Ip Group (LSE:IPO) — Investor Update & Annual General Meeting

0:00 Now, we're we're in our our new office, here in Kings Cross. And for those of you who've been to the area before, you'll know that it it it wasn't always like this. It didn't always look like this. And this, for me, is a really great example of a realization of a long term vision. And it was actually triggered by the move in 1996 of the Channel Tunnel up to King's Cross, and that trigger event, gave rise to a thought that maybe the King's Cross area could be redeveloped and turned into an interesting space where you could have a mix of, people and offices. And so they they work together with a group called Argent.

0:45 One or two people in the room know this from the the previous conversation, Simon. But Argent came up with interestingly a big design. It was called Principles for a Human City. I thought that's quite interesting. Principles for a Human City, and they had three principles for sustainable development, which were the combination of economy, environment, and equality. I thought that's sort of pretty interesting given what IP GROUP's been doing. So and and the result of that vision realized alongside some government backing, some initial industrial partners, and long term capital has given rise to what you see today. And now we are here in the heart of the knowledge quarter in London. We're here with Google, with AstraZeneca.

1:31 We've got the Crick Institute just over there, and it seems like a really great place for, IP GROUP to be. And just to sort of almost, like, finish the story a bit, does anybody know who owns now the majority in of of the Kings Cross development? Is anyone in anyone in the room aware of this? I I I gave you a bit of a clue in the the long term capital. Well, is a pension fund. It it it's actually Australian super. So the largest one of the largest pension funds in the world, largest pension fund in Australia, and just a really great example for me about how you go through those different stages of an inspirational idea through to some initial backers, through to long term holders of capital who want to have multi year, ten, twenty year returns.

2:17 And the the reason almost for telling that story is that that is how I see the vision for IP GROUP. Our our real sort of skill set is understanding and taking technological risk. And so we almost have intellectual capital right at the start. We then have growth capital, and we're joined by others on the journey to growth capital, and there's plenty more. I'll talk a little bit about growth capital and the opportunities there to partner with like minded investors as we have been doing over the recent past. But then there's a there's a there's a step beyond that, which is the sort of physical asset capital. And a lot of what we are doing is very, very well aligned to then physical asset deployment. And I and I'm not trying to pretend that that's IP GROUP's job or what we should do, but I see us as the thin end of a of a huge ecosystem. And if we're going to have an impact and build a better world, that is the sort of thing that we're gonna have to do, and those are the sort of partners that we are gonna have to work with. But I think there is a huge opportunity here, and part of my mission is to realize that opportunity through like minded partners. So onto today's subject. You know, the last sort of ten years or so of IP GROUP's history has been characterized by the success of one company, Oxford Nanopore, a couple of others, but one company. And this is about the future because IP GROUP wasn't set up as a business to hold big positions in main market listed companies.

3:44 And so over time, you will see, our position in Nannapur become a smaller proportion of the overall NAV, and part of that is gonna be due to some of the companies that we've got presenting here today. And this is about the future, and it's about the opportunities for IP GROUP, for our stakeholders, but importantly, for all the people watching today, our shareholders, to see what what what could be possible. And and I hope that you leave today with a better understanding of of three key areas about our business. The first is the the the portfolio that you're exposed to. I believe I'm delighted to have Martina here who's the CEO of Feature Space and she will be giving you an update on Feature Space and its prospects. The second is the capability that we've built within IP GROUP that I think is a great opportunity to leverage, and an example of that is Rob, who's a partner in our Cleantech team, and he's going to talk about the opportunity in energy transition.

4:39 But then I think crucially for today's markets, the financial strength that the group has, which is increasingly a strategic asset for the business. So in terms of the running order, let's get through here. So Martina will take over. Screen working alright? Yep. Very good? Yep. Excellent. Alright. So so so by way of by way of update, you know, you you will all know that the mission of IP GROUP is to build a better future through the impact of science and innovation companies that we have identified, that we've created, that we've backed, and we have grown as long term partners. And and for our shareholders, we are a play on disruptive, fast growth technologies.

5:27 Now, shorter term, there clearly are some some market challenges, and we issued an update this morning, a trading update. No, you know, no no material new portfolio news in there, but the but the context is that sort of first point. There's clearly some challenges in the global, economy, and there's clearly some challenges in the public markets. And I guess just a a few points to make here. You know, the the public and private markets are definitely linked, of course, but they do offer operate on slightly different cycles, and those different cycles can be driven by the funding windows and the different methods of valuation. Venture as an asset class does seem to be showing some signs of resilience. Maybe it's only Q1 and we'll see that out, but there have been a number of significant fundraisers. We're obviously down on the 2021 position, but still ahead of the back end of the the twenty eighteens, etcetera.

