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A listed VC fund
VNV Global is a $400 million Swedish holding company (listed on the Nasdaq OMX Nordic Exchange under the ticker VNV SS) that makes investments in high-growth technology-enabled businesses: it is essentially a venture capital fund with the added benefit of permanent capital that allows for long holding periods and considerable potential for value appreciation.
While its strategy is stage-agnostic (it can invest from seed and early stage to growth capital and late venture), it is nevertheless specialised in online marketplaces, consumer-focused and B2B companies (industries that benefit from network effects and with high barriers to entry for competition), and usually seeks to become a significant minority shareholder where it can actively manage the investment through board representation.
VNV has an unusual corporate history that started with the first investment in Russia in 1996 under the name Vostok Nafta and a focus on energy/resources and agriculture. Despite the country’s opportunities at the time, this strategy was not too successful.
“We have actively sought out risky – but sound – bets in emerging sectors and regions.”
In 2007 VNV shifted its focus to private high-growth technology companies. The strategy overhaul was led by then and now CEO Per Brilioth, who was a board member at Swedish company Tradera, which was acquired in 2006 by eBay. Brilioth became intrigued with internet businesses with network effects and convinced Tradera’s founders to build an e-commerce company in Russia with seed capital from Vostok: this company eventually became Avito, the leading online classifieds platform in Russia. Brilioth then began liquidating the legacy energy assets and using the proceeds to invest in other early-stage internet businesses primarily in same country (another early investment was Tinkoff Bank), but over time also across other emerging and frontier markets. VNV eventually sold its stake in Avito for $540 million in 2019 to OLX Group (today part of Naspers/Prosus), which already owned 70% of the company.
To reflect the new focus, in 2015 the company was renamed Vostok New Ventures and simultaneously spun off its “sister company” Vostok Emerging Finance (today simply known as VEF AB and probably worth a dedicated post in the future), which initially contained the holding in TCS Group/Tinkoff Bank and specialises in modern financial technology companies (consumer finance, digital lending and payment processors) in emerging markets. Brilioth is also a board member at VEF.
Finally, in 2020 the company settled on its current denomination as VNV Global to better reflect its more global investment focus.
The current portfolio is broken down across 3 core segments: digital health, mobility and marketplaces/classifieds. The full list is available here.
Babylon (10.5% ownership) is a data-driven digital healthcare provider which uses custom-built AI to diagnose ailments and provides users with the ability to make on-demand digital appointments with doctors. Babylon’s competitive edge is found in its AI technology, which benefits from a network effect as it gains users, enhancing the accuracy of the diagnostic tools, which in turn brings in more patients and commercial partners. This effect raises barriers to entry and makes it difficult for new entrants to dislodge incumbents.
Babylon listed on Nasdaq last October at an implied valuation of $4.2 billion by merging with a SPAC (Alkuri Global Acquisition Corp.): despite being a beneficiary of COVID-19 as healthcare systems have sought to reduce the number of unnecessary in-patient visits (it delivered over 5 million consultations in 2021 with revenues of $320m, +300% vs. 2020, expected to reach $900m in 2022), it has had a dismal start to its life as a public stock.
Numan (17.4% ownership) is a London-based online health clinic focusing on men’s health issues and erectile dysfunctions: its mission is to rid men of the need to face uncomfortable visits, waiting rooms and harsh judgments, and replacing them with a quick online consultation with expert clinicians and continuous care after that. Numan raised $40 million last year from both new and existing investors.
Voi Technology (23.1% ownership) is a Swedish mobility company operating networks of electric scooters around major European cities. Voi’s reputation as a “green” player and respect for regulations makes it an attractive partner for town councils. The recent shift in Europe towards the issuance of licences to scooter companies is beneficial insofar as it moderates competition and encourages more rational economic behaviour. Launched in 2018, it has since become a leading e-scooter player with presence in 70+ cities in 11 countries. It raised $45m and $115m in two financing rounds in 2021.
