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A core tech holding through the cycle

Molten Ventures 21 March 2022 Outlook
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Molten Ventures

A core tech holding through the cycle

Year-end outlook

Listed venture capital

21 March 2022

Price

727p

Market cap

£1.11bn

Net cash (£m) at 30 September 2021

156

Shares in issue

153m

Free float

93%

Code

GROW

Primary exchange

LSE

Secondary exchange

Euronext Dublin

Share price performance

%

1m

3m

12m

Abs

2.0

(22.3)

(17.6)

Rel (local)

3.4

(22.3)

(23.0)

52-week high/low

1180p

611p

Business description

Molten Ventures (formerly Draper Esprit) is a London-based venture capital firm that invests in the European technology sector. It has a portfolio of c 70 investee companies and includes a range of funds (seed, EIS and VCT) within the group, as well as its flagship balance sheet VC fund.

Next events

Trading update

April 2022

FY22 results

June 2022

Analysts

Richard Williamson

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

Molten Ventures is a research client of Edison Investment Research Limited

Molten Ventures is the leading listed venture capital (VC) in Europe, providing liquid exposure to Europe’s high-growth tech start-up ecosystem, through a diversified investment holding company with a proven track record. Following the sell-off of technology and growth stocks, Molten now trades at a 18% discount to the H122 NAV. This is despite Molten delivering a 20% H117–H122 NAV/share CAGR and management’s expectations for c 35% fair value growth for FY22 (implying FY22 NAV/share of c 929p). Molten offers a diversified technology portfolio across multiple segments, delivering the potential for NAV returns uncorrelated to the wider public markets. Management is confident in the outlook for the European technology sector and is focused on its Series B+ growth fund in 2022 to capitalise on the opportunity.

Period
end

plc cash*
(£m)

Gross portfolio value (£m)

NAV
(£m)

NAV/share
(p)

P/NAV
(x)

03/20

34.1

702.9

659.6

555

1.31

09/20

62.1

702.4

714.7

600

1.21

03/21

160.7

983.8

1033.1

743

0.98

09/21

156.2

1350.2

1357.4

887

0.82

Note: *Includes restricted cash but not funds held on behalf of EIS/VCT investors.

Molten’s investor day 2022

On 3 March 2022, Molten’s annual investor day showcased the range of companies in which it invests. In his introduction, CEO Martin Davis noted the group’s portfolio remains well funded, with most companies funded for at least the next 12 months, having topped up cash reserves in 2021. He also confirmed Molten remains on track to deliver targeted NAV growth, cash realisations and PBT in FY22. In the headline presentation, Graphcore announced its ‘brain scale’ computer, due in 2024 for US$120m each.

Opportunity for Molten to prove its mettle in CY22

Driven by the marked rotation out of tech, Molten’s share price has dropped 38% since its peak of 1,180p in September 2021. With a healthy pipeline of investment opportunities, and a portfolio continuing to show strong growth, management is confident that Molten can continue to deliver growth and remains focused on launching its Series B+ growth fund (c £400m fund targeted) in 2022 to capitalise on the opportunity. By deploying third-party capital alongside its balance sheet, the co-investment fund would support Molten to lead deals and secure allocation in an increasingly competitive European technology funding environment.

Valuation: 20%+ five-year NAV/share CAGR

Investors are in ‘risk-off’ mode amid concerns over rising interest rates, elevated geopolitical risks and high technology multiples. After its strong performance FY21-H122, Molten’s diversified portfolio and consistent track record of growth (five-year NAV/share CAGR of 20%) demonstrate why we believe the group warrants a premium to its peers, as a leading European VC company, in a sector with the potential to deliver strong growth and NAV returns uncorrelated with the public markets. Molten trades at 0.78x our estimated FY22 NAV per share (c 929p), with the discount to NAV potentially offering an attractive entry point to investors.

Investment summary

A leading European VC firm with a proven track record

Molten Ventures invests in high-growth companies across the UK and Europe and has built a direct investment portfolio of c 72 companies, across four technology sectors: consumer, enterprise, hardware and deeptech, and digital health and wellness. Its core portfolio comprises its 17 largest holdings, representing 68% of portfolio value at 30 September 2021

Exhibit 1: Core portfolio by sector (H122)

Exhibit 2: Core portfolio by value (H122)

Source: Molten Ventures (at 30 September 2021)

Source: Molten Ventures (at 30 September 2021)

Exhibit 1: Core portfolio by sector (H122)

Source: Molten Ventures (at 30 September 2021)

Exhibit 2: Core portfolio by value (H122)

Source: Molten Ventures (at 30 September 2021)

The company has a proven track record of delivering successful investments, having deployed over £810m of capital since its IPO in 2016 and realised almost £420m of investments. Its portfolio was valued at £1.35bn (GPV) at the end of H122, with a NAV of £1.36bn, equating to a NAV per share of 887p. The group has delivered a 20.3% NAV/share CAGR from H117–H122, recording 19% growth in H122.

Exhibit 3: Core portfolio (at 30 September 2021)

Fair value of investments 31 Mar 2021

Investments in H122

Realisations in H122

Change in fair value in H122

Fair value of investments 30 Sep 2021

Proportion of GPV

Cumulative share of GPV

Fully diluted shareholding 30-Sep-21

Latest funding round

£m

£m

£m

%

£m

%

%

1

Trustpilot

85.5

-

(2.5)

40%

119.7

8.9%

9%

6-10%

IPO (LSE)

2

Graphcore

108.8

-

-

2%

110.7

8.2%

17%

0-5%

Series E

3

Revolut

20.4

-

-

340%

89.7

6.6%

24%

0-5%

Series E

4

Ledger

41.8

10.0

-

68%

70.3

5.2%

29%

6-10%

Series C

5

Aiven

45.5

-

-

33%

60.7

4.5%

33%

6-10%

Series C

6

Form3

10.2

25.0

-

480%

59.2

4.4%

38%

11-15%

Series C

7

UiPath

100.3

-

(35.8)

(44)%

55.8

4.1%

42%

0-5%

IPO (NYSE)

