Molten Ventures PLC
LSE:GROW
Earnings Call Analysis
Q2-2024 Analysis
Molten Ventures PLC
Molten Ventures, led by CEO Martin Davis and CFO Ben Wilkinson, has faced a challenging technology industry landscape, characterized by high interest rates and inflation that have driven down valuations for both public and private tech companies. While the first half of FY 2024 saw a fair value decrease of GBP 51 million in their portfolio, the executives underscored a disciplined approach by making selective investments and preserving cash. The company aims to support their portfolio's longevity, with over 80% of their core companies boasting more than 12 months of cash runway, indicating a strategic emphasis on sustainability amid the tough climate.
Molten Ventures has curtailed investment activity in response to the ongoing market volatility, investing just GBP 17 million in the first half, prioritizing their existing portfolio over new investments. Their capital preservation strategy includes putting GBP 20 million towards supporting growth in their current portfolio companies, reflecting the company's focus on nurturing existing investments and cautious expansion during uncertain times.
In this turbulent period, Molten Ventures has reported a dip in its investment pace. However, they have reiterated commitment to their long-term performance targets, maintaining an average annual NAV return of 30% against a target of 20%, and aiming for cash returns of 10% of the opening portfolio. These figures, though slightly diminished owing to market conditions, still affirm the company's robust investment thesis and confidence in their strategic approach.
Molten Ventures has adapted its investment focus towards slightly earlier stages of company growth, finding it more sustainable to evaluate and invest in these segments given the rapid shifts in the cost of capital. They report that more than half of their portfolio is valued at cost with downside protection, which is a critical feature as valuations face downward pressure. Despite a decline in the projected growth rate to around 50%, the company's gross profit margins have remained resilient, suggesting robust future profitability and strong IP within their portfolio companies.
CEO Martin Davis commented on the persistent economic headwinds but conveyed cautious optimism about a potential market recovery. The company plans to keep building third-party assets, focusing on deal flow through their Fund of Funds program, and preserving PLC capital. Even as they hope for an improving environment for realizations, Molten Ventures remains disciplined in their investment approach, highlighting their readiness to exploit exceptional opportunities as the cycle evolves while ensuring careful management and growth of their existing portfolio.
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Good morning, it's Martin Davis here, CEO of Molten Ventures with the Group CFO, Ben Wilkinson. And we welcome you to our interim results for the first half of financial year 2024. And the first half has really continued to be a very difficult period for the technology industry. It's really been driven by macro events, macro factors, including interest rates, inflation, et cetera, which has led to a downturn in valuations, both public and private technology companies.
And obviously, that also affects those that invest in them. But overall, for the first half of the financial year. We've seen a continuation of our strategy. We think it's very important to remain disciplined throughout this downturn and to continue to support our portfolio of companies to preserve our plc cash but also to operate within the market volatility that we're seeing and to make selective investments at this interesting time in the cycle.
We've continued to strengthen our balance sheet and the position -- and the business continues to remain very well positioned for the current environment and for us to trade through the stage of the cycle and into what we hope will be a recovery in the months and years to come. Overall, we have seen a reduction over the 6-month period in our fair value by GBP 51 million, which excludes foreign currency movement, those fair value movements reflect specific provisions in a couple of core -- well 1 core company in a couple of emerging companies, which is necessary we can talk about later.
But the important thing is the portfolio remains very well funded with over 80% of the core having more than 12 months cash rate -- cash runway and 50% more than 24 months. And I think this is as a result of the work we've been doing with our portfolio, with our founders and our portfolio of companies over the last 12 to 18 months to enable them to extend their cash runway, manage their business for growth and in a very difficult fundraising environment.
We continue to focus on building third-party assets, which is important for us to build fees and our model with our EIS VCT businesses growing nicely, but also over the period, we launched our Irish focused fund strategy. But the important thing for us around capital preservation has been to retain the discipline in our capital allocation. And you'll see that we had a reduced deployment this year of GBP 17 million invested in the first half, both with new and follow-on investments, which only total GBP 4 million and then the remaining of the GBP 17 million in our commitments to our funded funds and early birds.
