While 2022 started strong, things went downhill from there. You name it, 2022 has been a tough year from Giga high inflation, the largest land war in Europe since WWII, the cost of energy rocketing higher, global strife, and pandemic stress…. geez… 2023 can only get better, right? SyndicateRoom, an online investment platform that offers a venture fund for smaller investors, has distributed a somewhat optimistic missive via email. SyndicateRoom noted that global private investment sunk during 2022:
“Global venture capital saw a major pullback in Q3 2022, as the ongoing slump in public markets continued. Venture funding for Q3 2022 totaled $81bn, a decrease of $90 billion (53%) on the previous year, and by $40bn billion (33%) compared to the previous Q3. On the positive side, the UK tech sector raised £24bn in 2022, the highest of any country in Europe, and beat the closest competition – France, with £11.8bn – by a considerable margin. To date, the UK has created 144 unicorns and is home to 85,000 startups. 28 of these hit a $1bn valuation in 2022.”
Venture investors are biding their time – keeping their powder dry, said SyndicateRoom, “a recession is exactly the time to invest in venture capital funds or startups, because these are longer term, slow-growing investments that are likely to be less affected by volatile public markets.”
The company added that pooled IRR achieved by funds that started investing between 2001 and 2017 was 14.7% (as of December 2021).
So how is SyndicateRoom doing now?
During 2022, SyndicateRoom made 48 investments joined by 31 angel investors (professionals), reporting an EIS-adjusted performance of 35.7% in 2020 and 23.8% in 2021.
Published in September, the Hardman Report provides additional information on SyndicateRoom’s progress:
“The fund was launched in 2019, and made its first investments in 2020. Since then, it has invested £9.08m into 146 companies. As the process above indicates, there is only a single investment round in each company.
Given the relatively short history of the fund, it is not surprising that the fund has had few exits to date. So far, there have been two successful exits. One was for a 1.4x MoIC. The other was for 1x, but, if it achieves milestones, this could rise to 2.5x. There have also been four total writedowns, for which loss relief has been claimed. Given that failures generally arrive before successes in venture capital, this profile is not surprising.
The 140 unrealised investments are showing an average gain of 22%. Of these, 50 have experienced later fundraisings at higher prices, 10 have been written down and 80 are unchanged. Note that the 2020 investments have many of the largest movements and overall show a 36% gain (including exits).”
One company partner says, “I think this coming year (despite challenges for the economy) one or two of the portfolio companies will see big successes in 2023.” I guess we will find out in the next 12 months.