8

Lyst

35.1

7.2

-

43%

50.3

3.7%

46%

11-15%

Pre-IPO

9

Aircall

32.8

3.6

-

50%

49.3

3.7%

49%

6-10%

Series D

10

Thought Machine

18.4

15.4

-

144%

44.9

3.3%

53%

6-10%

Series C

11

Ravenpack

29.9

-

-

17%

34.9

2.6%

55%

16-20%

-

12

CoachHub

12.4

14.7

-

166%

33.0

2.4%

58%

16-20%

Series B

13

Cazoo

25.7

-

(0.1)

28%

32.8

2.4%

60%

0-5%

SPAC (NYSE)

14

M-Files

29.7

-

-

(1)%

29.3

2.2%

62%

6-10%

Series C

15

N26

10.0

-

-

153%

25.3

1.9%

64%

0-5%

Series E

16

Isar Aerospace

14.8

-

-

70%

25.1

1.9%

66%

6-10%

Series B

17

Aiven

12.8

-

-

1%

24.1

1.8%

68%

0-5%

Series E

Core portfolio

645.1

75.9

(38.4)

42%

915.1

67.8%

68%

-

-

Remaining portfolio

336.1

89.1

(29.1)

29%

432.7

32.0%

100%

-

-

Total

981.2

165.0

(67.5)

37%

1,347.8

99.8%

-

-

-

Co-Invest

2.6

-

-

2.4

0.2%

-

-

-

GPV

983.8

165.0

(67.5)

37%

1,350.2

100.0%

-

-

-

Source: Molten Ventures, Edison Investment Research

What makes Molten unique

The factors that help differentiate Molten Ventures from competing investment propositions are:

Rare pure tech exposure: the UK and European public markets offer only limited exposure to the technology sector. However, latest data (State of European Tech 2021) show the European private technology company ecosystem is accelerating and starting to catch up with the United States and China. Molten Ventures provides liquid exposure to this alternative asset class, through a diversified portfolio of high-growth, private technology businesses.

Established reputation as a ‘go-to’ VC investor: as an early mover and market leader in the European VC sector, Molten Ventures has cemented its reputation as an investor of choice. This creates a virtuous circle where, through its partnerships, relationships and track record, Molten can attract top-tier entrepreneurs and businesses, improving its chances of offering superior returns to investors.

Market-leading track record: management is targeting 20% annual fair value growth through the economic cycle (H122: 27%). It has delivered a five-year NAV/share CAGR H117–H122 in excess of 20%, having invested over £810m since IPO, with over £420m of realisations.

Exposure diversified by segment, investment stage and vintage: although it is focused exclusively on technology, Molten offers a portfolio diversified across both vintage and stage of investment, investing in four technology segments (consumer, enterprise, deeptech and digital health). This approach means Molten can diversify its portfolio and ensure it has investee companies ready for realisation and investment through the economic cycle.

Fund-of-funds strategy: Molten is also significantly differentiated through its fund-of-funds strategy, whereby it has invested in 47 specialist seed funds across the UK and Europe (at 30 September 2021). Through this strategy, Molten has leveraged its reach and secured small investments in almost 900 companies, generating an option to make follow-on investments in successful companies from this indirect early-stage portfolio. Molten has already committed £90m to this strategy, of which £39m had been drawn as at 30 September 2021. In its H122 results, Molten pledged a further £75m to be deployed over the next five years.

Priorities, targets and KPIs

Management has largely delivered on its FY22 priorities for the business, including participation in (and increasingly leading) larger funding rounds, as well as further investment in follow-on opportunities, the next Earlybird fund and the fund-of-funds programme. The launch of the co-investment fund for growth stage (Series B+) dealflow remains outstanding business for CY22, although we understand the preparatory work has been completed. In FY22, management expects to meet its core targets for the business: 20% annual growth in GPV through the economic cycle (FY21 40%, management guidance of 35% for FY22); 10–15% realisations as a percentage of GPV through the economic cycle (FY21 29%, first 10 months of FY22 11%); £150m+ of annual investment from FY22 (first 10 months of FY22 £259m); and operating costs (net of fee income) below 1% of NAV (FY21 0.4%, H122 0.8%). In addition, management expects to maintain 12–18 months of cash resources, sustain quality dealflow and achieve the company’s four key environmental, social and governance (ESG) targets set out in its FY21 report and accounts (see ESG section).

Post period end: February trading update

As at end of January 2022 (first 10 months of FY22), Molten Ventures had invested £259m, of which c £106m had been committed to 12 new investments and £153m to follow-ons. Net investment YTD rose to £149m, with cash proceeds from realisations reaching £110m (11% of GPV). Molten’s portfolio companies saw strong revenue growth in CY21, which management forecasts to continue for CY22, with a healthy pipeline of investment opportunities ahead.

Sensitivities: Technology valuations and exits

As a people-based business, Molten draws on its senior investment team (with over 100 years of combined experience) and the team’s market reputation to attract the best entrepreneurs and invest in the most sought-after businesses. Once invested, Molten relies on efficient recycling of capital, with realisations supporting reinvestment. Realisations are dependent on the state of the technology market, the valuations of quoted peers and continuing investor appetite for technology companies at IPO or by way of a trade sale.

Valuation: Attractive VC returns provide portfolio diversification

Noting that valuations of private technology companies have a relatively low correlation to listed equity markets, even if the vehicle is publicly traded, Molten Ventures offers what we believe to be market-leading access to private European technology start-ups, a high-growth asset class that is otherwise largely inaccessible to the public market investor. Molten has built a portfolio of investments at different stages of maturity and a track record of exits that has delivered 20.3% H117–H122 NAV/share growth. Management also has a roadmap to a self-financing business model through scaling its fund management business. With the company trading at 0.82x H122 NAV. Catalysts for a re-rating include growth in third-party fee income with the launch of the growth fund, further scaling of the business and the potential for material upside from Molten’s portfolio through funding rounds, successful exits or IPOs.

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).