We talked about valuations as we go through the presentation. But overall, our valuations have been supported by the evidence of the capital raises that we have done during the last 12 months and 85% of those were either flat or increased valuations, which gives us real confidence that we are valued at the right level and that our portfolio of companies are both in demand and continuing to progress well.
The valuation approach, we remain entirely consistent through the process. And again, we'll talk a little bit about that later. And then finally, we've continued to invest in our Fund of Funds program, and we've now 79 funds invested through 66 discrete fund managers, and that really helps us to build that program to help us to develop deal flow and intelligence on what's going on in the market. So we're very pleased with the development of the Fund of Funds program.
Looking at the next slide, please. Moving into our model. I know a number of you will be very familiar. Some of you will be less familiar with the model. I think the only 2 things I would say here are, firstly, it's important to understand the stage that we invest predominantly in that growth stage when companies tend to break out or hit certain proof points. And so therefore, the technology risk tends to be less. It's more about hitting certain proof points around commercial delivery customers potentially having regulated businesses around regulatory milestones. And that -- and we continue to invest at that stage. But we also invested slightly earlier. And traditionally, this is always where we've been, and when we look at the breakdown of where we've been investing over the last 6 months and indeed the last 12 months, we have been going slightly earlier, which we reflect the opportunity for where we sit in the market at the moment.
The other point that I would raise is that we do have access to different pools of capital to invest at those various stages in seed and early Series A. That's where we do have both our own funds but also our Fund or Funds and also EIS VCT going into a series A and then into Series B. And that gives us additional capital to be able to deploy to remain in the market during this period when we're preserving plc capital enables us to continue to build pipeline for those future growth companies in the coming years.
Probably move on to the results now. If you could move on to the highlights. And Ben, if I could ask you maybe take us through the highlights.
Yes. Thank you, and good morning, everybody. Highlights for this period, as Martin already mentioned, we were preserving capital and therefore, invested less in this period and had the second 6 months where we actually realized more cash from the balance sheet than we invested into new deals. So that created a reduction in the gross portfolio value. In addition to that, we've valued all of the companies looking as we normally do at their revenues and at the market multiples, and that's led to a reduction for this period of 4%, which is reflecting the net movement of GBP 20 million of increases, GBP 70 million of reductions, and therefore, that net reduction in the period of GBP 50 million. And that's leading to a gross portfolio value just under GBP 1.3 billion, which is a GBP 71 million reduction from March, and with the cash that we have GBP 25 million, that's leading to net assets in the period end of GBP 1.1 billion, which in itself translates to a NAV per share of GBP 7.35.
The losses that will reflect on the changes in the value of the assets are being moved through to the income statement, and that's reflecting a loss for the period of GBP 72 million, but also incorporating our operating costs which have remained substantially less than the 1% of net asset value that we target and keep an eye on.
So I think that's the overall for the movements in the period.
If we go to the next slide, you can see on Slide 8, the breakdown of those incremental changes that I was talking about. And in the very middle bar, you have the March period. The left-hand side of the chart is showing the previous 6 months. And then as we move across through to the right, you can see the cash invested increasing the value of the gross portfolio, the realizations taking out those reductions. And then you see the net of those 2 movements, I was talking about increases in fair value, offset by larger decreases and then incorporating the currency movements in the per -- leaving us with the end gross portfolio value of just under GBP 1.3 billion.
And I think overall, it's worth mentioning that what we've seen in this period is some provisions, as Martin mentioned, on specific assets, also some slowing of growth. Growth is still strong, I would say, but slowing. What we've also seen now is less uplift offsetting those downs that we've taken. So GBP 20 million of uplift only in this period and therefore, resulting in a net decrease, but not a substantial decrease just 4%.
I think if we, therefore, move to next slide, I'll hand back to you, Martin, to talk about where the capital has been deployed.
Great. Thanks, Ben. And so when we talk about capital deployment, and we've mentioned and we've had a really recurring theme over the last couple of halves that we are looking to preserve plc capital. We are looking -- we're targeting GBP 20 million over the financial year that we need to preserve to put into our existing portfolios to preserve value and help them to continue to grow.
And so when you look at the breakdown of that, we've had invested in some really exciting companies, particularly, Binalyze, Oliva, Anima. We continue to invest in the types of companies that we would invest in, but smaller checks at a slightly earlier stage and also matched with our EIS VCT capital. And that enables us to continue to lead grounds, which is very much part of our model and enables us to continue to invest in the companies that we'll be delivering those returns in that growth through the next stage of the cycle.
