LFP129 – IPO-ing & Patient VC Capital Via Closed-End Funds? w/Tim Levene CEO Augmentum

Today we merge two fascinating topics – the Gold Medal for a startup – the Public Listing and innovating in Venture Capital to provide more patient capital. Our guest who connects these two is super-serial entrepreneur Tim Levene who listed Augmentum last year and is a real Fintech insider being on the Boards of Iwoca, Zopa, Seedrs, amongst others.
Tim’s career is most impressive, as we shall hear in the show – did you know he founded London’s juice bars called Crussh.
Before we turn to weaving in the Augmentum model of venture capital provided not from a limited lifetime fund but from a “permanent capital” closed-end investment trust let’s turn to listing which is something Augmentum have been through themselves
When you are a NewCo or Startup it seems inconceivable (even if you go round proclaiming the opposite) that one day you might be listed on the LSE. It can seem like starting some sport tomorrow and ending up being selected to run for your country. So there is quite some sense of achievement for the founder in doing so.
However wiser older owls realise that listing is no nirvana – ask Funding Circle who listed at 440p at the end of September and were trading seven months later at little over half this price at 250p.
Topics discussed on the show include:
Tim playing football for Great Britain in Mexico (!) in some seniors tour
altitude training in the City
Tim’s career starting with Bain in the early ’90s in Russia
Tim opened one of the first smoothie bars in London in Canary Wharf which became Crush
what you learn by peeling mangoes very early in the morning
the amount of work that goes into creating new things
Tim’s experience co-founding Flutter – which merged with early BetfaIr – which  ended up being  FTSE company
the journey from 50 to 250 to 2,500 people
raising money in dot com times
“growth can mask significant inefficiencies”
how you could learn on the job in the past but much less so now
Betfair was super-seminal to Fintech – the story of Zopa turning up in the early ’00s to ask about using Betfair’s P2P technology
Zopa being a brilliant idea but well-ahead of their time – often seen in digital businesses
what is a listing?
how do offerings work?
in the UK AIM versus the main market
Augmentum listed as an investment trust not as a plc (company) – the implication of that on being “patient capital”
what is patient capital and why is this model of closed-end VC funds superior?
innovating in investment trusts which conventionally are “externally-managed” ie have a fund-manager – Augmentum are internally-managed
Augmentum don’t have “numerous side-car funds”
in the past there have been a number of publically listed Private Equity ventures but very few VC
correcting lessons form these in the past – alignment of interests between investors and management
market cap of £100m invested in fifteen companies at present
how the market for listing changes – around dot com times next to no track record firms listed – the average private company is staying private for 14 years as compared to 7 years
timescales for listing – around eighteen months
getting an objective adviser is super-important
you don’t want to have a failed listing as its a huge waste of time and money
6mts for the roadshows
the amount of work required is huge – Tim and his partner Richard probably worked 18hrs a day for several months
costs are around 1-2% of market cap
Augmentum floated all their capital, in Funding Circles case they IPOed £300m (the “free float”) but the existing investors held onto the rest (at market value £1.2m) with a total market cap of £1.5m
often free float and market cap are confused
median lifetime of a listed CEO is less than five years
challenge for a CEO is “doing two jobs” – the day job and the significant job being CEO of all the listed consequences
Augmentum is listed and market cap is £100m but they are still – in scale – a small company
last 12mts they examined 600+ opportunities and invested in 9
aspiring entrepreneurs have more choice than ever when it comes to choosing capital
“Choose your investor as carefully as your investor will choose you”
“You as an entrepreneur will often only have one shot, we as an investor will have fifteen, twenty, thirty investments over time, but if you pick the wrong investor that can have a materially negative impact on your future”
“the one thing I always emphasise to potential investees is please go and check us out in the market, what type of people are we, how are we when the going gets tough?”
And much much more
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