Exhibit 4: Graphcore - the road to ultra-intelligent ‘brain scale’ computers (click to play)

Source: Graphcore

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 Davis, 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.

Company overview

Investing in Europe’s leading tech companies

Molten Ventures is a VC company dual-listed on the main market of the London Stock Exchange (FTSE 250) and on Euronext Dublin, with c 50 employees based in offices in London and Dublin. Founded in 2006 as Esprit Capital, the company was renamed Draper Esprit in 2015, after joining the Draper Venture Network (an international alliance of VC firms) before becoming the first European VC firm to list in 2016. Management then changed the firm’s name to Molten Ventures in November 2021, in recognition of the firm’s growth, its evolution and inclusion in the FTSE 250.

Molten’s core focus is on Series A+ funding for leading European start-ups from its own balance sheet, with the majority of capital targeted at later-stage rounds. However, the group also comprises other technology investment vehicles, including tax-advantaged EIS and VCT funds, as well as a strategic partnership with Earlybird Digital, a seed and Series A investor based in Germany.

From the thousands of companies the investment team meets each year, it only invests in c 15–30, including follow-on investments, which it believes have the potential to become market leaders.

Molten Ventures sources investment opportunities through three principal channels:

directly through the group’s market presence and established reputation;

through its membership of the international Draper Venture Network; and

via its seed funds and through its strategic partnership with Earlybird Digital.

Together, these channels deliver a strong pipeline of deals to ensure Molten Ventures has a market-wide view of the European technology investment landscape.

Targeting high-growth global leaders

Molten Ventures invests in high-growth companies with global ambitions and has built a direct investment portfolio of c 72 companies across four technology segments:

Consumer technology: new consumer-facing products, innovative business models and proven execution capabilities that bring exceptional capabilities enabled by technology.

Enterprise technology: the software infrastructure, applications and services that make enterprises more productive, cost-efficient and smoother to run.

Hardware and deeptech: the deeper technologies that will spark advances in computing, consumer electronics and other industries.

Digital health and wellness: using digital and genomic technologies to create new products and services for the health and wellness market.

At the end of H122, Molten’s core portfolio was weighted towards enterprise technology (39% of the core portfolio by value) and hardware and deeptech (29% by value), with consumer (27% by value) and digital health and wellness representing the remaining 5% (Exhibit 5).

Exhibit 5: Portfolio by sector

Source: Molten Ventures (30 September 2021)

Although Molten’s investments all fall within the broader technology sector, these four segments still provide a degree of diversification across the economic cycle, with Molten able to commit capital to segments with lower valuations, while simultaneously realising late-stage investments in segments where demand and valuations are higher.

Molten’s investment approach more UK than US

Molten’s investment approach is more entrepreneur-friendly than the typical US VC model, which sifts potential winners from losers and aggressively cuts underperforming investments. Molten prioritises using resources on its more successful investments, but still devotes time and effort towards its lower-performing companies to help them achieve exits where possible and release value back to Molten’s portfolio. As a rule of thumb, Molten’s management expects 30% of its investments to deliver strong returns, 60% to deliver returns of 0.5–2.0x money invested and only 10% to be write-offs.

Earlybird and fund-of-funds strategies

Seed fund strategy: An effective deal sourcing pipeline

Molten’s fund-of-funds strategy is a significant differentiator from its peers. It launched this strategy in October 2017 and has invested in 47 specialist seed funds across the UK and Europe (as at 30 September 2021). By investing in seed funds, Molten can identify and secure privileged access to a pipeline of attractive early-stage opportunities, ahead of core Series A and B investment rounds. Molten benefits from the expertise of sector-specific funds and an expanded European sourcing network. This strategy also helps Molten Ventures identify and invest in emerging investment trends ahead of its competition, allowing Molten to build relationships with, and providing preferential access to, investee companies.

In return, the seed funds receive additional capital to deploy in their core markets and a direct and deep relationship with Molten Ventures, helping ensure promising investee companies have a natural port of call for follow-on rounds as they develop, scale up and need later-stage capital.

At 30 September 2021, Molten had committed £90m to this strategy (of which £39m had been drawn), with a further £75m pledge with its H122 results to be deployed over the next five years.

Exhibit 6: Pan-European seed fund footprint

Source: Molten Ventures

As part of this strategy, Molten has built a sizeable body of impact funds, including Icebreaker, Seaya Ventures, byFounders and Join Capital (both follow-on funds), Stride, Five Seasons Ventures, Episode 1 and the Hardware Club. In addition, H122 fund commitments have included Atlantic Food Labs (sustainability, nutrition and health), Form Ventures (UK start-ups with public policy exposure) and Forward Partners (ecommerce and applied AI) for its IPO, as well as a follow-on fund for IQ Capital IV A.

Earlybird: A critical strategic investment partnership

The importance of Molten’s partnership with Earlybird cannot be overstated. At 30 September 2022, five of Molten’s core portfolio of 17 companies had emerged from Earlybird’s investment portfolio (Aiven, Isar Aerospace, N26, Smava, UiPath) and 18 of Molten’s 55-strong emerging portfolio. In total, 30% of Molten’s 72 direct investments have been sourced from Earlybird investments.

Exhibit 7: The importance of the Earlybird partnership to Molten Ventures

Source: Molten Ventures

Earlybird invests from seed to Series A, with offices in Berlin, Munich and Istanbul. As with the fund-of-funds strategy, Molten’s strategic partnership with Earlybird not only extends Molten’s investment platform, but also offers access to a bespoke dealflow pipeline and a larger pool of specialist investment expertise.

In July 2018, Molten Ventures took an initial 50% stake in Earlybird Fund VI and then, in 2019, it acquired a 27% stake in Earlybird Fund IV for €63m and a 5% stake in Earlybird DEF for US$20m. In March 2021, Molten committed €17.5m into Earlybird Fund VII and 15m into Earlybird Growth Opportunities Fund. In H122, Molten invested £7.3m into Earlybird’s Digital East Fund I, Growth Opportunities Fund and Earlybird West’s Fund VI and VII.