But as you can see that we've developed -- we have invested the majority over the first half in our LP commitments through Fund of Funds and Earlybird. I think the only other point that I would call out on this slide is if you look at the chart on the top right-hand side, financial year 2022 was definitely an outstanding year as far as investment. And so if you take that out and also '19, where we did the Earlybird investment, we've seen over the last couple of years a relatively stable level of investment. Now that will be down this year. But we don't see the ups and downs, spikes that some have seen in the market as something that is particularly concerning for us. We think we will get back to a regular cadence fairly soon. And certainly, if you look over, as I say, over the last 7 years since we've been listed, there's been a reasonable growth in investment in the types of companies, the number of deals we do. We've been putting slightly less cash into those deals, but we will probably do the same number of deals.
And I think even though financial year '24 will be slightly down on where we're expecting clearly because of the environment we're in. And we think that the overall trend over a 3 to 5 period is fairly similar.
If you move on to the next slide, one of the things that's quite clear here in the left-hand chart is the stage that we're investing. We've been investing more and more in slightly earlier stage that allows us -- it's easier to price in this environment. It's very difficult to price large Series B brands when the cost of capital is moving so rapidly. So it's slightly easier to price these earlier stage rounds. They tend to be slightly less competitive because they're harder to find because you have to get close to them earlier. And I think that very much works to our strength.
So over this period, we would expect both last year and this year to be investing slightly earlier. And again, this provides us with the pipeline to -- into these growth -- doing growth rounds over the coming years when pricing those growth rounds becomes a little bit easier once the interest rate environment stabilizes.
The chart on the right-hand side shows that clearly, we are focusing on our existing portfolio and the pink there, preserving value in the portfolio, making sure that we direct plc capital into our portfolio companies has to be our primary focus. And so we've seen that very much over -- last year was not that dissimilar to previous years, but certainly, that is the focus into this financial year, and I think we will continue to see that.
If we can move on to the next slide, please, around cash realizations and returns to the portfolio. We talk about realizations and returns in the portfolio through the cycle. And I think it's very important to talk in those terms. You cannot determine as and when you exit a business or indeed your investment cadence on an annual discrete financial year. That's just not how the market works.
And as a result of that, we have to look at this rolling 3- to 5-year period. And if you look at -- since we've been listing -- since we've been listed, our average, we target 20% NAV return. Our average is 30%. That's come down slightly as a result of the last -- particularly this first half of this year, you'd expect that. But it's still way above the 20%.
And when you look at cash realizations, again, we were reporting 18% average return, we're now 16% when you look at the first half of this year. Again, you'd expect that at this stage in the cycle. But as the cycle unwinds, we would expect to get back into a normal cadence and trying to keep that annual return on a -- through the cycle of 20% and cash returns of 10% of the opening portfolio but we do believe we can deliver and we can achieve that. And I would hope that we'll see probably those numbers may be improving slightly in the second half, but we'll have to see how the market develops.
On to the next slide, please, Slide 12. We've shown this a number of times. And so maybe I'll just talk very quickly about our average track record. I think it's important for those that don't know us well to understand that this is a portfolio business. We have 74 companies that we manage. We directly manage about 55 of those and the returns that we can deliver are very much related to our approach to managing the whole portfolio. And the reality is that portfolio and sadly, most of the portfolio won't return a 3x-plus, which is always our target return. But the important thing for us is to try to get our money out as much as possible. And so that's where the downside protection really gives us that certainty and that level of protection.
And so therefore, when you look at the returns over time and the capital deployed, we do have a good track record of getting the majority over 1x, a good chunk between 1x and 3x, but clearly, we are always looking for those outsized returns at the top end, which is a feature of venture. So, for us, the important thing here is that our overall track record we're much more comfortable that we can deliver that because of the whole portfolio approach that we deliver. And I know we always get asked about individual companies, and I think it's important that we do focus every one of our 74 companies is important.
But the reality is the returns come from managing the whole portfolio. And we are a very diversified portfolio. I don't think we have any asset over 10% of the NAV and into double figures of the NAV. And I think that gives us a much more diversified and stable -- ability to deliver stable returns.
