Following the exits of Marmalade and EVRYTHNG in 2021, Bloc’s FY21 NAV/share rose 7% y-o-y to £25.30. Bloc has now delivered an FY18–21 NAV/share CAGR of 19% and a portfolio IRR of 25% since inception. In Q122, incorporating a successful Series A round for Pharrowtech, NAV/share rose a further 9% to £27.51. In FY21, Bloc strengthened its team and processes with new hires. In FY22, management is raising a Series B extension round, having postponed a larger Series C funding round until market conditions improve. Despite challenging markets, management is able to identify a number of potential portfolio up-rounds that it believes could lead to growth in FY22 NAV/share of over 30% y-o-y.
FY21 results: £6.8m cash at year-end
Bloc reported FY21 net asset value (NAV) per share of £25.30, up 7% y-o-y. This included the exits from Marmalade and EVRYTHNG, as well as up-rounds for YellowDog and Yordex, offset by the write-down for Tether Technology. Bloc made three new investments, Mindtrace, Shield-IoT, and Helix Geospace, maintaining its active portfolio at 10 companies. Following £9.3m of initial cash consideration from the sale of Marmalade (with multi-year earn-outs still to come), the group held cash of £6.8m at 31 December 2021.
Deep tech, a defensive B2B proposition
Technology has become increasingly indispensable as an enabler of cost reduction and productivity increases. The deep tech sector, in particular, incorporates a broad selection of long-term, IP-based businesses operating B2B models. These are high-growth businesses seeking either to create new markets or to disrupt existing markets, with corporate demand likely to prove more resilient in a downturn than more speculative B2C models, reliant on weakening retail demand.
Fund-raising at an attractive investment price
Given current market sentiment, Bloc has decided to focus its own fund-raising efforts on a smaller round at the previous round valuation from a core investor group, including new and existing investors. The share price premium has been brought into line with the market, despite the early stage and resilient nature of the portfolio. The funds will allow Bloc to continue to invest in new and existing companies into 2023, postponing a full Series C round until market conditions improve and investor appetite returns. Given likely future up-rounds, management anticipates that the discount to its expected FY22 NAV will fall to 0.78x by year-end, underpinning a future funding round.
Valuation: High-growth and maturing portfolio
Bloc can point to a strong track record, with an FY18–21 NAV per share CAGR of 19% and a targeted annual return of 20%+, underpinned by strong secular and technology sector trends. Its portfolio continues to offer the prospect of further up-rounds in FY22. With a clear sector focus, a structured investment process, and an early-stage portfolio with high growth potential, despite worsening market conditions, Bloc remains an attractive investment opportunity for the medium term.
Portfolio companies
AccelerComm – wireless channel coding
Crypta Labs – quantum encryption
Helix Geospace – advanced precision antennas
Mindtrace – AI image processing
Paytia – cloud-based payment security
Pharrowtech – ultra-high bandwidth wireless
Shield-IoT – security for mass-scale IoT
YellowDog – commercial cloud supercomputing
Yordex – enterprise spend management
Zeetta Networks – enterprise private networks
Business description
Bloc Ventures is a London-based venture capital company, active in early-stage seed+ and series A investment in the deep tech segments of the UK and European markets. Bloc has built a portfolio of 10 investee companies focused primarily on cloud, data science, connectivity, and security for telecoms and computing applications.
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