Molten’s investment track record

Sector-leading 20% five-year NAV per share CAGR H117–H122

Looking at Molten’s track record in terms of gross portfolio return (the increase in GPV, together with net realisations; Exhibit 8 highlights a positive return in every period since IPO, with a return of 27.3% in H122 and a five-year CAGR H117–H122 of 66%. The growth in portfolio value has driven a 57% five-year NAV CAGR, again with a positive return in every 12-month period since IPO, leading to 48% NAV per share growth over the 12 months to H122 and a sector-leading five-year NAV per share CAGR of 20.3% over the period H117–H122.

Along with other London-listed venture capital funds (eg Augmentum Fintech and Forward Partners), as well as Seraphim Space Investment Trust, which has yet to establish a public market track record, we would identify HgCapital Trust (25% five-year NAV per share total return, 18% 10-year total return), IP Group (11% NAV per share CAGR since its 2003 launch) and Oakley Capital (19% five-year NAV per share CAGR) as Molten’s principal technology sector peers.

Exits have delivered an average money multiple of 3.4x

Exhibit 8: Key performance indicators

31/03/17

31/03/18

31/03/19

31/03/20

30/09/20

31/03/21

30/09/21

FY17

FY18

FY19

FY20

H121

FY21

H122

GPV

£m

112.7

243.5

594.0

702.9

702.4

983.8

1350.2

12m trailing growth

43%

116%

144%

18%

3%

40%

92%

Realisations

35.1

15.3

16.0

39.5

105.6

206.3

67.5

Investments

37.1

71.5

226.4

89.9

32.3

128.0

165.0

Gross portfolio return / Fair value growth

40.6%

66.2%

57.5%

9.8%

10.4%

51.1%

27.3%

Net cash/(debt)

£m

24.9

56.6

50.4

(10.5)

62.1

160.5

155.8

NAV

£m

139.9

300.5

618.6

659.6

714.7

1033.1

1357.4

12m trailing growth

9%

115%

106%

7%

5%

57%

90%

NAV per share

p

343

416

524

555

600

743

887

12m trailing growth

9%

21%

26%

6%

4%

34%

48%

Source: Molten Ventures accounts, Edison Investment Research

Molten Ventures has invested in its portfolio in every period since IPO, but only realised its initial investments in 2016 and has realised investments in every subsequent reporting period. The steady cadence of exits provides investors with comfort that the value of Molten’s late-stage businesses will be realised and reinvested in new opportunities to build future value. The group expects to realise 10–15% of portfolio value annually through the economic cycle.

Exhibit 9: Realisations by calendar year

Exit value

Money multiple

Total investment

£m

x

£m

2021

SportPursuit

22.1

3.9

5.7

Full

Conversocial

5.1

0.9

5.7

Full

Premfina

1.5

0.9

1.7

Full

Trustpilot

77.9

5.4

14.4

Partial

UiPath

40.0

16.2

2.5

Partial

Decibel

13.3

1.3

10.2

Full

2020

5 exits

141.8

3.2

44.8

2019

3 exits

7.3

1.7

4.2

2018

2 exits

14.4

8.1

1.8

2017

4 exits

18.9

1.5

12.4

2016

4 exits

39.1

3.9

10.1

Total value and weighted average multiple

381.4

3.4

113.4

Source: Molten Ventures. Note: For partial exits, investment value is calculated pro rata to the proportion of the total holding exited.

In H122, £67.5m of cash realisations included proceeds from the exits from SportPursuit, Decibel, Conversocial and PremFina, as well as selling shares (post-IPO) in Trustpilot and UiPath. To H122, Molten Ventures has realised over £380m of value from its portfolio (with an additional £40m of realisations in H222) with the majority of exits delivering attractive multiples, with an average money multiple of c 3.4x amounts invested.

Outlook: Focused on the growth fund in 2022

Management remains confident in the outlook for European technology investment, seeing rising demand for late-stage rounds in leading companies. Molten recorded total liquidity of £221m (including £65m of undrawn credit facilities) as at 30 September 2021, with the option to sell-down post-IPO stakes in Trustpilot and UiPath, to provide additional investment capital. On this basis, management can identify at least 12–18 months of cash runway, including potential exits.

Looking ahead, management has continued to make good progress on preparatory work for the growth fund and remains focused on launching the Series B+ growth fund in CY22, targeting a £400m raise. The purpose of the co-investment fund would be to deploy third-party capital alongside Molten’s balance sheet, providing the group with a greater ability to lead deals and secure allocation in competitive funding rounds, in addition to generating third-party fee income.

Taking into consideration continued revenue growth within its portfolio, as well as financing rounds and exits, and a healthy pipeline of new investment opportunities, management anticipates FY22 fair value growth of around 35%, subject to wider market conditions.

European tech coming of age and here to stay

The European technology sector has lagged the US and China for the past decade. Relative to both markets, Europe has few tech champions and a paucity of technology exposure on the public markets. However, Europe is finally starting to accelerate and catch-up, with a mature technology ecosystem delivering ever more successful businesses. Entrepreneurs are then reinvesting capital from successful exits to support the next generation of founders.

In this context, 2021 was a record year for VC investment globally, Dealroom estimates that over US$675bn was raised globally by start-ups (Exhibit 10), double the all-time high recorded in 2020. Europe led this surge in growth, growing faster than both the US and China, with 133% growth y-o-y, with total funds raised in 2021 of US$114bn.

Exhibit 10: Europe led the growth of global VC funding in 2021

Exhibit 11: European unicorns multiplying

Source: Dealroom, 2021: the year London tech reached new heights

Source: Atomico, The State of European Tech 2021

Exhibit 10: Europe led the growth of global VC funding in 2021

Source: Dealroom, 2021: the year London tech reached new heights

Exhibit 11: European unicorns multiplying

Source: Atomico, The State of European Tech 2021

The success and maturity of the European ecosystem can also be measured in terms of the number of ‘unicorns’ in Europe, private companies with a valuation above US$1bn. As can be seen in Exhibit 11, there was a surge in European unicorn numbers in 2021, increasing by 98 (over 40% growth year-on-year) to approximately 320 companies. Of the 98 new unicorns, 75 were VC-backed. Although the majority of unicorns are clustered in the UK, Germany, France and Scandinavia, unicorns are also becoming more dispersed, with the long tail to be found across 28 European countries, including Italy, Malta, Slovenia, Estonia and Cyprus.

