Draper Esprit : Happy Holidays, a letter from our CEO

Well what a year it has been. I am sure that 2020 has secured its place in history and will live long in the memories of many of us for different reasons. It really has been a year of contrasts. On the one hand we have had the horrendous disruption and suffering caused by the pandemic and on the other the huge growth and excitement in our particular sector, that is high growth tech in Europe.

January seems a very long time ago, when we started a new year with a new Prime Minister with a whopping majority and a clear mandate to take the UK out of the EU in an orderly manner and prepare for growth, I wonder how that has worked out for him! The US market was at an all-time high, betting on a second Trump term, with relations between China and the US at an all-time low. When I joined the business last year, I was met with lots of comments of how the tech market was overvalued. Lots of talk about firms like Tesla, Apple, Google etc being so overpriced.

Just under a year later and with the intervention of a major global health scare the outlook is very different. No more trump, Boris Johnson's government is walking a tightrope as no Brexit deal has been achieved, yet. The global economy is in tatters and global consensus is fragmenting as national governments everywhere are looking inwards. However, the talk of an overheating market is no longer focussed on the tech space but now on global equity markets, where all-time highs are being seen across exchanges everywhere, very much lead by the US. Indeed those 'overpriced' assets are sitting at almost double what they were a year ago when no one had even heard of Zoom!

As for us, I think it is fair to say we have had an extraordinary year. We used the first lockdown to really focus our team on being prepared for the inevitable growth in our space post pandemic. The investment team was super busy working with founders and portfolio companies helping them to navigate through the early days of the crisis. Cost control and capital preservation were the watch words. It quickly became clear that the high quality of the portfolio meant that we were in good shape and that it was 'heads down' for a few months then back on the horse and go for growth!

In response, we restructured our systems and processes around deal origination and brought in more resources. We strengthened our Partnership team with promotions for Vinoth and Nikki and in hiring Will Turner and Inga Deakin. We also strengthened our support functions to enable us to scale. What was clear to us was that our portfolio companies were set well to ride out the crisis. As we emerged late summer, global businesses agendas were packed with requirements for greater use of technology and digitisation generally but specifically more online presence and using technology to build closer and richer relationship with customers. For consumers, the habits formed during the lockdown around greater online, more ecommerce, more focus on the gaining and retaining online relationships were almost certainly going to endure. Black Friday last month was a sign of how far things have changed this year, as Philip Green's high street empire Arcadia went under on the same day that the online marketplaces in our portfolio broke all records. All this online activity is driving demand for better payment systems, better infrastructure and more reliable security and fraud protection.

In October we asked shareholders if they wanted to help us to back this growing and exciting sector and the answer was a resounding yes. Our raise was heavily oversubscribed, the 3-day accelerated book build demonstrated the strength of our model as we scaled back the orders but still raised £110million. The appetite for and strategic importance of the tech start-ups and rapid growth companies to the serious pools of listed was evident. Due to the unique nature of our model, we raised this capital in 3 days with no involvement (i.e. distraction) of the investment team. This is better for our entrepreneurs, their companies and the investors themselves. Our dealflow and deal making machine did not flinch.

We now have the backing and capacity to really drive growth in this sector. We can play a major role in supporting the extraordinary visionaries who are building the next generation capabilities and can help to facilitate public capital being deployed into the most exciting private growth companies.

So for us, like everyone else, 2020 was an extraordinary year but we exit it with a portfolio of great companies, and we are here to support them as they grow and continue to add ground breaking new companies to our team.

I have no idea what 2021 will bring, but let's hope it is healthier, less politically disruptive and very much tech enabled!

Happy Holidays,

Martin Davis

CEO, Draper Esprit

Posted on 17 Dec 2020

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