6:19 And, you know, I think for our shareholders, it's important to know that you've got a team who has managed through a number of cycles before, and we've been through at least two cycles. The combined experience of the Cleantech team is more than sixty years between the three partners, and so it's, you know, we have been through this cycle and we will manage our resources appropriately, while also making sure that we can accelerate our leading companies to do so through this period. And then on the right hand side, sort of the opportunity here, well, I think we still see fundamental demand continuing for the products and services for the kinds of businesses that we are creating. And many of those, and and I'm sure when, Martina speaks, you'll get an you'll you'll you'll you'll get a flavor for that.

7:10 Really, in our world, progress is often the key driver of valuations from period to period. If you're raising money every sort of eighteen, twenty four months, then the commercial progress in that time can clearly be the major driver. Of course, the macroeconomic factors have an impact on that. But I think history also suggests that those with capital in these tricky and volatile times will be best positioned to take advantage of those and to emerge stronger from the other side. And that's why it's really crucial that our careful fiscal discipline and our capital allocation policy, which we've designed to be sustainable, has put us in a position where we have a strong financial position going into this current situation. So in terms of just a reminder of the strategy, the strategic focus, at the last set of results I set out sort of three main areas of our evolving strategy, and I I guess the point of today, three months on, is to demonstrate how we are delivering against those. I'll come on a little bit to impact right at the end, the deeper thematic focus, and my hope will be exemplified when when Rob talks in accelerating leading companies, when Martina talks. But the the I I talked about capability and I talked about the capability we've built in in specific sectors.

8:31 And that's through the the partners and the investment professionals. Some of whom are here today. You'll get a chance to to talk to them later when when you're mingling around. But these are people who are experts in their fields and and will be increasingly thought leaders in their ecosystems, and that is how we will play and win in our chosen ecosystems. And so one of the things that I highlighted in the annual results was this plan to accelerate our track record in a sustainable future to to launch the first evergreen venture investment platform, we think, in the world, and and we plan to do that sort of over the course of this year. And that will be owned and funded by IP GROUP, very consistent with its strategy, and we we plan to, over the next five years, invest around 200,000,000 into that opportunity. We may well have got the sizing of that wrong. It could be considerably larger but based on what we know today and our financial resources, that's the the level of ambition that we have for that.

9:31 So Rob Rob will talk on that shortly. So that's the sort of the the capability points. Now all of this, of course, is around unlocking value for shareholders. And so in order to try to get across to people, you know, what's what's the point of owning a a share in IP GROUP? Why why do you do so? Well, I I think there are three main areas. The first is this sort of differentiated access to impactful deal flow and companies that will then scale. Will invest in. We will make a financial return, but there are many others who would like to invest alongside us. The the second is to to notice that this this model is, you know, primarily based at the at the at the point of inception when we first make investments, at the at the relatively early stage. So you could be looking at today and thinking, crikey, you know, they've got another ten, twenty years to go before the next Nannapur will will arise. The good news is sorry. One moment. I I cycled in this morning whenever I exercised before, and my my throat was a little dry. So the the the the the point here is, you know, we and I hope I demonstrated this at the at the at the full year results. There are, a a great cadre of companies. We highlighted three of them, who are on a fast track to being, billion dollar plus companies. And then we've part of our transparency with shareholders was to set out the the milestones that would be needed and then to report progress against those. And that's what I plan

11:03 to do today on those on those three companies. Now as as as such, because we've got this this maturing portfolio and we've identified these particular companies, we expect our we are targeting our returns over the over the cycle over the next five years to be 20% or above per annum, which of course is higher than the rate that we have been able to deliver to date. But there's a lot of learning that's built into that, and of course that's the level of ambition. But if you look at these businesses and our holding in these businesses, I think this will go some way to exemplifying and supporting that as a theory. Now just finally before I move on from this, I just want to make a comment on the discount to NAV.

11:48 You know, we are very frustrated by this. I hear many CEOs being frustrated by and the perception that their company is undervalued, and you know clearly some of that underperformance is driven by the wider market conditions. If you look at IP GROUP's trading over the last six months compared to a weighted basket of its peers, we're all trading very similar, nine off about sort of a third or so over the last six months, and that's obviously really disappointing. And, you know, it is a big focus of ours and very personally important to me. Now the things that we're doing in the shorter term are tactical things around, you know, greater degree of IR, such as this, greater transparency, setting out a clear picture for our key portfolio companies.