If we move to the next slide, maybe Ben, if you could talk about the NAV income and cost progression that we've seen over -- I mean, you touched on it already, but if there's any detail you want to bring out?
Yes. So I'm now looking at Slide 13, one of the features of our model, which we think is important and something that we focus on is ensuring that we don't have a cost drag -- dragging on the performance. And therefore, we're looking to have income, which offsets our cost base, and this is what we've been reporting on from the perspective of the income statement. We talk about a less than 1% of NAV target. In reality, it's substantially less than that, it's about 0.3%. But we are looking to continue to build out the income side of that equation with additional third-party assets that we manage and bring in.
And the majority of those assets, I think, as people know, are the EIS and VCT funds with the addition of the Irish fund in this period, that's another example of where we can bring on additional capital, which sits alongside the balance sheet and gives us, one, a diversity of pools of capital, but two, improve this income picture as we continue to scale the assets under management.
I think the left-hand side chart that we're looking at here really just shows the progression of the NAV and the NAV per share over time. And as Martin already outlined, that's really a feature of the free-to-cycle aspects, but also a feature of how we've managed to scale the balance sheet. And we think that's increasingly important as venture capital institutionalizes as an asset class. And when I talk about institutionalizing, I think what we're seeing is more capital coming into the space and for us to have the opportunity to manage additional third-party money, not maybe pension fund money and there's a lot of discussions about that ongoing at the moment and a lot of questions around that, but you do need to be a vehicle of scale. And we've seen that, that growth in that scale has become increasingly more important as we've increased the size of our assets.
Moving on into portfolio updates. I'll touch a little bit more on the valuation aspects for this period. I'm now looking at Slide 15, looking at the valuation methodologies. On the right-hand side, you see the split across periods of the different valuation techniques that we use. The single largest component of that is last round price but crucially calibrating that last round price to what the market has done since the round, but also how the company has performed versus those projections that it had at the time of raising capital.
And so what we do is we take that last round and we calibrate that to those movements, that you'll see on the first table that shows last round price valuations, the weighted average discount we have in this period is very similar to the one as of March when we have a 33% discount that we're taking against those last rounds.
So we think that, that's reflective of the fact that we are feeding through the changes in technology valuations through to our portfolio. And we did do that very quickly as the market moved, and that's why in the last 2 periods, the movements in the portfolio value have been more muted.
On the bottom chart that we have on this slide, you can see that in the comparable multiples approach to valuation, where we take the value of those companies relative to a peer group of publicly listed peers and use a revenue enterprise value multiple to determine the value of those businesses, what we're showing here that we're using a range of multiples, very similar to what we've had previously, actually come down slightly with the top end multiple of the range coming down.
And therefore, the weighted average multiple that we have in the period has moved down to 7.4x. So it's really just giving everybody a little bit more clarity and view on the metrics that we're using through each of these valuation periods. And I won't touch too much on the next slide, but that's again giving more detail on how those individual techniques or differentiated techniques that we've applied have affected the overall valuation. And so you can see the aggregate breakdown to each of those component parts.
Moving to Slide 17. This is really reflecting the metrics that we track in terms of portfolio resilience. There is within the table of valuation that's sitting in the financial review in the statement we put out this morning, but also in the interim report document. A couple of more columns that we've added to make it quite clear how much capital has been invested in the underlying portfolio relative to the value we're holding that portfolio apps. And we think that, that's another important feature to show the resilience of the portfolio but also to show how we're holding those businesses in terms of valuations and clearly, the majority of the companies that were ascribing value to on the core and the core account for 62% of the entire portfolio.
But within the emerging, we also have GBP 500 million of invested capital into that emerging portfolio. And the emerging clearly doesn't get as much attention because it's the larger companies that drive the value. And it's those larger companies that we showcased, if you like, line by line, ensure the movements on. But what's important here is when you think about on this slide, the chart on the bottom left-hand side, we have downside protection through liquidity preferences in the majority of our assets or 97% of our assets.
