In this update, we present our H2 update on the Baronsmead VCT portfolios, with a particular focus on the Data sector, which continues to be an area of opportunity for the investment team. In addition, we provide the latest factsheets and the recent intention to fundraise announcement.
Fund managers Ken Wotton and James Hendry share their perspectives in the accompanying video, providing a closer look at the portfolio’s performance and recent deployment.
We trust you will find this update informative and engaging. If you have any questions or would like to share feedback about the VCTs, please feel free to contact our team.
Latest news
Intention to fundraise
The Directors of Baronsmead Venture Trust plc (BVT) and Baronsmead Second Venture Trust plc (BSVT) are pleased to announce that the Company currently intends to launch a new offer for subscription (the “Offer”) during the 2024/25 tax year.
Further details of the Offer will be contained in a prospectus that is expected to be published by the end of January 2025. A further announcement will be made when the prospectus is available.
Capital at risk. Past performance is not a reliable indicator of future performance.
Why Baronsmead?
Gresham House Ventures is the second largest venture capital firm in the market by AUM with over 29 full time investment professionals employed by the manager
Only hybrid VCTs in the market which gives us flexibility across unquoted and quoted markets depending on conditions and valuations
Portfolio contains over 80 direct quoted and unquoted companies and diversification across the portfolio helps to reduce risk
Seeking to deliver long-term, consistent and attractive dividends
Ability to top-slice to generate short-term liquidity in AIM portfolio and equity funds
If you’d like any further information, please contact Rees Whiteley, Sales Manager, r.whiteley@greshamhouse.com
Performance and portfolio overview
The performance in the first half of the year was positive for the VCTs, with the net asset value total return of Baronsmead Venture Trust plc (BVT) increasing by 2.7% and Baronsmead Second Venture Trust plc (BSVT) by 2.2%.
The VCTs benefited from their hybrid mandate, with the quoted and listed part of the portfolios returning c.5.7% for the first half of the year.
The unquoted portfolios experienced a decline of 1.4% during the same period. While over a quarter of the portfolio experienced value increases, this was offset by declines in other parts of the unquoted portfolio.
NAV at 30 June 2024
One year portfolio returns to 30 June 2024
Quoted Unquoted Equity funds
11% (5)% 15%
10% (5)% 15%
Capital at risk. Past performance is not a reliable indicator of future performance.
Outlook
An ongoing focus on driving liquidity through unquoted exits, where appropriate, and quoted top slicing - delivered c.£40mn of capital proceeds over the last two years at an average of 1.1x investment cost
We believe it is a good time to be deploying capital - a strong flow of attractive new and follow-on investment opportunities
Despite the challenging environment, we remain confident that our portfolio of businesses have strong fundamental characteristics, with most companies exposed to resilient structural growth trends or self-help opportunities, and therefore able to perform well despite the wider macroeconomic uncertainty. NAV at 30/06/24
It’s important to note, however, that the macroeconomic environment remains challenging. Geopolitical risk remains high and whilst the direction of travel on inflation and interest rates has been positive there are some leading indicators that remain a concern. Consumer sentiment is one of those factors and is leading to longer decision cycles which is making growth harder to achieve.
This environment continues to present opportunities to deploy capital with £7mn of capital deployed into new and follow-on investments in H1, which contributed to total deployment of £27mn in the prior 12 months.
Capital at risk. Past performance is not a reliable indicator of future performance.
Unlocking the potential of data for enterprises and investors
Businesses of all sizes need help to manage the challenge of their data - and those innovative enterprises that are able to help them do so have huge investment appeal, observes Gresham House Venture’s James Hendry.
From improving the understanding of customers and their behaviours, to driving automation and operational efficiencies, to harnessing the power of AI, the data revolution promises so much for enterprises. Organisations of all sizes recognise the potential of data, however, many are struggling to capture the opportunity.
Digital transformation budgets are increasing in businesses of all sizes and across sectors, however recent research by the Harvard Business Review shows that improved usage of data has been below expectation and progress may have stalled, even at very large businesses with substantial technology budgets.