The mobility of talent and the increasing ability for companies to be based anywhere in the region are significant factors behind the success of the European ecosystem.

Exhibit 12: Announced UK funding deals

Exhibit 13: Growth of UK megadeals

Source: Beauhurst, The Deal 2021

Source: Beauhurst, The Deal 2021

Exhibit 12: Announced UK funding deals

Source: Beauhurst, The Deal 2021

Exhibit 13: Growth of UK megadeals

Source: Beauhurst, The Deal 2021

The UK has led this success, with almost US$23bn raised in 2021 according to Beauhurst, a UK private funding data provider (Exhibit 12). These data include more than 2,600 announced deals, with an average deal size of £8.5m, up from £5.0m in 2020. Exhibit 13 highlights the growth of UK megadeals (£50m+ rounds), which leapt from 44 in 2020 to 112 in 2021 (with even more marked growth for £100m+ rounds), contributing to the significant y-o-y increase in average funding round size.

We would argue that factors highlighted above all play to Molten’s strengths and underpin the rationale for management to raise its targeted Series B+ co-investment fund. These factors are:

increasing success and maturity of the European start-up ecosystem;

dispersed footprint of companies across Europe; and

continuing increase in the size of funding rounds and the greater number of megadeals.

Listed VC offers liquid investment in European tech

Molten Ventures, together with its listed VC and private equity peers, provides an attractive way to access private European technology companies and participate in the value they create through a diversified holding company, offering attractive liquidity to investors.

Direct European public market technology exposure remains limited, as software-as-a-service (SaaS) business models and digitalisation mean start-ups are far more capital efficient than they have been in the past. When coupled with better access to private capital in Europe, companies have not needed to list to access the capital required to drive growth. This means that companies can stay private for longer, avoiding the cost, governance issues and short-termism that can be found on the public markets. This has allowed private company investors (and entrepreneurs) to retain far more of the value created by Europe’s successful start-ups.

Molten’s holdings Cazoo, UiPath and Trustpilot were part of a wave of late-stage venture backed companies to IPO in 2021, although notably Trustpilot was the only one of the three to IPO in Europe (London).

Technology sector soared in 2021, 2022 off to a bumpy start

Since March 2020, technology indices have soared, with the COVID-19 pandemic accelerating the digital transition as consumers and companies were forced to embrace new, online ways of working. This trend is particularly well captured by the performance of the BVP Nasdaq Emerging Cloud Index, a US index (given the wide range of quoted SaaS stocks in the US and the paucity in the UK and Europe) of pure SaaS businesses, which reflects the types of company that Molten invests in (Exhibit 14).

Exhibit 14: The BVP Nasdaq Emerging Cloud Index 2020-22

Source: Nasdaq OMX (21 March 2022)

Having risen to 2.5x its 2020 starting point (and more than 3x the low point in March 2020), the cloud index rose fairly steadily to the end of 2021 (ignoring some valuation-driven jitters in Q221). Then from mid-November 2021, the index turned, losing a third of its value over the next three months, to a point where the performance of the cloud index is now broadly in line with the Nasdaq index since the start of 2020, although still up by c 61% from the beginning of 2020.

VC returns provide portfolio diversification

Molten Ventures and its quoted VC and private equity peers, provide technology exposure that is otherwise largely inaccessible to the public market investor. Valuations of private technology companies have a relatively low correlation to listed equity markets, supporting fund diversification and reducing the overall level of portfolio volatility. However, Molten Ventures, the investment vehicle itself, is publicly traded and, as has been seen at the start of 2022, is subject to wider public market technology valuation trends, suffering as investor appetite has moved to ‘risk-off’.

A joint report by Oliver Wyman and the British Business Bank (The Future of Defined Contribution Pensions, Enabling Access to Venture Capital and Growth Equity, September 2019) found that venture capital is likely to improve diversification in a multi-asset portfolio because, as an asset class, venture capital is relatively uncorrelated with listed markets. Although VC investments are exposed to broadly similar economic conditions to publicly listed equities, they are likely to be less affected by short-term swings in investor sentiment that lead to volatility in public markets. This partly reflects the time difference between asset valuations and reporting, as well as the illiquid nature of the underlying investments themselves.

The study found a positive 0.1x correlation between average global VC returns and MSCI World Index returns (1970-2016). However, independent estimates vary, with for example, Aberdeen Standard Investments (now abrdn) identifying a positive correlation of 0.42x between Global VC returns and US equities between 1990 and 2018.

The Economist (How unlisted startups valuations will adjust to falling share prices) highlighted another pillar of support for private company technology valuations, arguing that competition for leading assets, coupled with entrepreneurs using the valuations of other funding round as reference points, will help to support valuations. Even after the repricing of listed tech stocks, valuations are unlikely to fall immediately so long as new funds are being raised with continuing cash inflows into the sector.

Molten’s commitment to ESG

Management is committed to building and developing its ESG approach and has already taken meaningful steps across multiple areas of its business. The group has identified four ESG KPIs for FY22:

Environment: a roadmap to allow Task Force on Climate-related Financial Disclosures (TCFD) disclosure in the FY22 cycle.

Social: a group diversity and inclusion policy and a board diversity and inclusion policy.

Governance: engage with 10–15 portfolio management teams on governance.

Provide a training programme to apply Molten’s ESG policy to the investment process.

Management has stated that it intends to use its platform to encourage and promote its values across its portfolio, as well as applying ESG considerations to develop best-in class technology companies and achieve strong investment returns. The group completed an initial portfolio mapping exercise in parallel with its H122 results, aligning its portfolio companies to the United Nations Sustainable Development Goals (UNSDGs), the summary of which is set out in Exhibit 15 below. This highlights that 19 portfolio companies were aligned to UNSDG 9 (Industry, innovation and infrastructure), with 17 companies aligned to UNSDG 8 (Decent work and economic growth) and 10 companies aligned to UNSDG 3 (Good health and well-being).

