Dear investors,

We hope you had a safe and restful Christmas and New Year.

This letter marks our first investor update since our launch and we want to take the opportunity to thank you for your support for the Fund.

During the month of December the fund returned 1.9% net from realizing gains in the ASX listings of Hydralyte and BirdDog, as well as recognising the uplift from OwnHome, who successfully closed their series A at a significantly higher valuation than the seed round we participated in.

We made new investments in a seed-stage supply chain SaaS company called Remi.ai, and added to a fast-growing software business which we will be able to discuss in further detail shortly.

Portfolio Update

Hydralyte (North America) – PreIPO

In February 2021 we invested in Hydralyte via a preIPO convertible note which listed on the ASX in December 2021.

The company has had a successful debut raising $17 million at $0.29 per share and a $47 million market cap. Our effective entry price was $0.196c per share.

Amazon has been a key growth driver to the e-commerce side of the business. Sales are up 6x since Jan 2020 with strong increases in conversion rates, basket size, repeat customers and subscriptions year-on-year.

Core to the growth strategy is also broadening the product portfolio into verticals like immunity, gut health, energy & collagen and expanding reach into new geographies like Asia.

BirdDog – PreIPO 

We made an investment in BirdDog through a preIPO convertible note in June 2021. BirdDog listed on the ASX in December, raising $33 million at $0.65 per share and a $133 million market cap. Our effective entry was $0.4875 per share.

BirdDog is the leading global provider in Network Device Interface (NDI) and Internet Protocol (IP) video technology. The technology is used by media outlets, corporations, online gamers, videographers and other events and conferences.

Select global customers:

Birddog provides a premium broadcasting solution at extremely high quality and speed/low latency.

BirdDog delivered record revenue of $38.2 million in FY21 (up 303% on FY20) and a record underlying EBITDA of $2.6 million in FY21 (up 214% on FY20).

OwnHome – Series A Round

We invested in the seed round of OwnHome in May 2021 alongside Global Founders Capital (Canva, Facebook, LinkedIn & Slack); CommBanks x15Ventures; and Entree Capital (Coupang, Stripe, Deliveroo, Prospa).

Since then, this promising young start up closed their Series A round in December 2021 raising $31 million with SquarePeg and the CBA leading the round.

OwnHome operates a model known in the real estate market as rent-to-own, which is well established in the United States but new to Australia. OwnHome buys the house on behalf of its customer, covers the deposit and stamp duty, and the customer pays only a 1.5% fee and moves in as if they own the house.

The customer then adds 1% to begin a “purchase offset” and makes monthly payments to OwnHome, building up equity of 2.5% in their dwelling each year. They can then elect to buy the property for a pre-agreed price at any time between three and seven years.

With the fees considered it would mean that a potential buyer would only need to pay $25,000 upfront to move into a $1 million-valued home. A 20 per cent deposit and stamp duty on the median priced house in Sydney now requires about $350,000 upfront outlay – so you can see the appeal.

Since launching a media campaign last year, OwnHome has seen more than more than 3500 applications with 1500 in December alone. We are confident there will be enormous demand for this product, and are impressed that the founders have done the hard work of securing attractive financing for a new model in the local market.

Remi.ai – Seed Round

We made a seed round investment in Remi AI, a pure-play supply chain management SaaS business that helps retailers and manufacturers automate their supply chains.

Remi was founded in 2015 by four founders with a unique combination of technical and operational skills across all core verticals of the Remi business being product, data science, user experience and business development/operations.

Remi has bootstrapped their way to a seed round capital raise with a product in market, 11 customers, a growing pipeline and ARR growth of 3x over the last twelve months without a dollar of marketing spend.

A survey of 346 chief executives found roughly two-thirds of businesses in Australia have been impacted by supply chain issues in 2021 and the majority don’t expect the situation to improve until 2023. As we move through reporting season, countless companies globally from Kogan to Apple to Tesla are being hurt by supply chain constraints.

In the US, supply chain tech start-ups have raised $24.3 billion in venture funding in the first three quarters of 2021, 58% more than the full-year total for 2020.

In the third quarter of 2021, the median pre-money valuation for late-stage supply-chain tech companies reached $120 million, up 41% from the comparable period of 2020.

We are very excited about the future of RemiAI and if you’d like more info feel free to reach out.

Summary

We have been asked how the sell-off in global growth stocks has affected our strategy.

Similar to our listed fund, we will always remain valuation focused, and punchy valuations certainly aren’t isolated to US markets.

Ultimately, the IPO market is the final destination for the majority of large businesses, so as listed valuations return to the mean, we do expect to see a similar effect in private markets over time, starting with a moderation of expectations in preIPO deals, then filtering down the chain to earlier stage investments.

However, capital markets remain robust and local funds have recently raised plenty of fresh capital and are committed to supporting new ventures. Good companies will certainly still find funding available and there is no indication of a slowdown in innovation locally or overseas. It would be short-sighted indeed for an investor to pass on a multi-decade opportunity due to short term fluctuations in public markets.

We recently invested in a fast-growing software company at ~10x EV/Current Sales, and are currently conducting due diligence on another local software business at a similar valuation, so there are certainly plenty of high growth opportunities at reasonable valuations.

The fund is currently ~25% deployed, so we are in a great position to take advantage of opportunities as they arise over the coming year. We are assessing a number of new opportunities every week, and have extended the application/redemption period to the end of February. Some of our portfolio companies are in the process of raising fresh funds at higher valuations in coming months. We will reflect these uplifts in the portfolio as they come, and will be sure to keep you updated.

As a general principle, we will make follow on investments in portfolio companies that are meeting or exceeding the initial forecasts they provided to us.

The two core parts of our strategy are investing in 1) companies as they approach IPO, and 2) earlier-stage, longer term venture capital investments.

We are happy to record (small) initial successes in both parts of the strategy, and will distribute realised profits later in the year.

We thank you again sincerely for your support.

Joel Tomaino and Michael Frazis