12:37 And then longer term, it's around being able to articulate and then execute against a sustainable capital allocation policy. And and over the course, I mean, just just over the course of the last year, we introduced a dividend policy because we know that a small amount of cash return as part of an overall capital return as a as a component of TSR is important. And we also included a buyback program within our armory, and of course, tools remain available to us. At the moment, we see cash and liquidity as a strategic strength, but we are committed to using a proportion of all the realizations that we make in line with that capital allocation policy and to utilize those tools in the future.

13:24 So I talked about an opportunity for IP GROUP. I haven't spoken about this an awful lot in the past, but I just wanted to highlight a little bit the opportunity that we see in third party assets under management. This is the growth in third party assets under management that we have been able to achieve over the course of the last five years. And capital is really fundamental resource for our business, and we have we feel it's important to maintain access to a diverse pool of different capital sources. So we have some debt, we have some equity, we have some third party funds, and we have a deep network of co investors. And of course, we will draw on all of those resources at different points in the cycle.

14:10 But I see at the moment a really great opportunity to leverage our capability in growing our assets under management. And of course, Parkwalk is a big component of that. Parkwalk provides both growth capital alongside us, but also sourcing capability. Those of you who know the Parkwalk business, Murray's, here today, so you can speak to Murray afterwards. But work very closely with Oxford, Cambridge, Imperial, Bristol, and are the most prolific investor into, UK spinouts in in in the whole of The UK. So it's normally sort of IP route and part walk at number one one and two in the chart. So it it it provides both capital and deal flow. Then there are and there's there's there's growth providers such as Hostplus on the right hand side, so one of the Australian superannuation funds. We run a single LP managed account for that business. It's been very successful, and and that's that's enabling us to provide another layer capital over and above the the balance sheet capital that we provide.

15:09 And then we we mentioned last year that we plan to launch a partnership fund for onshore in China with China Everbright, and, again, there's a great opportunity there. That will be for funding development of companies in China through local JVs, and that gives us a very strong financial partner. But, again, there's a really interesting ability for us to take our companies and help them to grow into that market funded locally through this fund. So so there's some real opportunities here, and and Dave will be delighted. You know, sort of the the other good thing about them is that they they generate fees, and so they contribute to reducing our net overhead, and that's been a thing which, of course, has been on the agenda and continues to be on the agenda for IP GROUP. So it has, you know, mutual benefits.

15:55 And I often say to people, I think IP GROUP is is sort of opportunity rich and capital poor. And to to illustrate that, we have this during 2020, the portfolio as a whole raised 1,100,000,000, and we invested about 70,000,000 of that. In 2021, the portfolio raised over 2,000,000,000, and we invested about a 100,000,000 of that. So we're doing about 5% of the portfolio. Now some of that, of course, is due to the cyclicality of the markets and specific portfolio company fundraisers. But I think there is a real opportunity here to get some operational leverage with what we're doing with selected private capital providers who have a share a similar view of the world as we do, or indeed challenge it at times, which is always useful to get a diverse opinion. So I think there's a there's a real opportunity here for us to do to do more, and I look forward to updating people on progress on that front over the coming sort of twelve, eighteen, twenty four months.

16:54 And so then so then another part of the strategy that I talked about was this sort of focus on a smaller number of conviction companies. Part of that manifests itself in the way that we allocate our capital. You'll see in our update this morning, that we, as as part of our funding of companies this year, and there were two reasonable sized checks. One of them was into a company called Bramble, which is fast growth fuel cell business, and the other was a £10,000,000 check that we paid to Esthesto in order for them to get on with planning for their key value inflection point, which is the Phase 2b trial. That is a feature that you will see increasingly in IP GROUP as we focus down on a handful of our conviction companies. And we will update you on these regularly, and, of course, when we when we do our next set of results, there'll an opportunity for us to show showcase the next group, as as necessary.

17:44 You'll hear from FeatureSpace today. I'll give you a quick update on Esthesto and on First Light. If there's any detailed technical questions on, the the fusion experiment, we we have covered that. But, fortunately, Rob is on the board, and so I'll take the CEO prerogative, and and and Rob will answer the, the the tough technical questions, on, inertial confinement fusion powered by projectiles. So and so and and I just also wanted to highlight today that this our stakes in these three companies are worth 250,000,000, so it's about 24 p a share. And so these are these are significant holdings for us, and and, if if you believe the value creation pathway as we do, you can quickly add up to sort of a cumulative big increase in net asset. And these will be the key companies that will drive returns for us. So let's quickly move on to, Esteso.