Exhibit 15: Making progress to define its ESG ambitions

Source: Molten Ventures. Note: *Excludes fund of fund companies and certain emerging portfolio companies.

Full details of the UN’s Sustainable Development Goals can be found at www.sdgs.un.org/goals.

Molten has published the second iteration of its Annual Sustainability Report 2021, setting out its ESG roadmap. Published policies include ESG Policy March 2021 and a Modern Slavery and Human Trafficking Statement. Further details can be found on the group’s website.

Risk factors

The principal risk factors relating to Molten Ventures include:

Early-stage business risk: the early-stage nature of Molten’s portfolio businesses carries a high degree of risk, with Molten Ventures also exposed to risks related to non-controlling investments. Not all of the fund investments will achieve their hoped-for potential. To mitigate this risk, management invests in seed funds, as well as Series A and B stage companies and is looking to launch a co-investment fund to allow the group to make follow-on investments and continue to support its later-stage (Series B+) companies.

Portfolio concentration: Molten Ventures holds a relatively concentrated portfolio of investments. Realisations and investor returns may be dominated by a limited number of investee companies.

Reputation and deal flow: Molten Ventures relies on the reputation of its senior investment team (with over 100 years of combined experience), its strategic contacts and ecosystem to source appropriate deal flow and deliver the quality of investment opportunity to drive attractive investment returns.

Technology sector: the company is subject to risks associated with developments in the technology sector, including the cyclicality of valuations in the sector and potential trade tensions between China and the US, as well as other unforeseen future developments. Molten Ventures seeks to mitigate this risk by investing across four discrete segments of the technology sector, which allows the group to be simultaneously investing in one sector (eg digital health and wellness) while realising investments from another (eg consumer technology).

Valuation risk: Molten’s investments are difficult to value accurately, with valuation methodologies subject to significant subjectivity. There can be no assurance that the reported values of the company’s investments will be realised. As mitigation, it should be noted that the majority of Molten’s investments have been exited at a premium to holding value, highlighting management’s conservative approach to valuation. In addition, exposure to private technology companies can otherwise be hard to identify in the public markets. The NAV returns on Molten’s portfolio have a relatively low correlation to listed equity markets, as valuations of private technology companies take time to adjust to public market valuations, supporting fund diversification and reducing portfolio volatility.

Liquidity events: exits are uncertain and difficult to predict and proceeds from trade sales/IPOs are likely to vary substantially from year to year, with the potential for liquidity events to slow if technology valuations fall.

Financials

27% fair value growth in H122, c 35% expected for FY22

After recent sector weakness, Molten’s shares have slipped from a premium to a discount to NAV and are trading at a meaningful discount to both the H122 NAV of 887p per share. This is despite continued strong portfolio performance and portfolio revenue growth.

GPV rose 37% in H122 to £1,350m (FY21 £984m), representing 27% growth in fair value, allowing for net investment. Management reconfirmed its expectation in February 2022 for c 35% fair value growth for FY22 ‘subject to wider market conditions’, from which we estimate a GPV of c £1,475m (9% growth in H222) and an FY22 NAV/share of c 929p (5% growth in H222). However, with the announcement on 9 March 2022 of a funding round for an unnamed portfolio company leading to a £76m fair value increase for Molten (c 50p per share pre-costs and carry), we now expect FY22 NAV to be considerably above this target.

H122 NAV per share increased to 887p (FY21 743p), a 19% rise. Plc cash at period end was £156m (FY21 £160m), including £16m of restricted cash, after investments of £165m in H122 (H121 £32m) and cash realisations of £67m (H121 £106m), together with net proceeds from the June 2021 funding round of £108m. Cash realisations included proceeds from the exits from SportPursuit, Conversocial, Decibel and PremFina, as well as post-IPO share sales in Trustpilot and UiPath. The group also has a £65m undrawn credit facility, meaning that total available liquidity at 30 September 2021 was £221m.

Net portfolio value rose to 91% of GPV in H122 from 88% in FY21, as external carry fell from 10% to 9% of GPV, largely due to a reduction in deferred tax from £20m in FY21 to a credit of £0.2m in H122. In H122, Molten Ventures benefited from foreign exchange gains (£13m profit), having suffered a £51m foreign exchange loss in FY21.

Post period-end: February trading update

At the end of January 2022 (the first 10 months of FY22), Molten Ventures had invested £259m in portfolio companies, of which c £106m had been committed to 12 new investments and £153m to follow-ons. Net investment YTD rose to £149m from £98m as at 30 September 2021, with cash proceeds from realisations reaching £110m (11% of GPV). Portfolio companies saw strong revenue growth in 2021, which management forecast to continue for 2022, with a healthy pipeline of investment opportunities ahead.

New investments since the H122 results included Molten leading a US$10.8m seed round in an agtech company, Gardin (December 2021); a US$25m Series B funding round in MOSTLY AI (artificial intelligence, January 2022); and a US$45m Series A round in causaLens (artificial intelligence, January 2022). Molten also participated with a £20m investment in a US$200m Series C round for Thought Machine, a provider of cloud native core banking technology (November 2021) and sold its holding in Bright Computing to NVIDIA for a 1.6x return on invested capital (January 2022), having initially invested in 2014.

Net operating costs remain well below 1% of NAV

H122 income came from £252m of investment gains (H121 £56m), together with fee income from management fees and directors’ fees of £10m (H121 £6m). G&A costs rose substantially to £11.2m (H121 £6.6m) as Molten Ventures continued to invest in its team and infrastructure. Despite this, net operating costs of £5.7m (net of fee income) (H121 £1.3m), including £2.4m of exceptional costs relating to the move to the main market, when annualised stayed below management’s target of 1% of NAV. Net income was £218m (H120 £54m).

