AXIAL CAPITAL

Taking a look at three of the direct investments we’ve made at Axial, they offer very different solutions to entirely different markets – but where they show similarities is in their ability to scale. By adopting a tech-enabled delivery model each of these businesses runs a fluid user experience that drastically lowers barriers to rapid and far reaching expansion. That’s something we like, and is fundamental to our investment rationale.

If we take a look at each of those three companies we can begin to see how it’s increasingly possible to create a scalable delivery model in almost any industry.

RXLive is a MedTech in the digital pharmacy sector, and our investment into the company was part of enhancing its automation capabilities as the company rode the growth curve. Whilst automating operations is typically a good step toward improving efficiency, it doesn’t in itself facilitate scalability – and it was the underpinning architecture that the founder created at the very beginning that has allowed the business to scale so rapidly.

Creating a business model around a national digital pharmacy license was the primary platform, operationally speaking, that brought down borders for RXLive. Implementing a great UX and logistics function was fundamental to truly leveraging that ‘borderless’ business model, but it was the fore-thought that the founder had in implementing a primarily non-physical methodology for serving clients that opened his store-front to a customer base in the millions.

Outside of the UK, our investment in the blockchain based gun licensing platform ARMM was grounded on a similar ethos of putting the objective of increased safety directly into the hands of an entire nation – not just those people within physical reach of the company’s offices. For transparency and accountability of gun ownership to have significant impact, the user base must be as extensive as possible. And when it’s something as important as gun safety the mechanism for capturing and managing the details of firearm ownership must be as infallible as possible – and this is where deploying record keeping functionality over the blockchain can give all users instant and equivalent access to ARMM’s gun license ledger no matter which state or city they live in. Putting this broad thinking into action allowed ARRM to successfully IPO in the US this year.

Aspiring musicians have trailblazed a shift to digital, and even virtual spheres, across much of the sector in the recent decade. We invested into Shodement when their service offering was predominantly a centralised curation and PR solution for artists from anywhere in the world where those artists lacked the capital and capability to coordinate these functions. That founding ethos has allowed Shodement to bring together artists from multiple continents, and more recently to underpin their core offering with a fintech-for-artists service in order to release royalty payments to even the most fledgling artists. This is a huge shift in the music ecosystem when those royalties would otherwise be locked up in the corporate mechanics that tend not to favour small, independent artists. Again, it’s the accessible, digital delivery model that the founder employed from the outset that has allowed the business to reach audiences as far as Latin America and Africa

Ultimately it’s less about the sector when we look at the viability of an investment proposition, and it’s more about putting innovation and accessibility into action in whichever industry you’ve chosen to make a difference.

Just into the second quarter of the year and 2022 is already shaping up to be broadly a high performing year in terms of investment into growth companies. To put a spotlight on this article, it’s the emergence of the European scale-up ecosystem that has caught our attention.

Prior to 2021, a smaller proportion of Europe’s venture investment went to late-stage growth rounds. In 2021 a shift began to take place, with more significant amounts allocated to late-stage funding. Funding for those companies came from equity-led investment firms in the private capital markets and from a number of small-cap public listings where those scaleups could get access to public markets liquidity.

Let’s look at the numbers. Quarterly funding in Europe in 2020 ranged between USD$10 billion and $13 billion in each quarter. This trended upward through 2021 when it totalled $24.6 billion in the first quarter alone. 2022 is set to dwarf those numbers with venture investment already up by 21% on an annualised basis. Through our client portfolio alone we have seen offers of co-investment into companies in the EV, battery-tech, medical, and SAAS sectors to give a combined post-money value of more than $300m in private and public capital markets.

The six countries that led in scaleup funding over last quarter are the UK at the forefront with France, Germany, the Netherlands, Switzerland and Spain also showcasing support for stellar growth companies.

At a global level capital flows into VC backed companies in fact fell in the first quarter, but in Europe the picture was quite different with scale-ups receiving more investment on both an annual and quarter-over-quarter basis.  Europe is a growing venture market with an increasing number of high-performing scaleup companies, and clearly those businesses that prove their revenue model and their market fit are attracting the bulk of funding in 2022. The message is clear, where there’s traction money will follow.

With both private equity and public capital markets continuing to give access to new capital this year, we are pleased to have been appointed to advise on a London battery-tech IPO, and concurrently concluded on financial commitments into UK real estate. Our domestic and cross-border investment focus for scaleups provides increased liquidity to founders and this Q1 update highlights how supportive the markets are across ever-broad sectors:

• Energy and Renewables continues to be a focus for our investor network, and this month we are into DD on a SAAS based energy management solution to reduce power consumption, and CO2 output accordingly – seeing great momentum in ethical investing. We expect to see a further allocation of capital into this sector through the year, with some great entrepreneurs presenting their technology to us.
  
• Battery technology of varying forms are high on the agenda for the foreseeable future, and as we progress the terms and pricing for a £100m IPO of our client in the commercial battery regeneration space the co-investment interest from both our UK and North American network is overwhelming. More headlines to follow in the months ahead.
  
• Many experienced property developers will cite the increasing costs of materials and reducing availability of skilled labour across the industry. And this continues to be the case on both counts. In spite of this the market remains buoyant and this month we concluded investment terms for a 14 dwelling development in Suffolk to be built and sold over the coming 18 months.

Axial Capital recently attended the London Small-Cap virtual conference looking at the benefits enjoyed by scaleups and VC-backed startups when accessing liquidity in the capital markets. With our investment model having a focus on companies in the £1m-10m space across the UK and EU, we were pleased to hear other conference participants across both private finance and equity capital markets tell us they see the same clear horizon for placing further liquidity into growth companies – both public and private.

Equally positive is the conversations we have had in recent weeks on UK/Italy investment in particular, for placing capital into Italian growth-companies, and capturing investment from that market at the same time. This also extends to the public markets, and as we continue to lead on the dual listing of a cross-border resources technology company with a US HQ, engagement with the London-Italy investment base has played a unique part in how we complete this round of financing.

This positive experience is in part due to the flow of impressive startups out of Italy, which we continue to engage with for investment and access to equity capital markets. From CyberSecurity to FoodTech the innovation and energy emanating from across the region is brilliant, with a number of these companies set to be rising stars of 2022.