AIM is full of anomalies, particularly at the micro-end of the junior market.
Its current valuation is a pretty modest £1.35mln. Yet the company’s main investment, a 3.9% stake in luggage transfer specialist airportr, is worth £1.1m.
It has stakes in seven other companies including TSX Venture-listed blockchain specialist BTL, StreamTV Networks and UK-listed Rossyln Data Analytics valued at a further £1.3mln.
So there’s some value there that isn’t immediately apparent to the market at large.
Vela’s Laiker admits the company probably should do more to raise its profile. And in fact, it is now lifting its head above the parapet.
A social media campaign is about to begin, though the Vela story appears to have caught the eye two “very experienced technology investors” in Kevin Sinclair (who owns 14.4%) and Scott Fletcher (with 5.6%).
So what’s attracted them?
The attraction of technological disruption
Vela is a backer of innovative companies; but only ones where the solution or service is disruptive.
“By that I mean it alters irrevocably the way a business works a service or a sector operates. It’s a long-term change that can ride out bubbles in markets and industries,” Laiker said.
airportr is a case in point. It hasn’t so much changed a business as created a whole new sector – one that could usher in an era where travellers might not see their luggage until they reach the final destination.
At the moment it is a drop-off and pick-up service that will appeal to business travellers who need to ditch their cases as soon as they land.
It is cost effective and with agreements with Heathrow and Gatwick airports is likely to grow exponentially.
Vela bought in when the company was worth £2.5mln. The last two funding rounds have seen airportr’s valuation rise to £11mln and then £25mln.
“We reached the position recently that our investment in airportr was worth almost our entire market-cap based on the recent funding,” said Laiker.
More deals to come
More investments like airportr would be helpful. And Laiker and his team are looking at one very exciting opportunity that could be “truly disruptive”, but a couple of others have fallen by the wayside.
“We would see ourselves making no more than three [investments] a year,” said Laiker.
“If we had a chunk of money sitting there we might do more.”
Funding, which was initially done via friends and family and number of other private investors, is likely to be raised via debt rather than through the equity markets, according to the Vela director.
“We would probably only raise money in connection with a deal; when we have something tangible,” explained Laiker.
“We have options to take loan notes; debt instruments that would be advantageous for us.
“We are looking at alternative ways of financing. We have issued equity as it has been the only way to finance these deals.
“Now we have the company more established and people who understand what we do and we have two heavyweight investors with us that means we may not have to issue equity.”
Such is its burgeoning reputation the technology investment company doesn’t now have to scour the market for opportunities – companies are coming to Vela in search of backing.
However the criteria for investment is quite strict.
Disruption is a must
As discussed above the firm in question must have a truly disruptive innovation.
But also Laiker and his team are looking for companies that are advanced enough in their development to be considering an IPO.
That move to the public markets gives a degree of transparency and provides a benchmark for valuing portfolio investments.
In terms of sector to which the technology applies, Vela is agnostic.
“We chose technology when we took control of what was the shell company just over three and half years ago because technology would allow us to invest in any sector,” said Laiker.
Finally, Vela’s is a portfolio approach. So it is inevitable there will be a few jokers in the pack as well as a number of aces.
“Some investments will go down, but others will double or treble,” said Laiker.
“We have invested £1.15m so far and my back of an envelope calculation comes up with a gross value well in excess of that. So I’d say our approach is working.”
The Vela Technology portfolio
aiportr - launched at City Airport in 2014, and now expanded into all terminals at Heathrow and Gatwick.
BTL Group - developing blockchain technologies to disrupt and transform existing industries.
StreamTV – converts 2D to 3D on a 4K TV.
Revolve Performance - automotive engineering business that owns leading parts brand, Mountune.
Disruptive Tech – fellow investment company run by technology investor Nigel Robertson.
Advanced Laser Imaging – produces 3D, 360-degree images.
Social Superstore - combines social media and online retail in a unique way.
AIM investments – Rosslyn Data and SalvaRx.