuation recommendation method do you want to use?	Relative	There's two main types of valuation recommendation methods, relative and absolute. The relative method determines the investment recommendation relative to other investments (e.g. the investment is "suitable" if it's within say the top 10% of the investment universe in terms of investment returns), whereas the absolute method determines the recommendation based on a fixed return amount (e.g. the investment is "suitable" if it returns 50% or more). Assuming sufficient data, the Stockhub users suggest using the relative method.
Which top proportion of the investment universe constitutes a "suitable" rating?	10%	The proportion depends on the user's preference. That said, typically, the higher the proportion, the higher the risk associated with the investment.
Which universe of investments do you want to use?	All investments	If the main objective of the user is to maximise investment returns, then the Stockhub users suggest using 'all investments' as the investment universe.