NetScientific (NSCI) , a deep tech and life sciences venture capital investment group, issued a business, strategy and portfolio update for the year ended December 31, 2023.
NetScientific had 23 portfolio companies at period-end where it is expecting a modest year-on-year increase in fair value. Across the portfolio, an aggregate £52.2m was raised in 2023 through equity and venture debt by 13 companies. Capital under advisory increased by £6.6m to £23.5m.
An increase in fees generated by EMV Capital, NetScientific's wholly-owned VC and corporate finance firm, covered approximately half of core group costs, while the subsidiary provided infrastructure and services to NSCI and its portfolio. EMV Capital also received direct FCA authorisation during the period, enabling it to expand its corporate finance and fund management activities.
In terms of strategy, NetScientific emphasised several key objectives for 2024 and beyond, to carry momentum from FY23. Broadly, these include growing the value of stakes in its portfolio companies (both fair value and capital under advisory); expanding its management practice; identifying and creating better exit routes for holdings; scaling and developing its team and platform; and achieving financial independence.
Final results for FY23 are expected in May 2024.
Dr Ilian Iliev, CEO of NetScientific commented: "We have significantly advanced our strategic goals, focusing on a sustainable business model and enhancing the value of our portfolio holdings. We are generating fees and executing on secondary exits. Our goal is now to leverage our differentiated VC investment model at a critical time for the VC industry.
"With a more diversified investment approach, we are preparing for profitable investment returns and strategic divestments that align with our growth strategy. We are now also actively exploring new fund opportunities which fit our criteria and expertise."
View from Vox
NetScientific reports good progress in FY23 with steady year-on-year growth in both fair value and and capital under advisory, and portfolio expansion to 23 companies. NSCI also recorded a proprietary trade profit of £0.5m from secondary sales of a £1.4m position across 2 portfolio companies. Wholly-owned EMV Capital managed to cover half the group's core operating costs, as NSCI moved closer to financial independence.
The group also advanced its stated strategic goals, remaining well-positioned to profit from the shift in the VC industry toward deep tech opportunities. Capital-efficient and diversified investment continued, helped by value creation services provided by EMV.
On the fund management side, NSCI is targeting higher recurring revenues and carried interest returns, as well as more liquidity events to scale funding capacity. To that end, NSCI is seeking to take on management of 2 existing funds, and mapping out exit strategies for several portfolio companies, including ProAxsis (see below).
On the balance sheet and cost control side, the group is aiming to cover more core costs through operational income, including corporate finance fees, value creation services fees, and fund management fees, as well as secondary trading income through profitable exits of portfolio companies.
Several portfolio companies achieved significant operational milestones and fundraisings during the period:
ProAxsis (81.9% direct holding, 8.7% advised holding) intensified the development of its Patient Point of Care product range, leading to improved patient outcomes in respiratory disease, and is exploring avenues to scale up market access. The company has appointed EMV Capital to explore options for a potential sale (full or partial) to a new owner.
Glycotest (52.7% direct holding, 5.8% advised holding) secured a $1m investment from Fosun Industrial alongside private investment of c. $800k syndicated by EMV Capital. Glycotest completed enrolment in a clinical validation study for its HCC Panel and is moving toward sample assay and data analysis to demonstrate the superiority of its Glycotest HCC Panel test for identification of liver cancer.
For Q-Bot Limited (14.3% direct holding, 32.4% advised holding), EMV Capital led a £3.5m fundraise for expansion in the UK, US, and Europe. The company achieved 10,000 property surveys and 4,500 installations in December 2023. For Vortex Biotech (22.1% direct holding, 15.4% advised holding), EMV led a £3.2m fundraise as it expanded lab facilities at the London Cancer Hub's Innovation Gateway and generated studies with Imperial College London and University of Cambridge.
Ventive Limited (10.9% direct holding, 24.9% advised holding) secured a £900k investment via EMV Capital, in addition to a £1.5m DESNZ grant, and £100k UK Government grant for 'net zero HVAC' systems. And Deeptech Recycling (30% direct holding) secured a first investment of £1m via EMV Capital for commercialising its patented chemical recycling technology.
Sofant Technologies (1.4% direct holding, 25% advised holding) completed a £1.2m funding round facilitated by EMV Capital, and progressed product commercialisation, including advance orders with Inmarsat (now part of Viasat), the European Space Agency, and a global aerospace company, targeting commercial product launch in 2024.
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