One could be forgiven for assuming that the current pandemic would usher in an era of rationalisation, a normalisation of excess and a return to fundamentally sound company valuations. The policy induced euphoric equity valuations with which we entered the current crisis logically had the side effect of buoying assets within the VC/PE arenas, as easy access to capital sought a home. Expectantly the ensuing market correction would historically lead to a sanguine investing environment amongst falling asset prices and risk aversion; allowing the investor class access to opportunities in public and private markets. Curiously - this is not what has wholly transpired - capital has instead gravitated toward and accelerated existing trends into lean cash rich business models bolstering the influence and market positioning of a few incumbent names. The un-endearingly termed FAANG stocks are now a record setting 20% of the US benchmark index S&P 500.
Public vs. PrivateThe current tech focused public markets investor is faced with the daunting task of sifting through tech boom era multiples in search of returns. Few would doubt that many of the tech stalwarts indeed face unassailable leads due to their footprint and increasing influence (politically and financially). However, with P/E ratios at all time highs and in a global picture of increasing country insularity, the probability of negative surprises and significant downside moves is clearly non zero. As such and potentially counterintuitively, the VC and PE arenas are very active and retain significant pricing power and this is allowing investment in private companies at previously little seen competitive valuations. What value then to the oft heard criticism - that VC-fuelled start-ups aren't held to the same standard as publicly traded competitors who answer to investors worried about cash flows and operating earnings every quarter? Well, over 50% of S&P companies have dropped or shelved guidance...visibility anyone? Overarchingly one area of un-equivocation is that COVID and its ramifications have accelerated trends such as remote working, digital payments and broad adoption of tech within our daily lives; a trend which bolsters the veracity of our focus here at Fuel. We diligently continue to apply our rigorous methodology across our chosen target universe of future leading global scalable marketplaces, platforms and software (SaaS). Our team has been investing in these sectors for over 10 years and our philosophy remains the same, if a deal is fundamentally too expensive at this early stage, we will leave it on the table.
About Fuel Ventures:
- Fuel Ventures is a leading early-stage technology investor, investing in fast-growth UK and European businesses that have the potential to return between 10x and 100x.
- Entrepreneurial driven fund led by multi-exit entrepreneurs with £200m+ in exits.
- An advisory committee with over 50+ years’ experience, and exits totalling £2b+
- We now have 35 portfolio companies and after only 4 years our first fund has a 7.4X valuation uplift, validated by third-party follow-on investors.
- We screen 3500+ companies a year using our thorough due diligence processes internally, cherry picking the best 10 companies that have the potential to achieve 100x returns
- We put a director on the Board of every company we invest in and take an active and hands-on role in the management and development of each company, plus bring added extra value through our network of sector experts.
- We invest in commercially scalable technology companies, with operating gross margins between 30% - 90%
- Targeting a minimum of 10x return on investments over a 5-7 year horizon.
- Generous HMRC EIS tax benefits including 30% income tax relief, 0% capital gains tax on exit, loss relief, and inheritance tax relief for UK taxpayers.
- We invest in every fund ourselves, with a large 10% personal investment alongside our investors, this is £2,000,000 - £3,000,000 into every fund!