And when you put that in context of the invested capital that we have in the emerging portfolio, and you can see that we're valuing that emerging portfolio effectively a cost what you have is more than half of the portfolio value ascribed to the call, but all the rest of the value ascribed to the emerging where it's valued at cost with downside protection. But I think when you reflect that in terms of the discount, we're currently trading at to our net asset revenue, it's quite an important component to keep in mind because that downside protection of this model is an important feature Martin's run through the portfolio track record returns and keeping that in mind and how the portfolio skews over time in terms of its return profile this liquidity preference side is more relevant in these periods where valuations are moving and particularly when they're moving down.
Just touching on 2 other aspects on this slide. The core value in terms of the growth, so we're looking here at core portfolio growth metrics. As I mentioned earlier, growth has come down. It was projecting over 60%, last year has come in nearer to 57% and next year is projecting to be 50%. So we still think that, that average growth is strong, but it is clearly trended down, and we therefore reflected that into the valuations of this period. But what has remained robust is the gross profit margins. And we look at this as an indicator of the ability for these companies to have future profitability so that when they turn EBITDA profitable, having a very strong gross margin is an important facet of that, and it gives these companies flexibility, but also shows that they can generate cash coming through from the revenue that they take and that revenue is growing at 50% a year.
And so these gross margins are something that we do focus on, and particularly, we believe are an inherent feature of an underlying tech business with strong IP.
So I think with that, Martin, I'll pass it back to you for the outlook section, and then we give us some enough time for questions. I think.
Thanks very much, Ben. And look, I'll just say a few words in closing and about the outlook, and then we can move on to questions. I mean I think we all understand that the economic headwinds are likely to persist for some time, although I think a number of commentators are now saying that there is some -- a better weather on the horizon, if you excuse the metaphor. And so therefore, we will continue to remain disciplined and to focus on our -- both our scale and our adaptive of our model. Making sure that we really focus on the portfolio management and that we stick to the discipline around our thesis led investment approach. It's more important -- it's as important as ever to -- for us to remain disciplined during this period, particularly if we appear to be starting to come out of -- as the cycle starts to unwind.
So we'll continue with our strategy of building third-party assets and income, and we'll continue to syndicating the Fund of Funds program, which is very important for us, as I said earlier on, to help us to build deal flow and to help us to understand where the interesting opportunities are coming and where the technology is moving into the next stage of development.
But overall, our platform is built. We built the platform to be able to invest and to operate through the cycle. And so therefore, we will continue to focus as valuations stabilize, we'll continue to focus on managing the portfolio, but we would also continue to look to be able to capture those exceptional opportunities.
At a period in the cycle, when valuations are more attractive for buyers. And so deploying capital at this stage can be important, and we'll continue to make sure that we are active in the market and that we can take advantage of those attractive pricing. However, we will continue to preserve our PLC capital. And we will continue to look for realizations in the second half of this year. That's very much where our focus is. And we do think that, that's an improving environment. And so that's something that we'll really focus on.
We'll continue to keep on top of the portfolio to make sure that they retain their discipline in managing their own cash flow and their own cash runway, but also to encourage them to continue to grow in the right way because there is still huge opportunity. We'll continue to build our third-party assets. And as Ben demonstrated to continue to build our income but also those LP positions that we have in the Fund of Funds program, as I said earlier on, a really important way for us to get a risk-adjusted approach to building out the portfolio.
So we think our follow-on strategy will not change in the second half of this year. We'll continue to invest in our companies. And as I think investors turn today to the autumn statement and focus will come on to that and what's coming next. There is a continued focus on VC as an asset class and political parties of whatever persuasion, whatever happens in the general election next year in the U.K., appear to be very focused on helping to get more access, more capital into the venture capital ecosystem.
We've seen the Mansion House compact signed that we were part of earlier very recently. And we think this momentum will help to continue to raise the profile of this asset class and continue to help us to support the exceptional founders who are building solutions and solving problems with technology that are equally important now as they've ever been. We don't see -- and despite the cycle, we don't see any change in the need and desire of enterprises and consumers to adopt new technology in solving these problems. And the companies that we're investing in continue to innovate, continue to disrupt markets and continue to create value. And our job is to be here to support them both in managing their businesses, managing their self-set cycle, but also providing the capital to help them grow. And so that's very much what we look forward to in the second half of the financial year.