18:36 So what we said at the time, the next key milestone, for Esteso will be to enter into the phase 2b trial. As I said, we've we've provided financing of of 10,000,000 to the company, so that they can that they can get on with that. We're we're currently in the planning and authorization phase of that. It's a sort of 200 plus person trial. If again Sam's here, who will be able to answer any detailed questions that you'd like on the trial, but we look forward to updating you on progress of that. And that really will be a key value inflection point because that moves the asset into sort of later clinical stage. Once you're into Phase 2b, then you're into a sort of a later clinical phase. But the key value creation point for that will be the readout of that trial. We expect it to be about an eighteen month trial and it will read out in early twenty twenty four, sort of half one twenty twenty four. So going well and we'll announce that when we kick off the trial hopefully in the next month or two.

19:34 Feature space, I won't spend any time on this, Martina will exemplify here, and I think the things to look out for are the evidence of this sort of recurring revenue growth and also the scale of opportunity in the market and how Feature Space itself will be seeking to outpace that market, and they have an incredibly compelling value proposition. And Martin will do a great job in explaining that, and I hope that that will become even clearer. And then finally on First Light, so we said we didn't give a timing on this, we said possibly 2022 to 2023. And of course First Light, were very pleased to announce that they achieved a world first in inertial confinement fusion powered by a projectile.

20:21 It's an incredible scientific achievement, like really, really remarkable scientific achievement. The things that you will all be aware that that fusion and the journey to gain and the journey possibly to energy is a is a an incredibly long and will undoubtedly be a very risky path. The things that we like about this company and this approach relative to other fusion approaches is that it's relatively simple and it's relatively low cost, almost like an order of magnitude cheaper. And so that that is that was the attraction for us, and we we we took a position in this company with a very first investor there with a couple of, angels, and we understood the technical thermodynamic processes that were going on and the modeling that they were doing. Rob particularly led that investment. This is very typical of what IP GROUP does, and so we've had ten years with this company and we're very excited for the next stage in the journey.

21:19 So just very quickly before I, finish and hand on to Martina, I'm conscious I've got got one minute, Martina. I just wanted to say a quick word on ESG and impact. I know this is something which is incredibly important to us as a business culturally in terms of things that I lead, such as the and the ID project, which is our diversity and inclusion work, and we aim to be market leading in that space. But the the the point I made about impact right at the start is the IP GROUP has been an implicitly impactful investor. We the things that we do naturally lend themselves to impact, and the job to do for us is to become more explicitly and purposefully impactful as investors, and that includes forward looking measurement of impact, and it's a really, really tough thing to do, and lots of the industry is grappling with how we do that. We're signatories to a whole bunch of different standards and groups, and we're trying to lead and be in in the front pack. People like ESGVC, and we're signatories to the the UN or it's not the UN anymore, the PRI, and we've mapped our with Berenberg's help have mapped our portfolio to the SDGs, but we that market is moving incredibly quickly. We think we have the the portfolio and the skill set in order to be in market leading in the front of that pack.

22:38 But in order to do so, we've got to really run to keep up. But there is there is a massive opportunity here if we can demonstrate that our companies can deliver both incredible financial returns, but also incredible impact, on the environment, on a healthier future, and on a a tech enriched future. So to to to summarize, you know, the the market conditions are are are tough in the short term. We haven't yet seen that come through to our, portfolio company funding rounds. So we we aren't experiencing significant write downs at the moment, but we are planning cautiously to invest during this period and are very pleased to have the financial position that we have. We think that will be a strategic asset going forward. But we are I'm very pleased to report great progress in our conviction companies and deep expertise in our thematic focus areas, and the next two speakers will hopefully give you some further evidence that that is the case in the form of Martina and Rob. So with that, it's my great pleasure to welcome Martina to the stage. Martina is the CEO of Feature Space. Good morning, everybody.

23:50 There are a number of things you've just said there, Greg, which just really resonated with me. The first thing is patient capital. Anybody in the audience here that's tried to set up a company, run it, get it going. There's a piece of research and a professor I heard talking about how long it takes to build a good technology company. He said he has not found one that's been really able to do it in under ten years. And so when you find investors that back you and stick with you and go through all of the ups and downs and the trials and tribulations of trying to build a company, it really matters. And I'd like to start by saying a huge thank you to the IP GROUP for backing us, but obviously particularly to John Eddington.

24:37 He's a very modest person, but he's been on the feature space journey as an individual with us for ten years. And so having somebody with that longevity and consistency and commitment to our company is incredibly important. So as I've just heard, you want to get 20% return on investment on an annual basis. My job is pretty clear, isn't it?

