Draper Esprit, the venture capital company whose hit investments included Cazoo, TransferWise and Trustpilot long before they floated, is seeking £111 million from investors to back the surging numbers of new tech businesses.
As part of the plan, Draper Esprit will move to the main market of the Stock Exchange.
Currently on the junior Aim market, Draper’s chief executive Martin Davis told the Evening Standard the company could be in the FTSE-100 in two years if it keeps growing at its current pace.
The fundraiser is being done by issuing new shares in the company, and Davis said he was keen for members of the public to have the chance to buy as well as big City institutions.
“We are investing in super exciting companies and want everyone to have a slice - even your granny,” said Davis.
“Traditionally there has been no way for the public to get early access to brilliant companies - think about Apple or Google - but through us they can.”
Retail investors can buy into the new share issue through Primary Bid an investment platform company in which Draper Esprit was an early investor.
Draper Esprit has received £206 million during the year from profitably exiting some of its investments - a process known as realisation. In the past year, those included Peak Games, TransferWise and Decibel, a software firm allowing businesses to measure customer experience.
Davis, delivering his first full-year profit figures for the group, said: “We’ve had good realisations so we’re not short of cash but we think it is the right thing for shareholders to say: ‘With a little bit more dry powder we can really change the company’s prospects.”
He said there was an unprecedented number of strong new business ideas prompted by companies’ accelerating push in digitisation, big data and analytics since the pandemic.
“We don’t think this is fizzling out. The number of exciting companies seeing new opportunities is amazing as a result of the post-pandemic world.”
In the year to March, Draper Esprit’s gross portfolio value increase from £703 million to £984 million. It invested £128 million in the year, with the flow of deals accelerating sharply in the second half of the year after it spent the first half figuring out the implications of Covid on its businesses.
Since the financial year ended, it has invested a further £48 million including in Manna, a drone company doing “final mile” deliveries for retailers and tech companies FintechOS, Cervest and Lyst.
Davis said moving up to the main market at the Stock Exchange would attract more international investors and highlight the group’s strong compliance levels.
Such safety procedures were vital as the company got bigger, he said: “If we do something wrong and blow up it affects more people, more entrepreneurs, more investors and employees.”
Early stage investing is inherently high risk because the failure rate of start-ups is much greater than in mature plcs where most other funds invest.
There has been much speculation in the City that technology valuations have peaked on the stock market, so the values of startups will be badly affected.
Davis acknowledged that start-up valuations were affected by the stock market, in part because venture capitalists generally abide by British Venture Capital Association rules which force them to take plc prices into consideration when estimating values.
“But that’s just one factor of many,” he said. “The reality is people are willing to pay more for some of these [technology] assets because they now have better visibility of the way the world will look, and how we manage our lives in future.”
Some of Draper Esprit’s biggest hopes:
You will not have heard of any of these companies, but Draper Esprit reckons they could be household names in the coming years:
Manna: A drone company which will take your shopping to your door. Manna is already operating in test conditions, promising to deliver a coffee to your door in three minutes. In one test, it delivered a birthday cake so quickly that the candles on top were still alight when it arrived.
Focal Point Positioning: A tech company with super advanced geo-location skills. The company claims its software can give you ten times better accuracy than conventional GPS.
CoachHub: An online coaching and mentoring programme for use in companies, allowing firms to offer cost effective training in far more areas of the business than conventional HR programmes allow
PrimaryBid: Already making huge waves in the world of investing, this business allows companies launching stock market flotations or new share issues to include the general public, rather than just big City institutions
River Lane: An operating system for quantum computers, if it wins the race among its peers, River Lane could be the main OS for the next generation of personal computers if quantum computing takes off as its fans predict