So that covers the presentation that we were going to go through. It does leave time for some questions. And as always, we are very happy to take any questions that you may have. And I think Sergio is going to help walk us through that process.
[Operator Instructions] The first question comes from Tintin Stormont from Numis.
One for each. Martin, when you're talking about potentially accessing some exceptional opportunities. And if you look at that with the lens of source of capital and realizations, could you maybe like expand in terms of kind of how you guys are thinking about this and whether sort of the -- some of the opportunities are exceptional enough that perhaps you would think of selling some of your more priced assets? Or is it more of a we're not quite there yet, et cetera, and you want to run with those holdings?
And Ben, for you, during your decide and valuation, when you were talking about sort of kind of discounts applied, for example, the last around valuations. Could you perhaps give a general comment of how have the companies generally performed versus what they expected when they raised their last round?
Sorry. Thanks, Ben, and thank you for your questions. As always, very strut liquidity is a challenge across the whole market. And what that's doing is driving prices into a much more attractive area. I think for us, and we have to look at our ability to raise liquidity, and we're constantly doing that. You'll have seen in the numbers that we are realizing more than we're deploying at the moment, and that's helping us to build liquidity and to build dry powder in order to take advantage of these exceptional opportunities.
We also do have the significant amount of debt facility that we've not drawn, which is there for working capital to these opportunities. So I think we do feel that we have the capital to be able to take advantage of the opportunities we see. But as the market develops, particularly as we go into the next calendar year, if more of those opportunities are developing then we don't have to be more selective.
We think we will be moving into a period into next calendar year, where there will be more opportunities. We have the capital at the moment to be very selective and so we will have to be selective. And of course, the challenge that comes into next year is that we'll hope that we find the liquidity through realizations for us to be able to take advantage of as many of those opportunities as possible.
I think the second part of your question around should we deliver liquidity by selling our assets? I think the reality is that by selling our assets at a discount to NAV, which is what you have to do in this environment to generate cash quickly in order to buy other assets at a discount kind of doesn't make a great deal of sense to us right now. We have to -- and we all know that you've got to ride our winners in this space. And so therefore, we're very reluctant to sell our best assets.
We have confidence in their value. We believe they will be able to come to market at the right time at the right value. And of course, we will always be a little bit more flexible, I think, in selling around NAV maybe a very tight discount than we have been in the past. I think that makes business sense. We certainly wouldn't be interested in selling at the kind of secondary market to generate cash quickly that you have to do in order to -- within the secondary market right now. It just doesn't make sense. It's not good for long-term shareholder value.
So we will look to exit. We'll work as hard as we can at or around no or a very narrow discount if that's the right time for those businesses. But our best assets, we still believe we should run them, and we do believe that the -- we will get to a liquidity event for them at the right time in the cycle.
So overall, we don't want to fire sell our assets in order to be able to deploy into other assets. We'd much rather stick with the ones we know. But we will continue to generate liquidity that allows us to be very selective in the opportunities as they arise.
Maybe, Ben.
Yes. I'll just take the second question on the performance of the portfolio companies versus the expectations of when they raise capital. I would just say, inevitably, there's a mixture in here. I think we have some companies that absolutely meet those expectations. And then you have others, and it's not uncommon where those expectations take a bit longer to come through.
The key when looking up and from a valuation perspective is obviously, how are they progressing and trending, but also making sure that if there are any delays to that revenue, then those expectations in the market size and the revenue that can be delivered don't change. So there's a few factors to look at. And I would say as an overall trend, we might see some delays, and I'll give you an example of Thought Machine in this period where they are bringing on the customers we expected them to. It's just taking a little bit longer for the implementation side for, let's say, a Tier 1 bank to use their infrastructure and go what we call live, live, which is taking it out of a discrete test environment and running it out to the full client suite and inevitably in highly regulated businesses like banks that can take a bit longer. So that's an example where the revenue is still there. The opportunity is still there. It's just somewhat delayed.
A second example would be [indiscernible] in this period where they have a new product launching the product is slightly delayed just by a couple of quarters that impacts on the timing of that revenue, but not ultimately on the market opportunity. And so I think those would be the kind of features that we would tend to see. It's not abnormal. The companies are very aspirational and their growth targets reflect that and the pace of their growth reflects that. But what we've also seen with the companies is they're able to flex their targets and they're able to manage and preserve their capital against those growth targets as well. So the flexibility of these companies is a clear feature of the model.