Swvl (11.2% ownership): started in Cairo but based in Dubai, it is a premium alternative to intra-city transportation that connects commuters to bus lines through an app. The company serves both municipal governments and operates its own bus lines. Generally, the public transportation system in Swvl’s target cities lacks efficiency, security and reliability and the taxi alternatives are too expensive for the middle class. Swvl offers a premium on demand bus service with third party supply and currently operates in 115 cities across 18 countries in Europe, Africa, Asia, the Middle East, and Latin America. Swvl also listed recently on Nasdaq via a SPAC merger (with Queen’s Gambit Growth Capital), but again it has not been very successful having lost 40% of its market cap in less than 2 months.
BlaBlaCar (8.7% ownership) is a French transportation company that links up drivers undertaking a (typically long-haul) trip with other travellers in order to split the cost. BlaBlaCar also operates a bus marketplace, a bus network and a commuter carpooling service. Similar to other investments, its key advantage is the network effect, wherein the company with the highest number of users attracts the highest number of drivers, which in turn attracts more users and so on, in a virtuous circle: today it operates in 22 countries with 122 million members. BlaBlaCar has suffered as lingering lockdowns during 2020 and the first part of 2021 continued to punish its model, decreasing both supply and demand on its platform. Further growth should come from geographic expansion, introducing short-haul ride-sharing (e.g. commuting), new add-ons (insurance, car financing), and the recent acquisition of Ouibus to offer complementary services. Last year VNV led a larger financing round of €35 million to support the company’s growth strategy.
Gett (24.0% ownership) is an Israeli ride-hailing app similar to Uber and Lyft but with a difference: it derives a significant portion of revenues from corporate clients, who are less price sensitive. Gett also provides corporates with significant benefits, such as billing software and analytics, which allows companies to streamline and potentially reduce their ground transportation costs, making Gett more difficult to dislodge. Such positioning allows Gett not to compete with consumer-focused ride-hailing businesses but, on the contrary, partner with Lyft in the US and Ola in the UK among many others. Gett has 3.2 million vehicles connected to its platform through 2,000+ partner fleets. In 2021 it announced its intent to become a publicly traded company and entered into a SPAC merger agreement (with Rosecliff Acquisition Corp) to list on Nasdaq: however, the merger was recently terminated due to overall market volatility and Gett’s decision to exit the Russian market.
Borzo (18.8% ownership) is a delivery company that targets the first and last mile markets: long distance delivery works well, but first mile (out of the merchants’ inventory) and last mile (into the hands of the receiver) is inefficient, fragmented and expensive. Borzo essentially sells on-demand logistics for SMEs where there is a delivery within 90 minutes or exactly on time, and operates in Brazil, India, Indonesia, Korea, Malaysia, Mexico, Philippines, Vietnam and Turkey.
Marketplaces & classifieds
Booksy (10.4% ownership) is a SaaS driven booking platform for the beauty industry. The company is based in Poland and has expanded into the US, UK, Brazil and South Africa. Booksy is designed to make scheduling appointments seamlessly for people looking for health & beauty services: it allows clients to view the business’ profile, see their availability, and book an appointment right from the app.
Hemnet (3.1% ownership) is Sweden’s largest online property portal. Founded in 1998 and with 2.8 million visitors each week, in 2021 more than 207,000 real estate listings were published on Hemnet, up 7% year on year. During 2021, Hemnet IPOed on Nasdaq OMX: VNV sold shares in connection with the IPO and in subsequent private placements, but still retains an indirect stake in the company.
Property Finder (9.5% ownership) is the leading digital real estate platform in the Middle East and North Africa region that facilitates the house hunting journey for both buyers and renters. Founded in 2007 in UAE, the website has evolved over the years as the go-to platform for developers, real estate brokerages and house hunters and has branched out of the country’s shores and operates in a total of seven markets, (UAE plus Qatar, Bahrain, Saudi Arabia, Lebanon, Egypt and Morocco), and has a significant stake in the second largest property portal in Turkey.
HousingAnywhere (29.6% ownership) is a global platform that helps international students, expats and semi-professionals to securely rent rooms or apartments from landlords and property managers all over Europe. Founded in the Netherlands in 2009, the platform has become a place where more than 10 million users search for rooms and apartments. VNV participated in a further financing round in January 2022, which was done at significantly higher valuation compared to the previous transaction in April 2021.
HungryPanda (4.2% ownership) is a specialist in online food delivery serving Asian restaurants and Chinese populations overseas: it serves customers in 60 cities across 10 countries to ensure they find authentic Asian food away from home.