The stakes are high. More data than ever is being generated. In 2023, the world generated approximately three times the volume of data produced in 2019, and this figure is forecast to grow by 25% CAGR to 2030. Moreover, the use cases for data continue to multiply; digital transformation touches every pillar of modern organisations.
Against this backdrop, there are significant opportunities for investors. For companies whose raison d’etre is to enable enterprises and users to better collect, augment, interpret and manage their data, there will be opportunities for continued growth over the coming decades as they support their clients to better harness their data.
The Gresham House Ventures team has made investments and continues to actively look for investment opportunities in this area, and views the issues faced by these companies’ clients as fitting within at least one of three categories:
1 Poor data infrastructure: While data is plentiful, many organisations struggle to collect, share and manage data quickly and with a high level of accuracy. Where there are concerns about data quality, projects struggle for impact.
2 Inability to generate insights: Interpreting data can be complex and often requires specialists. Software can help, however this is also a people challenge. The current shortage of data scientists globally is forecast to grow, creating opportunities for specialist data consultancies and training providers.
3 Lack of access to high-quality, specialist data: Many organisations lack access to the rich datasets they need to optimise their use cases. Curating specialist data on an ongoing basis is impractical for most due to cost, in addition to potentially lacking market access.
Within data infrastructure, Gresham House Ventures has invested into OzoneAPI, a software platform that enables banks and financial institutions to securely share information in a low-cost, compliant manner. Ozone’s platform allows its customers to comply with, and to generate revenue opportunities, from Open Banking / Finance regulation which is experiencing significant growth globally.
Gresham House Ventures’ portfolio company
ActiveNav, which provides data privacy and governance software, enables its customers to better manage their data and to discover unstructured data within their organisation. As data volumes increase and data protection laws evolve, the imperative to protect data grows as organisations acknowledge that breaches expose them to significant risk.
Our investments into Bidnamic and CitySwift are also examples of investments into software platforms that provide customers with insight into critical parts of their organisation.
Capital at risk. Past performance is not a reliable indicator of future performance.
Bidnamic, a machine learning platform which helps customers optimise their Google shopping spend, supports clients to drive increased revenue and improved profitability through its automated data insight platform.
CitySwift’s proprietary software enables public transport network providers to optimise their asset usage, and to thereby significantly improve revenue and profitability.
Across the data provision space, Gresham House Ventures have invested into SciLeads and Airfinity. Both of these businesses provide customers with high-quality, specialist datasets which are curated on an ongoing basis. Airfinity provides high-quality data on infectious diseases, as well as tools that help customers to understand, predict and act on emerging research. SciLeads enables organisations who sell to biotech, pharma and academia to identify prospects, significantly improving sales efficiency.
Conclusion
While the use cases for data will continue to evolve over the coming decades, the ability to utilise data effectively will become increasingly crucial. Companies that can provide the necessary tools and expertise to overcome common challenges stand to gain significantly. For investors, this presents a significant opportunity to generate returns from a long-term trend.
By identifying and backing these innovative businesses, investors can not only achieve attractive returns but can also contribute to the next wave of technological advancement and productivity gains.
Article written by
James
Hendry
Investment Director
James joined Gresham House Ventures as Investment Manager in December 2019, before being promoted to Investment Director in 2024.
He is primarily focused on making new investments into fast growing software businesses focused on process automation, data and analytics, or cyber security. He led the investment in OzoneAPI and Fu3e and is on the board of SecureCloud+.
Prior to joining the team, he spent five years at PwC, latterly working in the financial due diligence team. He is a Chartered Accountant (ICAEW) and holds an MA in Economics and Accounting from The University of Edinburgh.
Portfolio
Growth companies must make talent the top priority
Optimising the talent function: our approach to building exceptional teams
While various components influence the success of growth companies, none is more essential than identifying and hiring talented individuals.
