One Alternative Fund Manager is Diversifying & De-risking ‘Frontier’ Tech for ASX Investors
PUBLISHED: 30-08-2018 11:54 a.m.
11 minute read
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Today’s rapidly accelerating global tech landscape is an increasingly competitive one, flanked by an ever-expanding crop of disruptive businesses operating in hot-topic ‘frontier’ sectors like blockchain, cybersecurity, AI (artificial intelligence), VR (virtual reality), and IoT (internet of things).
Investing in these companies, however, may come with a considerable side-order of risk, alongside an exhaustive and time-consuming due diligence process. There’s also the question of diversification — carefully selecting and then managing an array of tech investments in key growth areas.
With these challenges in mind, the nimble alternative investment company that’s crept onto our radar today is simplifying this process, making it easier for investors to access a range of carefully curated tech companies with high growth potential.
This company is a listed alternative investment fund manager with a shrewd focus on this burgeoning global tech space. In its repertoire is a diversified, de-risked, high return portfolio spread across direct investments and in funds across Asia-Pacific, Europe and the US.
In a nutshell, the company prides itself on being able to deliver excess returns through portfolio diversification in alternative investments. Its focus is to provide differentiated and active strategies across the global alternative investment landscape to service funds, family offices and sophisticated investors.
It is important to note there that while the company does co-invest off its balance sheet, the majority of the funds under management will come from family office, institutions and high net worth investors.
It is also important to note that this company is itself a speculative investment, so professional financial advice should be sought if considering this stock for your portfolio.
Alternative investments are traditionally classified as anything excluding cash, equities and bonds. These might include asset classes like venture capital (VC), private equity, real estate, debt funds and hedge funds.
Today’s company focuses specifically on fintech, proptech, mediatech, and ‘frontier’ technologies including blockchain, robotics, drones, AI and VR.
This $8.5 million-capped company uses a rigorous screening process and a veritable laundry list of exacting criteria to seek out high-level talents, globally scalable businesses and rapid growth opportunities in the aforementioned categories in order to unlock value for investors.
What this translates into is an opportunity to invest in a carefully vetted and actively managed portfolio of early-stage tech disruptors: businesses retail investors wouldn’t normally have access to.
The market opportunity this company brings to the table is based on three key thematics:
- Increasing investor allocation to alternatives
- Strong growth in technology investments
- Larger appetite for global investments
Furthermore, this company has built substantial partnerships with companies such as Scout Ventures based in New York and Propeller Capital in San Francisco that give it access to some truly cutting-edge companies working at the forefront of frontier technologies.
The company is actively looking at new investments and we should see a great deal of news flow flood the market in the next 12 months.
So, without further ado, let’s introduce...
Auctus Alternative Investments
A razor-sharp strategy, 3 key pillars, and some tech-savvy partners
Auctus Alternative Investments (ASX:AVC) is steadily building a ‘technology as an enabler’ alternative investment funds management business.
AVC takes stakes in companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition.
These are companies that are transformational or heading towards a lifecycle event, which opens up a range of possibilities for AVC and its investors.
Currently the investment managers listed on the ASX that focus on alternatives are the $145 million capped Blue Sky (ASX:BLA) and the $921 capped Moelis (ASX:MOE). So there is potentially a lot of growth to come for the $8.5 million capped AVC in what seems to be a highly lucrative space to play in, working across the proptech, fintech and frontier tech niches.
The alternative investment approach taken by AVC is driven by several key thematics, which could set it apart from its competitors. For instance, the increasing investor allocation to alternatives, coupled with strong growth in tech investments, and an observed larger appetite for global investments.
Within that focus, AVC operates across three core pillars:
At this stage of its development, the company is giving particular priority to refining the VC (expansion capital) piece of the puzzle, and is looking to add other alternative asset investment classes to the mix over the next twelve months.
AVC is focused especially on fintech, proptech and ‘frontier’ technologies and has established strong relationships with best-in-class channel partners across the investment and technology space particularly within its focused categories across Australia, Asia and the US.
Strong partners could lead to stronger returns
One key channel partner is Scout Ventures — an early-stage VC firm based in New York that targets investment in emerging and frontier technologies, and looks to cultivate relationships with otherwise hard-to-access, experienced tech business founders.
Scout has a particular interest in AR/VR, AI, drones, robotics, IoT, enterprise SaaS, cybersecurity, and big data — in short, all the frontier tech you could hope to get your hands on.
Since its inception in 2012, Scout has achieved a lifetime blended IRR of 18.4% and taken in excess of a dozen companies from discovery phase to exit, profitability or other liquidity event. With over 65 investments across three fund vehicles, Scout has made cash distributions for each of its previous funds.
Here’s a look at a just a small sample of Scout’s portfolio:
The expansion doors are wide open for AVC following the non-binding agreement it has recently signed with Scout, but it is building partnerships elsewhere to ensure it has other avenues to diversification.
Propeller Capital is a pure blockchain-focused VC company based in start-up-rich San Francisco with access to unique opportunities and deal generation within the US. In its own words, Propeller “invests exclusively in entrepreneurs using blockchain technology to change the world”, with an expansive network to match...
