TIDMWWW
RNS Number : 0210B
SuperSeed Capital Limited
31 May 2023
SUPERSEED CAPITAL LIMITED
(the "Company")
FIRST QUARTER 2023 RESULTS (the "Period")
SuperSeed Capital, a company established as a venture capital
fund of funds for early-stage AI/SaaS companies, announces results
for the quarter ending 31 March 2023. The Company invests in
technology-led innovation, primarily through funds managed by
SuperSeed Ventures LLP (the "Manager"). The Company's principal
investment to date is in SuperSeed II LP (the "Fund").
Financial Highlights for Q1 2023:
-- NAV per share has grown by 8% over the Period to GBP1.05.
-- IRR on portfolio investments since IPO >25%.
-- Available cash and prepaid investment commitments of GBP314,006 at end of Period.
-- The Company's Operating Profit for Q1 2023, which includes
unrealised gains on investments held at fair value, has grown by
298% compared to Q1 2022.
Portfolio and Investment Highlights:
-- Sales growth continued in Q1 2023, with quarter-on-quarter
contracted SaaS revenue across the portfolio of the Fund up by 11%
over the previous quarter. The expectation is that sales growth
will increase in Q2 2023.
-- Strong underlying performance for valuations based on new
financing rounds for the Fund's portfolio companies. Three
companies in the Fund's portfolio had offers for follow-on
financing in Q1 2023, all at increasing valuations from the Fund's
2022 investment cost.
-- Positive portfolio financing activity led to a healthy result
for the Company in Q1 2023, with earnings per share in excess of
8p.
-- Kluster, the revenue strategy AI platform that helps
companies beat their revenue targets, was added to the Fund's
portfolio in the first quarter of 2023.
Outlook for Q2 2023:
-- Portfolio sales forecast for the Fund in Q2 2023 remains
strong, and the expectation is sales growth will land in the 15-25%
range (quarter-on-quarter growth).
-- On the back of the performance of the underlying Fund
portfolio and given the uncertain market environment, the Company
expects second-quarter profit to be in the GBP200,000 to GBP300,000
range (8-13p/share).
-- Continued strong investment activity, with the Fund expecting
to make a further two investments in the AI/SaaS space in Q2
2023.
Mads Jensen, Investment Manager commented:
"In the face of significant macroeconomic headwinds and economic
uncertainty, the Fund's underlying portfolio has continued to
perform strongly and is well-positioned for further growth in Q2
2023. Kluster has been a tremendous addition to our holdings and is
well positioned to take advantage of the extensive structural
growth in AI."
For more information, please contact:
SuperSeed Capital Limited +44(0) 203 405 3060
Mads Jensen, Investment Manager
VSA Capital - AQSE Corporate Adviser and
Broker +44(0) 203 005 5000
Corporate Finance: Andrew Raca
------------------------------------------ ----------------------
Investment Manager's Review:
We are now one-third of the way into 2023, and the world is in
the middle of four major transitions:
1. Zero Interest Rate Policy (ZIRP) -> Inflation and Higher Interest Rates
2. Globalisation -> Global Power Rivalry
3. Internet & Mobile -> Next-Gen AI
4. High-Carbon Economy -> Low-Carbon Economy
We have only seen the beginning of the disruption caused by
these changes. The next decade will see an upheaval of business,
unlike anything we have seen in our lifetimes. The challenges will
be immense. And the opportunities will be profound.
Opportunities in software investing
These global changes continue to dislocate industries. And with
that dislocation, new investment opportunities emerge. On a gross
dollar basis, the biggest economic opportunity is likely in the
clean energy transition. Going from high-carbon to low-carbon
provides a trillion-dollar opportunity in the coming decades. It
will also require trillions of dollars in investment. There will be
areas with stand-out returns, but in many cases the % returns will
be modest as the transition will be very capital intensive.
When measuring on a %-return basis, we expect that the biggest
investment opportunity in this decade continues to be in software.
In the past decade, SaaS has already been an attractive investment
category. And the value created by SaaS companies will only
increase as we add more AI into the mix.
SuperSeed exists to back Europe's best B2B SaaS founders at the
earliest stages and to help them build great companies. In the
short term, our portfolio companies enable their customers to drive
revenue growth and efficiency savings using next-generation
software and AI. In the long term, they have an opportunity to
create category-defining global technology companies.
The current investing landscape
In 2021 we started seeing something we haven't seen for a long
time: inflation. In response, central banks have increased interest
rates to reduce liquidity and cool down economies.
This policy change has done exactly what was expected. Liquidity
has come down, and with less money sloshing around, so have the
frothy valuations of 2020 and 2021.
The tech sector went through a massive valuation correction in
2022. From the peak in November 2021 to the through in November
2022, EMCLOUD (the Bessemer Emerging Cloud Index - an index of 75
publicly listed SaaS/Cloud companies) declined by 62%. It's not
quite the dot-com collapse, but it is a meaningful drop.
