Deepbridge Review 2022

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Throughout 2022, the Deepbridge team and I were heavily focused on structure, finessing our processes and enhancing our existing team. We were pleased to make a number of key hires last year, including the appointment of Simon Thelwall-Jones to the role of Fund Manager, Head of Technology Growth. Simon brings to the team a wealth of experience as a qualified Chartered Accountant, an experienced Company Director and a corporate finance expert; with his most recent roles being Investment Director at MSIF followed by Director of Technology Ventures for the Development Bank of Wales.

This appointment forms part of a wider restructure within the Deepbridge team following my move from Head of Life Sciences to become Chief Investment Officer. I was delighted to take on this new role, with Ben Carter, who has been with Deepbridge for over five years, stepping up to become the new Head of Life Sciences.

As part of Deepbridge’s continuing growth, we also introduced two new Associate Investment Directors to the Technology Growth team, Dave Blake and Oliver Wheatley. Both new recruits have worked with Simon before and have previously been involved in the co-funding of a number of Deepbridge companies and come with a wealth of experience in their respective fields, adding further value and expertise to the Technology Growth and wider Investment team.

Furthermore, we have most recently welcomed Dr Andy Round to the Life Sciences team as Investment Director. Andy brings with him a wealth of experience from previous roles in early-stage investments. Importantly, the team is also well acquainted with Andy as he has been involved in the co-funding of a number of Deepbridge companies from previous life sciences funds he has led.

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Since joining, the new team members have been spending time getting to know our existing portfolio companies, and I was encouraged to hear that they have been extremely impressed by the quality of the portfolio. The addition of these highly-skilled team members marks the beginning of an exciting time for Deepbridge and is expected to help drive our ambitious growth plans, ensuring that our financial advisers and clients continue to receive the best possible products and services.

Our colleague Adrian Neilan, COO, who previously had stewardship of the Technology Growth portfolio will continue to provide specific portfolio support, allowing him to spend more meaningful time in areas of the business which are in need of his operational skills and commercial acumen. In addition, Louise Farley has taken on a new position as Head of Private Placements, a crucial role designed to further assist our portfolio companies in attracting significant co-funding.

Looking ahead, it wouldn’t be the most insightful comment to say that the world is going through a difficult time at present with technology and biotech valuations not immune to the general macro challenges. Although our investment teams will always look to mitigate risk, we must be aware of wonderful opportunities for growth which always present themselves in periods of uncertainty. Although not an economist, a quick glance at the financial press every day would alert even the layperson to what has been a tough few years for businesses.

The general economic backdrop remains soft at present and political instability in the UK (and more recently in the US) has not helped. The economy continues to be faced with a multitude of interrelated obstacles, including inflation, geopolitical flare-ups and supply-chain disruption. Market conditions have been undeniably tough and global Private Equity activity has been down significantly year on year. Furthermore, we have witnessed tech valuations negatively impacted by investor appetite, caused partially by ‘Big Tech’ companies’ valuation issues – e.g., Tesla, Apple, Google and Meta. One relevant aspect of this downturn has been the workforce reductions at these tech giants. What is undeniable, when good talent floods the market, is that it enables younger companies to up-skill their human capital and often accelerate their growth.

We will inevitably witness ups and downs within the portfolios this year, and part of our approach over the past twelve months has been to identify weaknesses within our legacy portfolio, moving those companies to a conclusion if we are not fully confident that they have the long-term prospects we seek to support. In times of turmoil, self-help is often the first and most vital ingredient to a recovery. If companies cannot exhibit the ability to help themselves and reflect the environment they are operating in, the world will be tough for them. For new investment opportunities, we will maintain a multi-sector investment approach and will continue to work extremely closely with the companies we back.

Whilst we have seen specific pressure on valuations across mainstream tech sectors, such as SaaS companies, I can report that valuations remain reasonable in other sectors, such as MedTech, diagnostics and contract research (CROs) which tend to hold their value in periods of economic downturn, so a portfolio approach to investing remains as important as ever.

We saw a great deal of progress across our Life Sciences and Technology Growth portfolio companies in 2022 and believe this further validates our investment decisions and Deepbridge’s hands-on approach to portfolio management. Within Life Sciences, LCC has broken through the £1m ARR barrier. Our metaverse investment, vTime, has also pushed through with revenues of over £1m. Hurricane remains on course to show good exponential growth with revenues likely to exceed £3m this year. AlgaeCytes, which provides the world’s first vegan omega 3 supplies is on the cusp to break ground with the construction of its first manufacturing facility and forward sales of all its capacity exceeding expectations. There is no doubt that working to assist our portfolio companies as much as possible contributes towards successful results and future exits.

The maturity of our portfolios means that we have a number of companies which are now in active exit mode and we look forward to updating you on this as the year progresses.

Deal flow of exciting tech and life sciences companies continues to be extremely strong, as the UK remains one of the best places in the world to start and grow highly innovative companies – the Enterprise Investment Scheme is a key reason for. The work of the British Business Bank is also a great example of the UK Government’s focus on supporting early-stage companies. That we continue to benefit from significant co-funding from British Business Investment’s Regional Angels Programme also reaffirms support for what we at Deepbridge are doing.

We were of course encouraged that each Chancellor of 2022 publicly supported the Enterprise Investment Scheme (EIS), and the expansion of the Seed EIS is further great news. The Government is set to continue its commitment to help entrepreneurial businesses raise growth capital by renewing its support of EIS. The 2022 Autumn Statement further validated Deepbridge’s belief that our investors can access companies driving the UK’s ability to grow as a global R&D powerhouse, and in the words of the Chancellor become ‘the world’s next Silicon Valley’.

In summary, with over 120 EIS and SEIS companies supported to date, we shall naturally see attrition of the portfolio as not all companies will succeed. However, I look forward to numerous good news stories in 2023 as we work on exits, co-funding and commercial growth across our portfolios.

On behalf of the Deepbridge team, I thank you for your continued support and look forward to the year ahead.

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