Valuation: Molten justifies a premium to peers

Molten Ventures’ most direct competitors are private European VC firms such as Accel Partners, Balderton Capital, Index Ventures, Northzone and Partech Partners. However, there is also a growing number of listed peers following the IPOs of Forward Partners and Seraphim Space Investment Trust in 2021 (Exhibit 16).

Exhibit 16: Quoted peer group

Price

Currency

Market cap (£m)

Last NAV reported (£m)

Net cash/
(debt) (£m)

NAV per share (p)

NAV premium/
discount

Molten Ventures

727.0

GBp

1,112

1,357

156

887

0.82

 

3i Group

1360

GBp

13,231

11,967

(709)

1,235

1.10

Augmentum Fintech

141

GBp

254

267

44

142

0.99

Eurazeo

72

EUR

5,706

7,900

(306)

99

0.72

Forward Partners

89

GBp

119

102

32

104

0.85

HgCapital Trust

415

GBp

1,889

2,006

(57)

441

0.94

IP Group

97

GBp

998

1,738

276

167

0.58

Mercia Asset Management

31.5

GBp

138

186

52

42.4

0.74

Oakley Capital Investments

400

GBp

713

961

163

538

0.74

Seraphim Space IT

104

GBp

249

251

70

105

1.00

TMT Investments

3.92

USD

123

237

41

7.49

0.52

VNV Global

56

SEK

6,575

12,663

(1,346)

109.63

0.51

Peer group mean

0.79

Peer group median

0.74

Source: Company accounts, Refinitiv. Note: Priced on 21 March 2022.

Sector valuations fell markedly in Q421/YTD, with renewed concerns over rising interest rates, high technology valuations and as part of a cyclical market rotation out of growth and towards value shares.

Molten’s NAV returns have a relatively low correlation to listed equity markets, as valuations of private technology companies take time to adjust to public market valuations, supporting portfolio diversification and reducing the overall level of portfolio volatility.

Molten Ventures offers a diversified technology investment portfolio that has delivered a consistent track record of growth and, after its strong performance in 2020 and 2021, management has demonstrated why we believe Molten warrants trading at a premium to its peer group as a mature and rapidly scaling leader in the technology VC sector. As technology valuations come under pressure, this will be the time for Molten Ventures to show it can offer NAV returns uncorrelated with the wider market. Molten Ventures trades on 0.82x H122 NAV (0.78x our estimate of FY22 NAV), in the top half of its peer group, recognising the group’s market-leading five-year NAV/share CAGR H117–H122 of 20%. In our view, the discount to NAV offers a potentially attractive entry point for investors.

Exhibit 17: Financial summary

£'000s

FY17

FY18

FY19

FY20

FY21

31-March

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Change in unrealised gains on investments

35,744

66,603

114,715

40,755

276,307

Fee income

1,673

7,163

6,101

11,255

12,507

Revenue

 

 

37,417

73,766

120,816

52,010

288,814

Cost of Sales

-

-

-

-

-

Gross Profit

37,417

73,766

120,816

52,010

288,814

Operating costs

(3,832)

(5,945)

(7,937)

(10,330)

(14,494)

Investment and acquisition costs

-

(424)

(207)

(239)

(262)

Normalised operating profit

 

 

33,585

67,397

112,672

41,441

274,058

Amortisation of acquired intangibles

-

-

-

-

-

Exceptionals

-

(229)

(34)

-

94

Share-based payments

(4,551)

(4,896)

(3,089)

(990)

(1,548)

Reported operating profit

29,034

62,272

109,549

40,451

272,604

Net Interest

-

112

120

(1,302)

(1,809)

One-off items (incl FX)

221

(1,530)

1,481

1,234

(3,348)

Profit Before Tax (norm)

 

 

33,806

65,979

114,273

41,373

268,901

Profit Before Tax (reported)

 

 

29,255

60,854

111,150

40,383

267,447

Reported tax

(438)

43

11

(17)

(26)

Profit After Tax (norm)

34,309

65,931

114,262

41,390

268,901

Profit After Tax (reported)

28,817

60,897

111,161

40,366

267,421

Minority interests

(330)

(3,131)

(582)

(659)

-

Discontinued operations

-

-

-

-

-

Net income (normalised)

33,979

62,800

113,680

40,731

268,901

Net income (reported)

28,487

57,766

110,579

39,707

267,421

Basic average number of shares outstanding (m)

32

65

96

118

129

EPS - basic normalised (p)

 

 

105.4

96.6

118.4

34.5

208.7

EPS - diluted normalised (p)

 

 

103.8

95.9

113.6

33.7

207.3

EPS - basic reported (p)

 

 

88.4

88.9

115.1

33.6

207.5

Dividend (p)

-

-

-

-

-

Revenue growth (%)

97.1

63.8

(57.0)

455.3

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

Normalised Operating Margin

89.8

91.4

93.3

79.7

94.9

BALANCE SHEET

Fixed Assets

 

 

116,716

242,629

572,658

669,379

879,392

Intangible Assets

10,335

10,232

10,130

10,028

10,936

Tangible Assets

152

229

209

1,760

1,368

Investments

105,971

231,910

562,061

657,333

867,088

Investments in Associates

258

258

258

258

-

Current Assets

 

 

25,419

61,481

51,498

41,857

164,377

Stocks

-

-

-

-

-

Debtors

527

4,840

1,140

7,719

3,700

Cash & equivalents

24,892

56,641

50,358

32,255

158,417

Restricted cash

-

-

-

1,883

2,260

Current Liabilities

 

 

(1,548)

(2,948)

(4,959)

(5,396)

(9,990)

Creditors

(1,548)

(2,948)

(4,959)

(5,038)

(9,645)

Tax and social security

-

-

-

-

-

Lease liabilities

-

-

-

(358)

(345)

Short term borrowings

-

-

-

-

-

Other (incl deferred consideration)

-

-

-

-

-

Long Term Liabilities

 

 

(716)

(651)

(631)

(46,222)

(638)

Long term borrowings

-

-

-

(44,636)