During the same period, the median forward revenue multiple
declined from 15x to 4.5x (since recovered to 5.25x). Investment
valuations are now back to where they were in 2017.
Macroeconomy in Q1 2023
As of the end of April, the S&P500 is up 9%. Although not
bad over a 4-months period, this is on the back of a dismal 2022.
And almost all the gains are driven by the big tech stocks
(Microsoft, Apple, Google, Meta, Amazon and Tesla).
EMCLOUD is up 7%, but all the gains were in January. The index
has been running sideways for three months.
2023 continues to be an uncertain proposition for investors. The
big tech companies took the pain in Q4 and have been cutting costs.
While this boosts short-term earnings, it paints a different
picture of the future. Has big tech now gone "ex-growth"? And if
even Google can't be relied on for growth, what will pull the
economy out of the current malaise?
The upside of "back-to-basics."
As highlighted above, we've seen a meaningful reduction in
valuations. And counterintuitive as this may sound, this reduction
is largely a great thing for serious technology start-up founders
and investors. Frothy valuations and an abundance of capital drove
all the wrong behaviours. Too much capital spent on unproductive
endeavours. And too much competition for talent and customer
attention.
The froth has now been replaced with a "back-to-basics" focus on
strong unit economics and building good companies. This makes it
easier for founders to focus on what matters and for investors to
buy into the best companies at an appropriate price.
The venture eco-system in Q1
Venture funding continued to decline in the first quarter of
2023 and compared unfavourably to Q4 of last year, which was itself
already the weakest quarter since Q2 of 2020. Both the number and
value of VC deals were down, with the UK struggling compared to its
global peers. It is fair to say that the general market slowdown
has continued.
Outlook for the rest of 2023
Financial markets continue to be turbulent, and we don't expect
to see valuation multiples increase meaningfully in the short term.
However, the four transitions mentioned above lead to many exciting
investment opportunities - especially in AI.
Generative AI is a concept that has been building for years, but
it came to the forefront of the tech industry in 2022. Over the
past decade, AI (/machine learning) has primarily been used for
classification. Show an algorithm lots of data, and it can help
figure out whether it is a cat or a dog; a working product or a
defective product; a stock to buy or a stock to sell. In one word:
classification.
With generative AI, the field is taking a great leap forward.
It's no longer just about classifying things into neat categories.
It is about creating whole new things. At first, this was mainly as
digital objects (e.g. a digital product design), but generative AI
now extends to physical objects. An example of this is our
portfolio company Ai Build. The company has created a platform
which helps high-end manufacturers use AI and 3D printing to create
new products faster and more efficiently. This is especially useful
in automotive and aerospace, where Ai Build already has many
customers.
The outlook for the Fund's portfolio for the remainder of 2023
continues to be very encouraging. We still expect revenue for the
existing portfolio [companies] to more than double over the course
of the year. And in parallel, we will be adding existing new
AI/SaaS companies to the portfolio.
2023 is a great time to build technology companies and an
excellent time to back the best technology founders to help them on
their journey. We look forward to an exciting year for our
portfolio and the wider software/AI industry.
New investment - Kluster:
Key information
Kluster has created a revenue intelligence platform which uses
machine learning to accurately predict revenue forecasts and manage
pipelines by reverse engineering targets through deeper analysis of
management data, sales rep data, and market data. The platform is
used by sales teams, function heads, and the board to optimise four
main components; forecasting, reporting/dashboards, pipeline
management, and setting/hitting KPIs.
Sales forecasting is the compass that CFO's use to aid the
navigation of their businesses and is a core metric employed to
measure the improving financial performance of a company. Yet, many
companies continue to fail to meet their targets, negatively
impacting investors' perception of a business, because they employ
old-fashion approaches to setting goals and forecasting
attainment.
Investment name Kluster
Industry AI/SaaS
Geography UK
Currency of investment GBP
Stage of initial investment Series A
Fund's role in initial investment Co- Lead
Website https://www.kluster.com/
Investment Rationale
Solves a fundamental problem for businesses:
Kluster has developed a powerful platform to solve the problem
of inaccurate and inefficient sales forecasting, reporting, and
pipeline management.
Expertise of Management Team:
Founders Dan Thompson and Rory Brown combine experience from
both a product/tech and sales domain perspective which positions
them to capitalise on the need for intelligent revenue management
software. The team are targeting high growth B2B SaaS companies who
are hungry for real-time data but have poor visibility over their
sales cycle. Kluster's platform pulls data from existing CRM
systems and applies ML to pull smarter metrics from the data.
Through this, Kluster is able to provide more accurate revenue
forecasting, and realistic KPIs by reverse engineering targets -
end result being an increase in conversion rates, decrease in sales
cycles, and increase in AOV.
Customer Traction:
There are a number of revenue management platforms in addition
to the incumbents such as Salesforce and HubSpot - however none
offer the level of flexibility, mathematical/AI input driven input,
and specific focus on top line growth and pipeline management.