Talent management is more than simply filling various positions. Attracting, integrating and retaining the right people in the right roles is vital at every stage of a company’s growth journey – especially in the early formative years. But recruitment has many complex challenges, which is one reason why many encouraging growth companies fail to fully capitalise on their potential.
Growing businesses often need assistance in devising strategies to optimise candidate assessment processes and navigate the depth of the talent landscape. This is where the strategic insights of venture capital (VC) investors - who understand the skills needed for growing companies to achieve their long-term goalsare invaluable.
Timing is everything
The ability to identify talent is essential, yet many businesses fall into the trap of hiring the right people at the wrong time.
It is vital for leaders to have a thorough understanding of a business’ true stage of maturity - its market position, growth trajectory, and the primary drivers of this growth.
Early in their lifecycle, companies should establish a comprehensive people and organisation plan aligned closely with the broader growth strategy. This plan should specify crucial hiring areas, as well as optimal timing to enable the business to scale effectively. For instance, if a company aims to expand internationally, it is essential to determine the right stage to boost the team and also the right operating model to support this international expansion. Recruiting too early can squander resources, while recruiting too late risks missing key growth opportunities. Similarly, choosing the wrong candidate profile in the wrong location can hinder growth.
At this point, leveraging VC expertise towards crafting and implementing effective hiring strategies can be immensely beneficial.
A broader view
In many companies, the importance of clearly defining the hiring brief is often underestimated. While unsuccessful hires are often attributed to the candidate or the recruitment process, the underlying issue frequently stems from an inadequate or incorrect hiring brief.
While external recruiters can be helpful in the hiring process, it is often challenging for these entities to understand the specific internal needs and cultural nuances of the company. Without this insight, even wellintentioned recruiters can struggle to find candidates who truly fit the unique requirements and dynamics of the business.
After developing clear and comprehensive hiring briefs fully aligned with a company’s goals, the next step is to meticulously evaluate the candidate landscape. At this stage, it is vital to look beyond just candidates in the same industry or domain.
For instance, an e-commerce start-up looking for talent might instinctively consider candidates from large, established e-commerce platforms. However, these individuals are unlikely to have contended with the same scaling challenges facing a smaller company in the sector. It may be more fruitful to target individuals who played pivotal roles in groups at the same stage of development. Situational understanding is everything.
Capital at risk. Past performance is not a reliable indicator of future performance.
The
ideal fit
Within the candidate selection process, the assessment stage is pivotal. Reliance on a series of unstructured interviews is the most common approach, but this is often a poor predictor of success. Adopting a structured assessment framework can enhance how a business evaluates potential hires, offering a clearer insight into a candidate’s suitability and potential.
This approach could include a combination of structured and unstructured interviews, as well as more contextual forms of assessment and full and comprehensive referencing. For example, candidates could be presented with current contextually complex challenges and asked to outline how they previously navigated similar situations.
A great example of this would be a recent CFO project supporting Patchworks, our iPaaS investee company who drives growth and optimisation within retail brands globally.
The business has scaled tremendously; at this stage of growth it faced very different challenges from the initial start-up phase. A different type of CFO was required.
Alongside robust and structured interviews focussing on behaviour and capability, we needed to assess and evidence in context that a candidate could be successful on the next stage of the Patchwork’s journey.
The dynamics are not as simple as ‘tell me how you have done this before’. Albeit that is of course a factor! More so, we needed to assess the ability for a candidate to pattern recognise and frame the contextual challenge with their career experience to date and demonstrate good judgement.
This is often oversimplified into ‘a presentation’ or as is often misconstrued ‘a case study’. Careful thought must be given to the question and structure of the data provided to ensure a high likelihood of predictive validity from the assessment to success in the role.
Collaborating with VC can significantly enhance the assessment process, as these investors bring a wealth of experience from working with a variety of businesses – each with unique hiring processes. Their insights are invaluable, offering tailored strategies to meet specific recruitment needs. With the right guidance, growth companies can build, enagage with and attract a robust talent pool essential for achieving and maintaining success.