393

Lease liabilities

-

-

-

(975)

(669)

Other long term liabilities

(716)

(651)

(631)

(611)

(362)

Net Assets

 

 

139,871

300,511

618,566

659,618

1,033,141

Minority interests

104

2,792

234

-

-

Shareholders' equity

 

 

139,767

297,719

618,332

659,618

1,033,141

CASH FLOW

Op Cash Flow before WC and tax

33,712

67,557

112,835

41,961

274,708

Revaluation of investments held at fair value through P&L

(35,744)

(66,603)

(114,715)

(40,755)

(276,307)

Working capital

(42,306)

(62,249)

(212,927)

(61,750)

74,684

Exceptional & other

(438)

(74)

97

(17)

68

Tax

28

(107)

(32)

(3)

(2)

Net operating cash flow

 

 

(44,748)

(61,476)

(214,742)

(60,564)

73,151

Capex

(166)

(155)

(58)

(368)

(143)

Acquisitions/disposals

-

-

-

-

(650)

Equity financing

69,665

95,086

207,496

292

104,285

Dividends

-

-

-

-

-

Other

-

(49)

-

-

-

Net Cash Flow

24,751

33,406

(7,304)

(60,640)

176,643

Opening net debt/(cash)

 

 

0

(24,892)

(56,641)

(50,358)

12,381

FX

221

(1,530)

1,481

1,234

(3,348)

Other non-cash movements

(80)

(127)

(460)

(3,333)

(2,104)

Closing net debt/(cash)

 

 

(24,892)

(56,641)

(50,358)

12,381

(158,810)

Closing net debt/ (cash) (inc restricted cash)

 

 

(24,892)

(56,641)

(50,358)

10,498

(160,470)

Source: Company accounts, Edison Investment Research

Contact details

Revenue by geography

20 Garrick Street,
London, WC2E 9BT
United Kingdom
+44 20 7931 8800
www.draperesprit.com

Contact details

20 Garrick Street,
London, WC2E 9BT
United Kingdom
+44 20 7931 8800
www.draperesprit.com

Revenue by geography

Management team

Chair: Karen Slatford

CEO: Martin Davis

Karen is a non-executive director of AIM-quoted Accesso Technology Group and Softcat, a FTSE 250 IT infrastructure provider, and senior independent non-executive director of LSE and NYSE listed Micro Focus. Karen began her career at ICL before spending 20 years at Hewlett-Packard Company, where in 2000 she became vice president and general manager worldwide sales and marketing for the business customer organisation, responsible for sales of all Hewlett-Packard products, services and software to business customers globally. Karen holds a BA honours degree in European studies from Bath University and a diploma in marketing.

Martin was appointed CEO of Molten Ventures in November 2019. He has more than 20 years of experience in financial services and joined Draper from Aegon Asset Management where he was the Head of Europe, Aegon Asset Management and CEO at Kames Capital. Before Aegon Asset Management, Martin served as CEO at Cofunds, spent eight years at Zurich Insurance Group, and was also CEO of Zurich’s joint venture, Openwork, the largest network of financial advice firms in the UK. Before this, Martin held senior management roles at Misys, Corillian and Reuters. Martin also served for 11 years in the British Army. Martin has an MBA from London City Business School and Diplomas from the Institute of Marketing and the Market Research Society.

CFO: Ben Wilkinson

COO: Stuart Chapman

Ben was appointed to the board on 4 June 2019, having joined the group as CFO in 2016. In addition to his responsibilities for the group’s finance and investor relations functions, Ben serves as a member of the Investment Committee. Ben has led on recent equity and debt raises totalling over £350m. Ben is an experienced leader of public company finance teams having previously served for five years as CFO of AIM-listed President Energy, where he was responsible for all financial aspects of the group. During his time at President, Ben was part of the board that undertook investments into Argentina and Paraguay and raised US$175m across several equity issuances with shareholders such as IFC/World Bank and significant UK institutional investors. Ben is a Chartered Accountant, FCA, with a background in M&A investment banking from ABN Amro/RBS where he was involved with multiple cross border transactions and corporate financings, both debt and equity. Ben is a graduate of Royal Holloway, University of London with a BSc in economics.

Prior to co-founding the group in 2006, Stuart was a director of 3i Ventures in London. Having joined 3i in 1992, he has over 25 years’ VC experience in Europe and the US. He was a founding partner of 3i US, based in Menlo Park, CA from 1999 until 2003. Stuart was responsible for Esprit’s investments in Lagan Technology (sold to Verint), Redkite (sold to Nice) and Kiadis (IPO). Stuart serves as a director with Netronome, DisplayData, Resolver, Realeyes, Crate and Conversocial; and as observer with Graphcore. Prior to 3i, Stuart was involved in software and systems implementations for Midland Bank. He is a graduate of Loughborough University and serves on the strategic advisory board for the Loughborough School of Business and Economics.

Management team

Principal shareholders

(%)

National Treasury Management Agency

9.15

T Rowe Price Group Inc.

7.36

Baillie Gifford & Co

7.07

BlackRock Inc.

5.26

British Patient Capital

3.73

Liontrust Asset Management

3.45

abrdn

3.38

Marlborough Fund Managers

3.34

Schroders

3.25

Beijing Biaoqi Advert Co.

3.11


General disclaimer and copyright

This report has been commissioned by Molten Ventures and prepared and issued by Edison, in consideration of a fee payable by Molten Ventures. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. Molten Ventures never take payment in stock, options or warrants for any of Molten Ventures’ services. The research analyst primarily responsible for the preparation of this report personally holds an equity position in the company of less than 1%.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however Molten Ventures do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that Molten Ventures provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If Molten Ventures’ advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Molten Ventures and prepared and issued by Edison, in consideration of a fee payable by Molten Ventures. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. Molten Ventures never take payment in stock, options or warrants for any of Molten Ventures’ services. The research analyst primarily responsible for the preparation of this report personally holds an equity position in the company of less than 1%.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however Molten Ventures do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that Molten Ventures provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If Molten Ventures’ advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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