Over the past half year, the Draper Esprit (LSE:GROW) share price has increased significantly, rising 65% at the time of writing.
The AIM-listed venture capital firm, which invests in European technology businesses, allows investors to gain access to a portfolio of some of Europe’s fastest growing private, pre-IPO, technology businesses.
Draper Esprit’s core portfolio is concentrated, where 67% is invested across 16 companies. These include well-known names such as the online global review site Trustpilot, and the challenger bank, Revolut.
Seed stage investor
Draper Esprit shares also allow investors access to early-stage technology companies, through its seed fund investment strategy, which invests in other early-stage technology funds. Revealed at its full-year results in June 2020, it has invested £39m across 20 seed funds to date.
Draper Esprit’s seed fund portfolio complements its existing core portfolio and allows the firm to diversify its exposure to European technology companies across the business life-cycle.
Fund raising
With an active history of placings, Draper Esprit announced a successful placing early October 2020, raising £110m. The Covid-19 pandemic has accelerated the shift to digital technology, and as such Draper Esprit has had to support its portfolio of businesses that cover services such as online payments and fraud detection.
The proceeds from the placing will allow Draper Esprit to deploy funds into new potential future investment opportunities, further diversifying its overall portfolio. It will also allow Draper Esprit to contribute to follow-on funding rounds for its existing portfolio of companies with a view to exit for an attractive Return On Investment (ROI).
Recent activity
The rally in the Draper Esprit share price reflects that the company is an active European venture capital investor. In October 2020 it co-led the $50m series B fundraising of PrimaryBid, a technology platform that allows retail investors access to public companies raising capital.
It was announced in June 2020 that Zynga would acquire 100% of the Istanbul-based mobile developer Peak Games for $1.8bn. Draper Esprit’s investment upon sale was worth approximately £80m.
Over recent months, Draper Esprit has successfully disposed of its investment in TransferWise, the international money transfer platform. It has led the $20m Series C investment into Ravelin, a fraud detection company. Ravelin uses machine learning and graph network technologies to help online businesses accept more payments with confidence.
A positive update
Draper Esprit posted a mid-year update ahead of its interim results scheduled for release on 30th November 2020.
The venture capitalist expects its Gross Portfolio Value to be no less than £695m, and has seen a Gross Portfolio Fair Value increase of £70m over the six-month period, which includes the uplift from the disposals of Peak Games and TransferWise. Draper Esprit remains in a strong position to invest in technology businesses with cash resources at year-end of £62m.
An encouraging outlook
I believe the mid-year update is a sign of positive prospects for the Draper Esprit share price. Investments such as the telemedicine company Push Doctor has allowed Draper Esprit to benefit from the Covid-19 technology boom, which I expect will continue. The management team have successfully displayed their ability to identify, invest and exit European technology companies.