These kinds of strategic relationships give AVC access to some of the world’s most promising companies that are developing cutting-edge frontier technologies.
AVC currently has 10 investments in its portfolio, some of which we’ll look at in further detail shortly — these include:
Let’s take a look now at AVC’s stringent criteria for these investments...
Through the AVC lens — de-risking the investment process
Armed with its tech prowess, AVC has created a proprietary screening process to evaluate potential investment opportunities — a crystal-clear ‘lens’ through which to target assets with high growth potential.
This selection process focuses on six key areas or questions:
- Growth capital expansion — is the business at an expansion stage?
- Does it offer a valuable solution?
- Does it have current, repeat customers?
- Strength of the underlying technology — is there validation around the product or service? Is it solving a problem that people will pay for?
- Is this a global and scalable opportunity?
- What does management look like?
Unsurprisingly, this is pretty intensive, exacting stuff. AVC typically tracks businesses for 6-12 months ahead of making a firm investment, and will generally only follow those with at least US$1 million in recurring revenue and a robust tech bent.
On top of this, AVC also executes two different investment means, depending on the geographic location of the business at hand:
With this disciplined investment approach in mind, let’s take a look now at some of the investments themselves...
AVC’s diverse portfolio — some salient investments
GOPHR goes the last mile
London-based GOPHR is an Uber-style tech platform operating in the last mile delivery service market — something that clearly fulfils the criteria we mentioned earlier relating to globally resonant, scalable technology.
As far as AVC’s assets go, this is the proverbial jewel in the crown. Consider that the global courier market is worth $250 billion a year, and is projected to grow to $343 billion by 2020.
Although it is difficult to determine how much of this market AVC can attract through GOPHR, so take all publicly available information into account and maintain a cautious approach when considering this stock for your portfolio.
Importantly, GOPHR is also solving an addressable problem in the last mile delivery space, which tends to be expensive and unreliable, and fraught with unpredictable demand.
The Retail Dive article below hinges on many of the key issues at work in the last mile delivery space, and how many of the industry’s players are failing at nailing down the right tech-inflected solution:
With that in mind, GOPHR’s solution — which automates traditional courier company tasks — drives efficiency and reduces costs, cutting through layers of logistics tech.
Also boding well are GOPHR’s financial specs, with the company reporting revenue of £640,000 ($1.136 million) in the last quarter, driven by its work with high-profile names like HelloFresh and Marks & Spencer.
Mobilicom — a critical mission
Mobilicom (ASX:MOB) is a 4G mobile mesh solutions for robotics, drones and mission-critical applications — another rapid-growth frontier tech sector. Based in Azur, Israel, Mobilicom is best known for its wireless ‘mesh’ network which connects phone users to each other’s handsets without the need for phone towers.
A quick glance at Mobilicom’s newsflow suggests that the communications specialist has been drawing quite a bit of attention — beginning with its listing on the ASX last year...
Meanwhile, in a completely different part of the world — Melbourne’s vibrant start-up scene — is SuperEd, a robo advice platform that provides retirement solutions:
This fintech investment is another company that’s receiving plenty of media coverage:
On top of these investments, there’s also the San Francisco-based Storr, which works in the social media influencer space, as well as Snapsi — which produces an innovative single serve packaging solution... and that’s just a taste of the fast-growing tech investments on AVC’s radar, all of which have been put through its rigorous screening process.
Some pivotal tech players
Alongside its ability to de-risk tech VC investments and its unique access to domestic and global opportunities, something that gives AVC a distinct edge is a directional team with some serious tech credibility points.
Chief Operating Office, Michael Hynes, has three decades of corporate experience under his belt, and is a leading figure in venture capital, private equity and corporate finance across APAC.
Hynes has a well-recognised flair for building trusted, long-standing partnerships and has completed numerous capital raisings and IPOs — especially in the tech space.
Chief Investment Officer, Peter Gaidzkar, on the other hand, brings with him 20 years’ corporate experience in both advisory and in-house corporate strategy, mergers and acquisitions, and operations. Gaidzkar also has considerable tech moxy, having built the APAC arm of a global proptech business that sold to Accel-KKR (a private equity firm with US$4 billion in capital under management), as well as a frontier tech incubator.
Meanwhile, Auctus Managing Director, Campbell McComb, has 20 years’ behind him working in the funds management space within Australia, the UK and Asia. McComb has captained several successful funds management companies, including Armytage (Treasury Group), and was an early investor in Blue Sky Alternatives.
Gaidzkar, McComb and Hynes:
In short, these three tech and corporate mavens are precisely the kind you’d want to have in your corner if you were seeking out high-level tech investment opportunities...
The Auctus edge
With its ability to deliver excess returns and portfolio diversification for forward-focused investors wanting a slice of the global tech boom, AVC seems to have all the right ingredients in place to take things to the next level.
Although it is in the early stages of its new growth phase, so seek professional financial advice if considering this stock for your portfolio.
Something that clearly differentiates this ASX listed alternative fund managing small-cap is its access to unique domestic and global opportunities that retail investors wouldn’t normally be able to see.
As an alternative investment manager, moreover, AVC’s disciplined expansion capital approach and ability to de-risk and diversify tech investments should give it a major edge over its peers as it continues its own growth cycle.