OCTOPUS TITAN VCT PLCAs the 2023 total return has been negative, and net assets have declined since 31 December 2021, no performance fee is payable. To remind you, the performance fee is calculated as 20% on net gains above the high water mark (the highest total return as at previous year ends), which is currently set as 197.7p as at 31 December 2021.Shareholders will recall that in the half-year report, the Company announced a revised dividend policy targeting a dividend of 5% of the opening NAV per financial year supplemented by special dividends when appropriate. This revised policy aligns more closely with the Company’s long term sustainability goals.We were pleased to raise over £237 million in the fundraise which closed on 5 April 2023 and on 19 October 2023, we launched a new offer to raise up to £125 million. The new offer was closed on 5 April 2024 having raised £107 million. We would like to take this opportunity to welcome all new shareholders and thank all existing shareholders for their continued support. This is a lower fundraise than in recent years but still represents the largest VCT fundraise in the market for the 2023/24 tax year. We were pleased that in the November Autumn Statement the Chancellor announced that the VCT sunset clause will be extended, meaning VCT relief will be available to subscribers for shares issued before April 2035, rather than April 2025.I am pleased to announce that Julie Nahid Rahman was appointed to the Board on 1 August 2023. Julie brings to the Board a wealth of experience drawn from her long career in private equity, executive search and strategy consulting.Malcolm Ferguson, Octopus’ lead fund manager for Titan, has resigned and Jo Oliver has been appointed as Adviser to the Board on fund and strategy on an interim basis. Jo brings 15 years of experience with Octopus Ventures and the Company, having previously been the lead fund manager for Titan from November 2014 to June 2022. Since 2022, Jo has remained part of the Octopus Ventures investment team, as a Partner, on a part-time basis. Malcolm will continue to take an active role as lead fund manager of Titan until 30 April 2024, with Jo then taking on the interim role overseeing the fund management of the Company while a process is undertaken to find a permanent replacement. The Board welcomes the breadth of experience Jo brings to Titan in this interim period. I would like to take this opportunity to thank Malcolm for his contribution to the Company and wish him well for the future.The AGM will take place on 11 June 2024 from 12pm noon and will be held at the offices of Octopus Investments Limited, 33 Holborn, London, EC1N 2HT. Full details of the business to be conducted at the AGM are given in the Notice of AGM.The decline in Titan’s NAV reflects the difficult environment in which its portfolio companies are operating. Multiple factors have had an influence, including the slowing of growth across the portfolio as companies optimised for efficiency and profitability (where possible). Slowing growth has meant that the uplifts in value in certain portfolio companies have been insufficient in this period to offset some of the headwinds. There were also company-specific performance issues with companies encountering tougher trading conditions, reducing growth in revenue. This led to under-performance against expectations which translated to lower valuation multiples. Some portfolio companies attempted to raise and were unfortunately unsuccessful, leading several to be placed into administration or accept acquisition offers on unfavourable terms; more can be read on these disposals in the Portfolio Manager’s review. Others had to complete funding rounds at lower valuations or structured in a way which negatively impacted some existing shareholders as they were on more dilutive terms. This reflects the increased cost of capital for investors because of higher interest rates.ChairThe NAV of 62.4p per share at 31 December 2023 represents a decrease in NAV of 9.5p per share versus a NAV of 76.9p per share as at 31 December 2022, after adding back dividends paid during the year of 5p (2022: 5p) per share, a decrease of 12.4% in the year.Despite the reduction in NAV in the year, the total value has seen a significant increase since the end of Titan’s first year (31 October 2008), from 89.9p to 164.4p at 31 December 2023. This represents an increase of 83% in value since Titan’s first full year including 102p of dividends paid since inception. Since Titan launched, a total of over £506 million has been distributed back to shareholders in the form of tax-free dividends. This includes dividends reinvested as part of the DRIS.One full profitable disposal completed in the year with iSize being acquired by Sony Interactive Entertainment in November 2023. In the year, Titan also received deferred proceeds from the sale of WaveOptics (to SNAP Inc in 2021), Conversocial (to Verint Systems Inc in 2021), Glofox (to ABC Fitness Solutions in 2022), Digital Shadows (to ReliaQuest in 2022) and Skew (to Coinbase in 2021). Liquidation proceeds were also received in the reporting period when Third Eye was dissolved. In 2023, these disposals, deferred and liquidation proceeds have returned £46 million to Titan in cash, shares and/or deferred amounts.Titan completed 22 new investments and made 18 follow-on investments in 2023. Together, these totalled £98 million (made up of £54 million into new companies and £44 million invested into the existing portfolio). This compares with 31 new investments and 33 follow-on investments in 2022, together totalling £157 million. This slowing of investment rate is a result of a reduced volume of founders seeking funding as they look to reduce reliance on further funding, or take steps to make their existing capital go further. The total value of the portfolio as at 31 December 2023 is £791 million.Where does Octopus Ventures source its investments from?The team receive inbound approaches from entrepreneurs across all stages of development and sectors. We engage with thousands of companies seeking investment and go on to invest