Our next question comes from Milosz Papst from Edison Group.
First, I just wanted to ask if you -- if you've seen any major changes in the mix of investors participating in the funding rounds of your portfolio in the recent months, I mean traditional VC versus nontraditional investors. And secondly, in terms of the companies which have a cash runway of less than 12 months, but can you give us an indication in terms of the stage of negotiations around the new funding rounds and the strength of the syndicate for those companies?
Yes, certainly. And I think we saw a change in the mix of big people who were competing for the best businesses probably 12 months ago or certainly into this calendar year. We've not really seen a change -- a particular change in -- over the first half of our financial year. So I think over the first 6 months, 9 months of this year, we have seen a change.
There were clearly in 2021, 2021, there were -- we saw a lot of different investors, a lot of crossover investors. I think we've referred in the past and they've been referred to as tourists coming into the venture space, they mostly left last calendar year, at the end of last calendar year or during last calendar year. I haven't really seen that.
I think for the best deal, the best deals still remain very competitive, and we are back into our good old traditional foes and friends in competing for those businesses. It tends to be now the types of businesses we're going after tends to be the top tier either global but certainly European venture firms that we are competing with and in many cases, working with as well, which I guess comes to your second point, which is when they have less than 12 months, how do we manage that and build those syndicates.
I think a very important part of our model because we've been at this, the company has been at this for 20 years. We understand that companies that are successful will require to -- as they grow to raise capital every 18 months. And really, once they get to around the 12-month stage, as you quite rightly said, that's when we, as quite often a syndicate leader in the early stages are starting to look at the options and to build our capabilities.
And I think that's certainly something that we're doing that we're seeing a lot more of over the last 12 months or so. I would tell you that we're probably a little bit more -- we get on top of this a bit more. I think in certainly 2 years ago, you'd be looking at 12 to 14 to 18 months, you'd be reasonably comfortable that you'd look at it in 6 months' time. I think we're much more on top of this and everybody is really saying that anyone who's got less than 12 months, it's going to take 3 to 6 months to raise in this environment. We'd be very clear about what they need to deliver and what the company needs to look like in order to be able to raise. And I think we're working on those, and this is very much part of what we're doing working with founders, is we're working much earlier, trying to build longer cash runways.
So I would say under 12 months tends to be the smaller companies, the larger companies tend to be a bit more strategic when they raise money, they tend to raise it for much longer.
I think the other point I would say is that there's much more focus as well now on making sure that when we look at companies and when they raise that we're not just raising to the next fund raise. We're looking to raise towards cash breakeven or cash flow positive not exit in many cases or in some cases, yes, but to cash flow positive. And I think that's a real focus that we've seen over the last few years.
And so increasingly, we're saying, raise another 2 years in order to get you to that cash flow breakeven point. And I think we're seeing a lot more of that. But the short answer to your question is much more traditional competition in the market as liquidity is tighter. And certainly, under 12 months, there's a lot more focus on building syndicate early, and I think that's the key thing. I don't know if you wanted to add anything to that, Ben on the...
No, I think that's right. It's about the foresight that we're able to have and making sure that we are multiple plans on the table, but this is very much standard in the model, but not something that concerns us as you see, over several cycles. We've had companies with less than 12 months runway and then we have had a funding round in the period and we moved them into a different category. So it's not something that gives us concern.
[Operator Instructions] Our next question comes from James Lockyer from Peel Hunt.
Three from me, please. Just in terms of the growth reduction at 50%. Is that more the market or was it due to sort of reductions in investments that were made to protect cash that maybe there are opportunities that might have happened, but it's sort of softer growth because of that?
Second question. In terms of the current share price, I mean, you mentioned, obviously, there's a huge discount to NAV, but I wonder whether the downside protections are part of thoughts of the misunderstanding around that and maybe the current 0.9x cash return on [Technical Difficulty]
Quite -- could you to repeat it? Just from question 2, if you can.
I think we lost James.
We lost James. And we have a question from Gerry Hennigan from Goodbody.