Bokadirekt (15.9% ownership) is Sweden’s leading health and beauty platform that allows consumers to discover more than 24,000 health & beauty experts, make real-time bookings and pay for services (similar to Booksy). For merchants, Bokadirekt’s innovative platform facilitates seamless online bookings, scheduling, and payments acceptance, reducing administration and increasing time spend with the end consumer. Every month, more than 13,000 merchants use Bokadirekt’s subscription-based business software to manage their operations, and more than one million end consumers discover, book, and pay for appointments through its marketplace. It has a dominant position in Sweden, where some 50% of merchants are using it, while its largest competitor is less than one tenth of its size.
Wasoko (4.0% ownership) is a leading B2B marketplace in Africa providing free same-day delivery of essential goods and financing to informal retail stores. Wasoko has delivered 2.5 million orders to over 50,000 informal retailers across Kenya, Tanzania, Rwanda, Uganda, Cote d’Ivoire and Senegal: through the platform, informal retailers can order products at any time via SMS or mobile app for free same-day delivery to their stores. Leveraging historic purchasing data, the platform also evaluates retailers to provide them with access to “Buy Now Pay Later” financing.
Breadfast (8.1% ownership) is an Egyptian quick-commerce business that delivers all the households essentials, from bread, to milk, fruits and veggies and more than 3,000 items in less than 60 minutes.
Kavall (20.7% ownership) is a Swedish quick-commerce business delivering groceries in 10 minutes. The company launched in 2021 and to date is active in Sweden and Finland.
Olio (11% ownership) is a UK based food sharing app that connects neighbours with each other and local businesses so surplus food can be shared, not thrown away. Olio has more than 5 million members which have shared more than 30 million portions of food.
2021 was the first full year of the Scout Investing program: over $18 million was invested across 14 names: Study Smarter, NoTraffic, Tajir, Guardknox, Lenus, Byte, Beacon, Urban Kisaan and others.
As per the company’s reporting, these are currently the top 10 shareholders:
Acacia Partners is a private partnership underneath the Ruane, Cuniff umbrella: the general partner is Conifer Capital Management, which is managed by Greg Alexander who also serves as a principal of Ruane, Cunniff & Goldfarb. Alexander is one of the best investors that few people have heard about: more than a decade ago Warren Buffett stated that he is one of three people he’d give his money to manage if he ever retired (the other two being Seth Klarman and Li Lu)
Recent results: exposure to Russia and Ukraine
During the first quarter of 2022, VNV Global invested a total of $60 million, mainly in Wasoko ($20m), Breadfast ($8m), HousingAnywhere ($6m) and Booksy ($5m).
We can’t obviously forget the impact of Russia and Ukraine on the value of portfolio: approximately $47 million out of the -$216 million fair value adjustments in Q1 2022 are directly related to holdings with their main business in Russia and Ukraine (OneTwoTrip, Monopoliya, BestDoctor, Napopravku, Dr Ryadom and YouScan). As per March 31, 2022, the holdings in these companies accounted for approximately 0.5% of total investment portfolio and have on average been marked down by -88% compared with the fair value assessment at year-end 2021. Other portfolio companies (in particular BlaBlaCar, Gett and Borzo) have international presence which includes operations in Russia and Ukraine: their fair value assessment has also been adjusted.
VNV is kind enough to provide a quarterly update of the valuation of its portfolio companies: the following table reports the NAV estimates as presented by VNV, to which I added the percentage change in value in both 2021 and Q1 2022. On an ex-cash basis, the top 4 positions represent over 50% of the portfolio, and the top 10 73% of it.
At the current market price (~SEK 31), VNV is selling at a massif 67% discount to the latest reported NAV (SEK 95).
But this is nothing unusual, especially for a PE/VC fund where marks are somewhat arbitrary (“mark-to-model”): with rare exceptions, the stock has always traded at a significant discount to NAV, on average around 33% since 2015.
Notes: pre-2015 NAV should be taken “cum grano salis” as it also includes the VEF spin-off and previous revaluations of the stake in Avito. The “spike” in the NAV premium in 2013 is due to the effect of the distribution of holdings in Black Earth Farming and RusForest AB to shareholders through the 2013 redemption program during that year. The pre-2013 much higher discounts reflect the larger percentage invested in Russia at the time.