Article written by
Graham Butler Head of Talent
Useful documents
Factsheets
Interim report
Baronsmead Venture Trust
Baronsmead Second Venture Trust
Baronsmead Venture Trust
Baronsmead Second Venture Trust
Company spotlights
Panthera Biopartners
Panthera is an independent site management organisation which recruits patients for clinical trials through its own dedicated research sites for pharmaceutical and contract research organisations, pharma and biotech companies. The primary focus is phase 2 and 3 clinical trials for new drugs across multiple therapeutic areas. Panthera supports all aspects of new clinical trials including feasibility assessments, site set up, patient recruitment and engagement and day-to-day running of clinical trials in line with strict regulatory criteria.
It was founded in 2019, with the Baronsmead VCTs providing an initial investment of £0.5mn in September 2020 and providing follow-on investments totalling £5.9mn in April 2022 and June 2023. Our investment was used to fund further site expansion in the UK and Western Europe, as well as continuing to invest in enhancing the service offering.
Portfolio investments in smaller companies typically involves a higher degree of risk. Investments investment strategy and are not investment recommendations.
Ozone Financial Technology
Ozone API is a provider of a software platform enabling banks to deliver APIs to comply with and generate revenue opportunities from Open Banking (“OB”) and Open Finance (“OF”) globally. The software also provides country regulators and financial services technology providers with an out-of-the-box solution to enable OB / OF in their ecosystem. The Baronsmead VCTs invested £3.7mn in December 2023 as part of a £8.5mn investment alongside other Gresham House funds.
Investments selected for illustrative purposes only to demonstrate
Contact details
Chris Elliott
Managing Director, Wholesale
M: +44 (0) 78279 20066
E: c.elliott@greshamhouse.com
Andy Gibb
Sales Director
M: +44 (0) 78490 88033
E: a.gibb@greshamhouse.com
Rees Whiteley
Sales Manager
M: +44 (0) 75975 79438
E: r.whiteley@greshamhouse.com
Source for all information is Gresham House unless otherwise stated.
Risks to be aware of
The value of the Company and the income from it is not guaranteed and may fall as well as rise
As your capital is at risk you may get back less than you originally invested
Past performance is not a reliable indicator of future performance
Any tax reliefs are dependent on your individual circumstances and may be subject to change
Funds investing in smaller, younger companies may carry a higher degree of risk than funds investing in larger, more established companies. Investments in smaller companies may be less liquid than investments in larger companies
Important information
This document is a financial promotion issued by Gresham House Asset Management Limited (Gresham House) as Investment Manager for Gresham House plc under Section 21 of the Financial Services and Markets Act 2000. Gresham House is authorised and regulated by the Financial Conduct Authority with reference number 682776 and has its registered office at 5 New Street Square, London EC4A 3TW. The information in this document should not be construed as an invitation, offer, solicitation of any offer, or recommendation to buy or sell investments, shares or securities or an invitation to apply for securities in any jurisdiction where such an offer or invitation is unlawful, or in which the person making such an offer is not qualified to do so. Whilst the information in this document has been published in good faith, Gresham House provides no guarantees, representations, warranties or other assurances (express or implied) regarding the accuracy or completeness of this information. Gresham House and its affiliates assume no liability or responsibility and owe no duty of care for any consequences of any person acting in reliance on the information contained in this document or for any decision based on it. Past performance is not a reliable indicator of how the investment will perform in the future. Your capital is at risk. Prospective investors should seek their own independent financial, tax, legal and other advice before making a decision to invest. This document has not been submitted to or approved by the securities regulatory authority of any state or jurisdiction. This document is intended for distribution in the United Kingdom only. Any dissemination or unauthorised use of this document by any person or entity is strictly prohibited. Please contact a member of the Gresham House team if you wish to discuss your investment or provide feedback on this document. Gresham House is committed to meeting the needs and expectations of all stakeholders and welcomes any suggestions to improve its service delivery.