25:06 Would just obviously like to say thank you very much to the IP GROUP and to you, John Eddington, for all of your support. Because without your early days of Feature Space, I wouldn't be here today to tell you what a great company we've got. I'm Martina King. I'm the CEO of the company. I've been with the company coming up for ten years as well. So, I was introduced to FeatureSpace. I met Professor Bill Fitzgerald, who was the founder, and his PhD student, Dave Exel. I was told that they had invented a fundamental technology. And so, when you hear something like that, you think, Goodness, but what can it do? And actually, it could do an awful lot, but trying to find a market fit for a British deep tech invention is, again, not for the faint hearted. So we had to work really hard to try and find a part of the world where we could really make a difference.

26:00 And that took a good sort of eighteen months to two years of knocking on an awful lot of doors, telling people that we've invented a thing called adaptive behavioural analytics, and we know it's the future, but what on earth can we do with it? So, we found our product market fit and we have absolutely determinedly stuck to that over the years. And we make the world a safer place to transact. Here's the agenda for today, a little bit of information about us, to talk a bit more about that product market fit, our commitment to our industry and innovation, show you a little bit about the product, because we've innovated there too, obviously. And given I'm talking to an investment community, you'll want our numbers. However, obviously, we are a privately held company, and we can't reveal the numbers that I would normally talk about, which is really frustrating for me, but never mind.

26:54 So, making the world a safer place to transact, I've told you a little bit about already. There's Bill. Bill, extraordinary individual. He unfortunately developed a brain tumour and he died in 2014. And when he died, he asked me to make his company as commercially successful as he had been academically. And Bill's renowned as being probably one of the top five people in bringing machine learning to the world globally. So that was no mean mission for him to hand over to me. And the other thing, of course, about it is he's not here any long to tell me when we've achieved it. So, we just have to keep going. So, a new way to fight financial crime, that's adaptive behavioural analytics. And I'll show you our Eureka moment.

27:41 We now work with major financial institutions globally and have offices in Atlanta, Singapore, Israel, and teams now in Spain, Mexico and Australia.

27:51 And we protect consumers across the world from that awful financial crime that takes place. We do like to win awards, and that's really important. It's important to our customer base. I remember being on the stand at an event many years ago and somebody came up to me and said, The reason why I'm here is because your awards are up to date and lots of your competitors aren't. So we would want to work with the current company. And the awards that are most important to us are the Cars and Payments Awards. So TSYS and Capital One, we always want to try and make our customers the hero. So that was one of our first awards, and that was so exciting. And then we've continued with the best anti fraud development for NatWest, and most recently for Worldpay, again, the Cards and Payments Awards. We've invented automated deep behavioural networks, and that's bringing deep learning to protecting payments. I'm gonna talk a little bit about that. And it's great to be honoured by the Queen.

28:57 So, have two Queen's Awards. Okay, this is our eureka moment. When you're a technology company or when you're inventing technology in academia, it's actually really hard to get hold of good data sets. So you can have theory, but it's hard to actually put it into And it was a gentleman who came to visit us called Roger Alexander, a really well known payment industry veteran and expert. He took me to one side and said, Martina, focus on the payments industry and you'll revolutionise it. So I thought, Oh, okay, we'll do that then. He opened up his Rolodex and off we went. We worked with TSYS and they introduced us to a customer of theirs who said, If you genuinely can do better than everything else out there, well then we'll listen to you. But we have companies turn up on our doorstep all the time who say they can do this. So, you're a bit different, off you go. So, they gave us a dataset and this is what we learned. So, if you're thinking about payments, but this is a card payment example, so you're using your card.

29:54 For every transaction that goes through, there would be 10 genuine transactions. So every one fraud that would be identified, 10 genuine transactions would be blocked. Where you're looking at card presence, so modern digital payments, what we learnt from that is that for every one fraud attack, 23 genuine transactions were being turned away. So that's actually a big commercial problem. So our question was, could adaptive behavioural analytics make any difference to that? And it's not very often when you look at technology and you get a real wow moment. And what we could see is that we could reduce the declines by 70%, but actually 80% where a card wasn't present. So that's a huge uplift for the industry. So allowing transactions to take place, but simultaneously identifying more fraud and blocking more fraud.