in less than 1% of these. We also proactively research the best-in-class founders and businesses which are looking to fundraise within our seven areas of focus and reach out to the teams to learn more and understand if they meet our investment criteria. In-line with our female diversity pledge we have launched different initiatives to help drive engagement with female entrepreneurs to ensure we offer an equal opportunity to assess female founded and led businesses. Sometimes we can meet a business which may not be right for our investment at that point in time, but we offer the company constructive feedback and give guidance on milestones so that they can come back to us and we can reassess in the future. As well as entrepreneurs we haven’t worked with before, a great endorsement of our reputation is founders we have previously partnered with often returning to us to back their next businesses.After reviewing pitch materials and having an introductory call with a business, if we feel the opportunity is truly pioneering and led by an incredible management team, we invite them to pitch to our investment team – allowing the company to tell us their story and to ask any questions. If positive, we will then spend time evaluating in more detail the key elements of the company ranging from team and hiring plans, product and technology, financials, sales pipeline and competitive landscape among other matters. In parallel, we will frequently speak to partners, customers and relevant third parties to help us asses the opportunity. The final step in our process is to invite the management team to a final pitch to our Investment Committee, made up of senior investment professionals within the Octopus Ventures team. Following that meeting, if we have built sufficient conviction in the team and opportunity, we will put forward terms upon which we will invest in the business. Once terms are agreed, we will complete confirmatory due diligence alongside Director checks and negotiation of the investment legal documents, which govern how we will work with the company post-investment.We would expect a typical investment process to take around three months from initial meeting to completion of the investment, but we are often in contact with a management team for months if not years before making our initial investment. An existing relationship prior to investment allows both parties to ensure there is a good fit, ahead of working together, in many instances this can span many years. We recognise that fundraising is a necessity for early-stage companies, and that it puts a huge strain on a business which is typically short on resource and time. As a result, we are always focused on trying to make the investment process as smooth and frictionless as possible whilst ensuring due process is followed.Our typical investment horizon is seven to ten years, and early-stage companies will often need several rounds of funding and support before an exit. So, we don’t just make an investment, but we also actively participate in the company’s growth plans. Usually, someone from Octopus Ventures sits on the board of the companies in which we invest, allowing them to play a prominent role in the company’s ongoing development and share their expertise and learnings. In addition, we focus on two core value-add initiatives – firstly, we work hard to help the founders raise their next funding round, through investor introductions and fundraising advice. Secondly, we understand that, as with many companies, the quality of the team can make or break a young business, so we support this with a dedicated in-house people and talent team. Their contributions range from establishing best-in-class recruitment processes, to finding appropriate coaches for the senior leadership team, to selectively supporting recruitment efforts for key roles.Titan’s unquoted portfolio companies are valued in accordance with UK GAAP accounting standards and the International Private Equity and Venture Capital (IPEV) valuation guidelines. This means we value the portfolio at Fair Value, which is the price we expect people would be willing to buy or sell an asset for, assuming they had all the information available we do; are knowledgeable parties with no pre-existing relationship; and that the transaction is carried out under the normal course of business.ibex-ai.com
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December 2021: Series A1Skin+Mewww.skinandme.comManyPetswww.manypets.comAmpliencewww.amplience.comPermutivewww.permutive.comPelagowww.pelagohealth.comVitessewww.vitessepsp.comEllipticwww.elliptic.covHive Tech Ltdwww.vhive.aiTokenwww.token.ioXYZ Realitywww.xyzreality.com2. Information not publicly available.The decline in Titan’s NAV is disappointing and looking ahead in 2024, there remain headwinds which need to be navigated, notably around the lack of capital, especially at the later stages for driving growth. We have seen the impact on our portfolio companies with their growth slowing, leading to slower valuation appreciation. This has limited their ability to raise follow-on funding at attractive terms or achieve successful exits at appealing valuations. Both the funding and exit environment have been subdued as businesses look to preserve cash and focus on achieving profitability. According to Pitchbook (a provider of private markets data), European funding in 2023 fell to roughly €57 billion, down from €105 billion in 2022 and VC firms raised €16 billion compared to €28 billion a year ago^{1ChairChair
Company Number 06397765Accounting policyInvestment income includes interest earned on money market funds. Dividend income is shown net of any related tax credit.Accounting policyAccounting policyAccounting policyThe corporation tax charge for the period was £nil (2022: £nil).Accounting policyQuantitative remuneration disclosures required to be made in this annual report in accordance with the FCA Handbook FUND 3.3.5 are available on the website: https://www.octopusinvestments.com/remuneration-disclosures/.LEI: 213800A671KGG6PVYW756th
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