Nevertheless, price has crashed -77% over the last 6 months and is trading today back to early 2016 levels. It is also worth noting that in November 2021 VNV raised new equity capital from institutional investors (approximately $135 million) at SEK 123, vs. the current price of SEK 31!
For much of the 2020-2021 period, when the stock price more than doubled from SEK 60 to SEK 133, the “narrative” was essentially focused on Babylon, which was carried on VNV’s books at a relatively conservative valuation of 6x revenues compared to multiples of 15x and 33x for Teladoc and Livongo, respectively. A re-rating of Babylon would have led to a sharp increase in NAV (at which point Babylon aloe would have accounted for two thirds of adjusted NAV…).
Despite the rapid acceleration in revenues, the experience of Teladoc and Livongo should have been a red flag: in August 2020 Teladoc acquired Livongo for $18.5 bn, creating a company with an enterprise value of $37 bn. Today, the entire new company is worth just above $5bn! And Babylon’s experience as a listed company is following in exactly the same footsteps: the IPO/SPAC merger was indeed an uplift from the carrying value of $2.6bn, but today the company is worth less than $500 million, despite management assertion that:
“I think our expectation that Babylon has the potential to assume a USD 20 billion valuation in five years may prove conservative. There is certainly upside beyond this”.
It was precisely at that time (end of 2020) that the market bid VNV up to trade at a substantial (30%) premium to reported NAV.
However, we are in the middle (or more likely still in the early innings) of a “great valuation reset” for most of the disruptors that bolted on the scene in the last few years.
It is always difficult to determine a range of intrinsic valuation for these companies, last but not least because being private they disclose very little (most of the times not even revenues). Below, I tried to “adjust” the latest calculated NAV from VNV disclosure to the current situation (at least for the biggest investments): very arbitrary, I admit it, but just to get a sense of what NAV could be today.
For Voi, the only listed e-scooter company I’m aware of is Bird Global (BRDS): it listed on Nasdaq in November 2021 at a $2.3 bn valuation, then proceeded to crash 90% and today is worth just above $200m. More or less at the same time (Dec. 2021) Voi raised $115m in its latest financing rounds (VNV Global participated) at a $1 billion implied valuation. VNV still carries the investment at the same implied valuation, but using Bird as a reference would reduce the value to approximately one tenth.
Both Babylon and Swvl are listed, so we can use the current market price (VNV didn’t use it for Swvl in Q1 because the SPAC merger was consummated exactly on March 31): their prices are down, respectively, -72% and -50% since the last valuation. I applied the same “haircut” as Babylon to Numan too.
Despite some differences, BlaBlaCar and Gett are quite similar to Uber and Lyft: using the two US companies multiples (they both trade at about 2.2x this year sales), I estimate a reduction in BlaBlaCar’s and Gett’s valuation of around 40%.
Hemnet is also listed, and its price in US$ has declined 13% since Q1. I applied the same percentage reduction to Property Finder and HousingAnywhere, although they should have “suffered” more considering their illiquidity and geographical exposure.
For Hungry Panda I used the sales multiple from Just Eat TakeAway and Delivery Hero (1x sales), for a 62% reduction in reported value (I admit US-based DoorDash trades at a much higher sales multiple, 3.7x).
I left the other positions unchanged as I do not have enough data to make even a guesstimate: but just with these adjustments, NAV decreases by 41% from the latest valuation (SEK 56 vs. SEK 95), which means however that VNV is still trading at a significant discount (~44%), but more in line with historical averages.
Despite a good track record (+26% p.a. NAV IRR – including distributions - since 2012 [*]), and for as much as I like some of the shareholders, I’m not convinced this is yet a good entry point: the de-rating for many disruptors has just started, and many companies will find it extremely difficult to finance not only their future growth but even their existence. Related to this point, I’m not a big fan of the mobility segment: there are too many companies competing in the space for the same end customers, and underlying unit economics still do not make sense.
For the moment I prefer to stay on the side-line and will re-evaluate VNV Global at a later date.
[*] Note: this is what the company discloses in its investor presentation, it’s not possible to extrapolate the track record over a longer and less benign economic cycle.
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