30:45 So the question then was, well, if we genuinely can do this, and as transactions move into a digital environment, then surely this has got to be an area for us to focus on. And the more I learned about the sector, the more we realized that it was ripe for disruption. The incumbents hadn't been really prioritizing innovation, there was a real appetite for change from the customer base and a big growing market with a big growing fraud problem. So all the components for disruption were spot on. So we focused on this area. And then our route to market. So big enterprise systems,

31:27 they can take quite a long time to install, the sales processes are long. And so therefore, for us, we just thought this is not going to help us grow fast enough, so we need another distribution methodology. And an awful lot of the card payments in particular are run by the big payment processors. So we decided to have direct and indirect route to market, and this is where you can see that we have been able to be very successful putting our system in to protect payments across the banks, all types of transactions that take place. And then the indirect route to market, where we build technology for our customers and they on sell it to their customers, and there's transaction fees that Featurespace takes on the back of that. A good example of that is Worldpay from FIS, where we have two different use cases. One is looking at all of the transactions that go through for step up authentication for PSD2 in Europe, and the other then is globally providing for them a fraud system that they on sell to their merchants to protect their merchants.

32:29 And that in all the tests, we've been able to see that we can outperform everybody else out there. So we're really proud of that relationship. And TSYS, another great big payments company, they have a product called Card Guard, where they offer a variety of card scores, but the feature based score is called the foresight score, and they offer it to their customer base, and they inform us that we outperform all other scores in the industry on all metrics all of the time. And that's led to us being able to build two further products with them that we now have in the market. A little bit about adaptive behavioral analytics and why it's good. As we saw during the COVID crisis, 03/23/2020, payments all shifted, didn't they, from a mixture of card present and card not present to all card not present.

33:15 And so what we learned here is that nearly every single industry or financial services company that was using a machine learning model had to retrain on that new dataset. So you manually have to reset your model and then promote it back live into the systems again. That put a huge amount of burden. And of course, while you're doing that, you're opening your systems up to further fraud attack. On this chart, the one really to look at is the zoomed in section on graph two. And you can see here that our adaptive models learnt automatically in situ. There was no human intervention. The promise of machine learning, absolutely there for pure evidence.

34:01 And our performance was able to bounce back within days to the performance that was achieved on the combined dataset. So this is all card not present. And I love the image that TSYS created for me, which was we were able to kick back and smoke cigars while the adaptive behavioral analytics model just did its work. So, commitment to industry innovation. Bringing deep learning to the payment sector. Always what we're trying to do as a scientific based company is to outperform ourselves. Because if we know that we have the best performing models in the industry, we've got to keep on bettering ourselves. Bringing deep learning technology to payments is difficult. And the main reason for that is the time series nature of payments. It's much easier to predict text or the next image, you know, or where am I driving? Those sorts of deep learning problems, in some ways, they're still difficult to solve, but it's easier than solving a payment fraud matter with this deep learning technology.

35:05 I've talked quite a bit about cards, but of course, that led us over the years to be able to build solutions that solve half a dozen other problems. So hopefully, hopefully, this is now going to build, and you can see So these are the problems that we're solving for the world on the outside. This is the solution that we then have. So cards and 3DS, payments, merchant fraud, application of financial crime. When we talk about merchant, it's primarily providing systems for the merchant acquirers to be able to identify merchants that are out of kilter where fraud is taking place. IATA is a very good example of that, where we are monitoring all of the travel agents. And so there's a lot of crime that takes place with false travel agents setting up. Obviously, we have our platform and our promise on the platform. And then here are all the components that exist within it. And this is a video I won't play at all for the sake of time.

36:00 But the idea here is that people and our customers, there's a portal online, and our customers can go and interrogate every single part of the technology that we've built. In our industry, there's huge amounts of cynicism, and I'm sure you've all heard of the expression vaporware or slideware. And so this, for me, is again the proof that everything that we have to offer actually does exist. And then deployments, of course, very important. Big shift that we've seen. The payments industry have been one of the slower, let's say, to move into cloud hosted by third parties because the payment data is so precious. We have been able to win their confidence with regard that as well, and we've seen during the COVID crisis a real swing to cloud hosting. So we offer our hosting environment in a totally agnostic way. If customers want it on prem enterprise, that's no problem. If they want it in their own cloud, that's no problem. If they want us to host it for them, we do that too.

36:57 Okay. The financials. Here we are, a few features based by the numbers. Jonathan Crossfield, our CFO, is here in the audience with us today too. Many of you might know Jonathan because he was on the investor side of the fence. But like FeatureSpace so much, he came to join us. So he's keeping us on the straight and narrow. So I always said that I didn't want to take FeatureSpace public until it was gonna be a very easy company for investors to be able to model our performance. And one of the greatest ways for doing this is what's the pipeline? What which are the deals that we've got coming through? So we've got fantastic bookings. That would be total contract value, 53% growth on that. 2021 revenue grew by 45%. We've got a lot of money currently in our pipeline. We've got 53 direct customers processing in 120 countries. And of course, the indirect method enables us to reach over 100,000 customers because our customers or partners are on selling our technology.