A question maybe probably for Ben. In the context of the discounts that you've applied across the portfolio companies, Ben. Given your comments and maybe some of those that have suggested that private sector valuations have started to stabilize here. Do you think there will be any change in the approach, which is over the recent past has been maybe more biased towards comps than it had been previously? Or would there be any change at all? And later your point of view here.
Yes, I think there's a sense that private sector valuations are stabilized. I think for our portfolio, my feeling was our approach was in the good times to walk them up slowly. So wait for that commercial traction, and therefore, we're holding at discounts to some of the rounds that they've achieved. And I think that's -- that was the right thing to do and that we had a degree of conservatism and waiting for the commercial traction of those businesses to come through and underpin the valuations that they were raising capital at.
That meant that we didn't peak out quite as high as the market would have done. And therefore, mainly had less to come down. But what was also true was that at the point where the public market valuations were moving quite rapidly. We took those down quickly as well. So we've had 2 additional valuation periods now year-end March this year and then this September period where we've been reflecting through changes, but certainly not as significant.
And then I think you're right that the broader market in terms of the private space, there is a lag, we don't have, if you like, the luxury of that lag because we are publicly trading and we have the governance around our structures. And therefore, we work very closely to make sure that we are being accurate with our valuation, but also taking our broader approach, which won't change, which is being prudent to make sure that when the companies are doing well and raising new capital that we're holding the valuations within the right fair value range, but at the lower end of that range. So that when they raise that capital, hopefully, then is there's an uplift.
And also on the inverse when companies are showing any signs of slowing down growth or not hitting their targets, we're taking those into account in evaluations. And so I think that isn't going to change as an approach. And I think it's the right way to continue to value the portfolio. And what we're trying to do in each period, we're giving more detail and more granularity on that process and the metrics that it delivers. What we're trying to do and retain is just the confidence of our investors that the marks we're giving are accurate, and that they get proven out over time when we're selling companies at uplifts to the values that we're holding.
One more, if I can. You referenced previously about the provisions you've taken in the core and the non-core. Can I take it that some of the assets in the non-core were on that slide. I don't have in front of me here the way you didn't generate a large return on. Can you give any more detail around those in the non-core?
Yes. Yes. I mean every period, there'll be some that fall into one of those categories in terms of our realizations. In this period, we have [indiscernible] analytics, which we're not getting a return on. And effectively the decisions after we made along the journey if the companies are scaling and growing to meet our cost of capital.
In many cases, we can work with them and get those returns, at least some value back to us. And in some cases, I think in the slide, we show is maybe 10% of those cases where we'll end up with a 0 or less than 1x our capital, but that's the feature of the model. So yes, certainly, some of the emerging where we've taken those downs have been reflected onto our track record slide.
And it appears this was the last question today. With this, I would like to hand the call back over to Martin for closing remarks. Over to you, sir.
Thanks very much, Serge. And James, if you can hear us, but we kind you very happy for you to contact us, obviously, to answer your questions. I guess probably just a last couple of words from me. As I say, the -- working through this stage in the cycle, we're very pleased with -- that we've built a platform that enables us to manage through the cycle. And I think that's something that's put us in very good stead over the last 12 or 18 months.
The portfolio is stable. It's got good cash runway. It continues to lengthen that runway and the portfolio continues to perform very well. From our perspective, our focus is very much in supporting the founders as they also manage their businesses through the cycle. And I think it's very important to be an experience of being through cycles, many of our founders haven't and helping them to understand how they manage cash flow, but also continue to innovate, disrupt and to grow their businesses is something that we believe that we can help them with and will deliver very good results over time.
But as we start to emerge through the cycle, and I think there is a view that as we get into the next calendar year, that the cycle will start to level out and potentially unwind, I think we will see more and more opportunities. And our focus in the second half we'll be very much using our unique access and to generate as much liquidity as we can to be able to access those very best opportunities as we do think this is a very, very exciting time for venture, and we do think there'll be increasing opportunities as we move into next year.
So with that, I'll probably finish our presentation and the call. As always, we always welcome feedback, and we're always very happy to take questions directly or to have direct contact with the company. But I think from the presentation from myself and Ben, would like to thank you for your time, and thank you very much, and have a good day, and enjoy the autumn statement for those of you who are focusing on that next.