Katalysen Ventures’ 2022 Q2 report is now available under ‘Investor Relations’. Highlights from the second quarter include:
- We have successfully listed Katalysen’s share on Spotlight Market,
- We are on track to meet our new client/project acquisition target for 2022,
- Our collaboration with Tetrad Capital Partners is proving to hold even more potential than we had initially thought,
- And, we are (despite weak public markets) still on a trajectory towards our 30% annual growth target for 2022.
- However, weak markets have also caused delays in two Series-A projects in the portfolio.
Let us more closely examine the above. During the first half of the year, and in particular during the second quarter, we have prioritized assisting current client and portfolio ventures through the rough market climate. This has included advice on how to prioritize the use of limited resources (i.e. smart cost-cutting), hands-on help in implementing effective solutions to meet funding needs, and actual funding if agreed. As a result, the overall burn rate of the portfolio has been tightened up without making large sacrifices in terms of long-term potential. We have also made holistic adjustments in our portfolio valuations, with a few rather drastic cuts (30-90%) in individual venture valuations. Despite this, the portfolio saw modest (0.4%) growth during the Q2 period (excluding new cash invested). While this leaves us short of our 7% quarterly growth target, we are still confident that we are on a trajectory toward our 30% annual growth target for 2022. We consider this possible, despite delays in the two ongoing Series A projects in the portfolio (we will have to wait a little bit longer for these projects to pay off). The following paragraphs outline some sources of our continued confidence.
During Q2, we successfully listed the Katalysen share on Spotlight Market. This was an important milestone for us, and a “2022 IPO” had been a stated target on our roadmap going as far back as 2019. Our reasons for pursuing an IPO were elaborated upon at length in the memorandum but advantages as a publicly traded company include 1) the opportunity to position Katalysen as the easiest way for retail investors to gain exposure towards a hard-to-reach segment (early-stage), 2) improved ability to create value for clients, and 3) improved access to capital markets.
Our new client/project acquisition target for the year (as previously communicated in the IPO memorandum) is to sign 6-10 new client agreements during the year. We have, since the start of the year, signed 7 new client agreements. Three of these with new ventures, and four with returning ventures. Importantly, many of these deals are expertise-only investments and create millions of SEK in value for Katalysen from day one.
As of this writing, multiple portfolio ventures are on track towards closing funding rounds at valuations that are significantly higher than in our valuation dashboard at the end of Q2. Additionally, during the quarter we have chosen to be opportunistic and extended convertibles to several ventures at what we consider attractive terms. When extending such convertibles, it is always based on the availability of a scenario under which conversion into equity is deemed the most attractive outcome.
Our confidence is also strengthened by the promising progress that is being made in collaboration with Tetrad Capital Partners (see "2022-04-01: Katalysen announces new partnership with Tetrad Capital Partners”). In this partnership, Katalysen is currently in discussions with some of the world’s most well-known venture capital funds regarding the provision of our venture development services to these VC’s portfolio ventures. In particular, discussions are focused on Katalysen providing hands-on assistance related to European-market entry for some of India’s fastest-growing scale-ups. It is worth noting that the value of this project (of which Katalysen’s share is 40%) is currently zero in our books and will remain so until the project has been incorporated. We expect this to happen during the autumn and are confident that the venture will have accrued significant value at that point.
Looking more long-term, the venture developer model is an essential prerequisite for being able to craft a larger, actionable strategic plan and forecast leading up to 2027. This because the venture developer model allows us to better forecast client success (since we are active in developing it), and it provides a predictable path for leveraging talented people to unlock new value through new deals, largely without investing cash. We will have more to share on this during the second half of the year, but it is safe to say that we are striving to become not only the most engaged early-stage investors in the Nordics but also one of the most active in terms of new deals done, both of which make commercial sense and will generate strong income streams for Katalysen.
In line with this goal and our goal to establish the Katalysen brand in the Nordics during the year, you will be able to find us at various events throughout the latter half of the year, including at Slush in Helsinki and TechBBQ in Copenhagen. Make sure to let us know if you will also be there!
Finally, we are pleased to observe that our venture developer business model works well in a depressed market, too, where both cash and especially expertise are valued highly.
Warm Summer Wishes,
Peter, Heiner, & Team