37:56 We have four eleven team members, 60 now in The USA, two proof of concepts that are coming through in new markets for us, and most importantly, 76% of our revenue is outside of The UK. So we've really been able to take our company and scale it globally. Raised £83,000,000 in capital, and 33 new customer projects underway in 'twenty two, as well as our most recent release coming out, Patents Filed. And as I've already said, we've got Really proud of these partnerships that we've put in place. Now, I had to take the numbers off this. It's so disappointing. But nevertheless, I just thought you wanna see the the bar chart so you can see the trajectory of the company. TCV, as I say, that's the bookings, and you would know that we're on for a record TCV this year. And revenue, we measure our revenue, obviously, in a number of ways, but some of the big recurring revenues through transactions as well as those license fees.

38:54 So we already know I mean, one of the things I love about this business is I just said, Look, I don't wanna wake up on a January 1 and have an empty book and have to start all over again, for goodness' sake. I know we call it annual recurring revenue, but there's a more sensible way to look at it, which is, can we just have contracts that are closed? We sell it once, we book the money, and we delight those customers, and they'll stay with us forever. And then we just have to keep on building new business that comes in. So we've been able to pull that off. And if we look into 2023, as I stand in front of you today, subject obviously to no major issues in our market, then we can see that we're on for a record year in 2023 already. And then annual recurring revenue, here we go.

39:40 So the revenue that drops in year and then the recurring nature of that, as you can see, the color charts really show that the red at the very top and the purple at the very top is the gap between our target and our closed revenue. And all of that is already identified and in our forecast with a 50% weighting. So our customers recommend us, and that, after all, is the most important thing. And I absolutely believe totally and utterly that if we do the right thing for our market, that's a promise that we made to our market. We promise you that we will give you better technology and we will give you a better service than anybody else. If we do that, will you back us? Because remember at the beginning, I said that's what they asked of us. So that's what we have done. And we stick absolutely to that. And so we don't have to worry about our board because we have long term investors.

40:39 We don't have to worry about, I don't have to get distracted by thinking about board matters. I can focus on running the company and building it. And that is very, very reassuring, and not many CEOs are in that fortunate position. So culture. Why is that important? Because our customers asked us for it. So we train every single person on culture. That's reflected in the Net Promoter Score that we've been able to achieve, which is world class. We have an incredibly high retention rate. In fact, our net retention rate is 127% at the moment. And we have a very high win rate when we are into that final stage as well. So that's a bit about feature space. How am done on time? Thank you. Thank you, Martina. It's a hard act to follow.

41:35 Okay. So I'm going to talk about clean tech, and you'll see a lot of the presentation today is about the macro picture. Investing in clean tech is always about policy and the macro sort of world, and in energy, policy just got real in the last six months, you probably are all aware. So we'll talk quite a lot about that in this talk. A lot of the analysis I'm presenting today is work we do with the Energy Transitions Commission. So that's a think tank with the membership shown on the screen, sort of convened by Lord Adaire Turner, and the intention of the Energy Transitions Commission or ETC is to bring together an objective view on how it's economically possible to complete the energy transition.

42:22 We're the only venture investor member of the organization, and through working with them we get a lot of these insights, and the insights directly drive our investment strategy. So it's a very valuable thing for us to be part of. All of the work from the ETC is published, and a lot of the presentation from today came out in a report a few months ago around how to respond to the energy crisis. So if you look at the website there, you can see a lot of this underlying data. So I'll start with the energy crisis as it's now being called. I think it's fairly obvious to this audience, but this is really about gas. So it's not a cold crisis, there is high oil at the moment, but fundamentally the issue we're facing now in energy, particularly in Europe, is around natural gas. And just a few comments on that. There's a huge consumption in The US, but The US is more or less self sufficient.

43:19 And on the right hand side, in terms of where gas is used, a huge amount of gas now is used for power. And that's been a change over the last twenty five years as we've moved away from sources like coal towards gas. And that's mean that it's not just about gas for things like heating and industry. The energy crisis, the gas crisis has affected power prices as well. I think many people have done work on what the causes of this crisis were. I'll get on to the invasion of Ukraine in a minute, but there was already a problem brewing at the end of twenty twenty one. So this is the ETC summary of the factors that led to the crisis. We'd had a cold winter, and it's interesting how weather and climate directly interacts with energy. So we're starting to see those factors. So a cold winter in 2021 was an issue.