Kluster's revenue grew more than 60% in 2022 in an otherwise
challenging climate, with solid pipeline for the year ahead.
SuperSeed Capital Limited
Condensed Statement of Comprehensive Income
for the period 1 January 2023 to 31 March 2023
1 January 6 October
2023 2021
to to
31 March
2023 31 March 2022
GBP GBP
Income
Investment income 328 -
Realised gain on investments held at
fair value through profit or loss 33,052 -
Unrealised gain on investments held
at fair value through profit or loss 180,555 65,328
Other income 1 -
Total income 213,936 65,328
---------- --------------
Expenses
Establishment costs - 194,298
Administration fees 7,611 4,932
Audit fees 5,671 5,178
Directors' fees 4,500 4,500
Insurance - 535
Legal & professional fees 12,183 -
Loan interest 134 -
Regulatory fees 5,351 5,297
Sundry expenses 703 205
Total expenses 36,153 214,945
---------- --------------
Total gain/(loss) and comprehensive
income for the period 177,783 (149,617)
========== ==============
Basic earnings per share 0.086776 (0.210554)
Diluted earnings per share 0.069795 (0.210554)
Operating profit excluding establishment
costs for the period 177,783 44,681
========== ==============
Basic operating profit excl. establishment
costs per share 0.086776 0.062879
Diluted operating profit excl. establishment
costs per share 0.069795 0.062879
SuperSeed Capital Limited
Condensed Statement of Financial Position
as at 31 March 2023
31 December
31 March 2023 2022
GBP GBP
Non-current assets
Investments 2,189,288 1,799,616
Total non-current assets 2,189,288 1,799,616
-------------- ------------
Current assets
Trade and other receivables 254,895 11,025
Cash and cash equivalents 64,006 235,089
Total current assets 318,901 246,114
-------------- ------------
Total assets 2,508,189 2,045,730
============== ============
Current liabilities
Trade and other payables 16,678 21,745
-------------- ------------
Total current liabilities 16,678 21,745
-------------- ------------
Total liabilities 16,678 21,745
============== ============
Net assets 2,491,511 2,023,985
============== ============
Equity
Share capital 2,369,743 2,080,000
Retained earnings 121,768 (56,015)
Total equity 2,491,511 2,023,985
-------------- ------------
Net asset value per ordinary share 1.051384 0.973070
SuperSeed Capital Limited
Condensed Statement of Changes in Equity
for the period 1 January 2023 to 31 March 2023
Share Capital Retained Total
Earnings
GBP GBP GBP
Ordinary Shares issued on incorporation 1 - 1
Issue of Ordinary Shares 1,999,999 - 1,999,999
Total comprehensive loss for
the period - (149,617) (149,617)
Balance as at 31 March 2022 2,000,000 (149,617) 1,850,383
-------------- ---------- ----------
Share Capital Retained Total
Earnings
GBP GBP GBP
Balance as at 31 January 2023 2,080,000 (56,015) 2,023,985
Issue of Ordinary Shares 289,743 - 289,743
Total comprehensive gain for
the period - 177,783 177,783
Balance as at 31 March 2023 2,369,743 121,768 2,491,511
-------------- ---------- ----------
SuperSeed Capital Limited
Condensed Statement of Cash Flows
for the period 1 January 2023 to 31 March 2023
1 January 6 October
2023 2021
to to
31 March 2023 31 March 2022
GBP GBP
Cash flows from/used in operating
activities
Net cash flow used in operating activities (43,290) (213,071)
Cash flows used in investing activities
Net cash flow used in investing activities (127,659) (289,687)
Cash flows from financing activities
Net cash flow from financing activities (134) 2,080,000
Net movement in cash and cash equivalents
during the period (171,083) 1,497,242
Cash and cash equivalents at the beginning
of the period 235,089 -
Cash and cash equivalents at the end
of the period 64,006 1,497,242
============== ==============
SuperSeed Capital Limited
Investment Analysis
for the period 1 January 2023 to 31 March 2023
31 March s
2023
GBP GBP
Cost 1,748,152 1,539,035
Cumulative movement in value 441,136 260,581
Fair value 2,189,288 1,799,616
========== ============
Investment fair value can be further analysed
as follows:
1 January 6 October
2023 2021
to to
31 March 31 December
2023 2022
GBP GBP
Cost:
Cost at beginning of the period 1,539,035 -
Cost of investment - settled 515,017 1,539,035
Cost of investment - sold (305,901)
Total cost of investment 1,748,152 1,539,035
========== ============
Fair value movement:
Fair value adjustment at beginning of the
period 260,581 -
Revaluation of underlying investments 156,750 260,581
SuperSeed II LP management fee and other
net movements in NAV 23,805 -
441,136 260,581
========== ============
SuperSeed Capital Limited fair value of
investments 2,189,288 1,799,616
========== ============
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END
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