44:15 There's increasing demand from Asia, a recovery from Covid, so demand is a massive part of this. There'd been a couple of sort of interruptions in supply in liquefied natural gas and a big theme around what we're facing here is there's a global nature of traded commodities like LNG. We'd had a low wind year and as a low wind year starts to become important, so as we move forward into the twenty first century with modern sources, weather and wind and solar resource will start to be part of the picture. And what does a low wind year mean? It means about 10% lower than predicted wind production. We'd also had this phase out of coal and interruptions in nuclear. An interruption in French nuclear is really important, I think people aren't that aware of it, but there have been significant outages in the French nuclear power stations.

45:06 And finally, and maybe a little bit sinister, Russia had been prioritizing directing a lot of its gas production to its own storage towards the end of twenty twenty one, and that may have been in preparation for the action that they then took this year. So what happened? I think everyone's aware of this, but two things. One was a sort of almost unprecedented spike in gas price. So on the left hand side of the chart here is the wholesale gas prices. I put them all in megawatt hours so we can compare gas and power. And if you look at the diamonds there, those are the kind of normal prices you'd see in December. And these are really unprecedented high prices for gas, and that fed through into power. So as I said at the beginning, there's a real connection now between gas and the price we pay for electricity.

45:55 UK is very heavily exposed to this, that we saw some of the highest underlying increases in wholesale gas prices. And as a combination of our, at the moment, significant reliance on gas and also the way The UK wholesale market works, which prices on the margin. It's not just The UK, obviously Europe was affected and some Asian countries, so Korea and Japan also saw big price increases. But primarily this is about Europe and the price of power and gas in Europe. So looking at some of the underlying causes, slightly complicated chart here, and I should mention all these charts are going be available as slides afterwards, so that you don't need to make extensive notes. There are a couple of policy decisions made around Europe that have really affected this, you know, the impacts of this event.

46:42 One is a decision to liberalise gas markets. So ten, fifteen years ago, most of European gas was traded on long term contracts. There was a policy decision to move towards sort of gas on gas, sort of to participate in the global LNG market. That saved the EU and Europe tens of billions, but it's meant that we're much more, as a continent, as the European continent, much more exposed to changes in wholesale market prices than we otherwise would have been. There's also been a general increase in supply of Russian gas to Europe. So as European production has come down, Europe has gradually increased its dependence on Russian gas, and I think we're all starting to see the consequences of that.

47:30 This is a chart that's been extensively studied of what happened when Russia invaded Ukraine at the end of February. And of course there was a huge spike in gas prices. It's come down a bit, but we're now still talking about unprecedentedly high sort of gas prices. Gas is still flowing. It's an important part of the Russian economy, and as we'll see a number of countries are really dependent on the source of energy. So this chart illustrates the issue. So on the left is gas supply to Europe in 2019. The red rectangle there is the Russian supply, so 1,800 terawatt hours. So it's a huge fraction of all the sort of gas coming into Europe. And on the right hand is just a sort of overview of by country what fraction of their gas supply comes from Russia.

48:20 So you've got smallish countries, but very dependent countries like Estonia, Finland, Latvia are in terms of gas supply wholly dependent on Russia. So, you know, this is a significant issue politically. It's a huge fraction, so 40% odd of the overall continent's gas. But for some of these countries, it's a massive crisis in terms of the concerns about the availability and pricing of that supply from Russia. Norway is very important. It's worth appreciating that despite some of the political rhetoric, UK is no longer a sort of significant supplier. You know, the North Sea is declining. Norway is important and you're seeing LNG coming through. But really Europe is significantly affected still by the Russian supply. So I'll just talk a bit now about kind of what's the near term response, what is happening this year and what are the implications of that.

49:11 This is the IEA plan to the International Energy Association. It's slightly easier to digest than the very complicated long European plan, and it's fairly basic stuff. So let's not have new contracts with Russia, let's find alternatives, let's use LNG. There's bit in there about wind and solar, I'll talk more about that in a minute. Keeping existing biomass and nuclear operating as much as possible is important. Energy efficiency, as mentioned by the IEA, we need to do more on that in this country. And increasing system flexibility is also an important thing. So these are all sensible measures. Frankly, they're all measures that have been talked about for a long time. The difference now is that people are really taking action on them. So what does this mean? So these are are three views of what fraction of that 1,800 terawatt hours of gas could plausibly be reduced or displaced in this calendar year in 2022.

50:02 So there's the IA plan, the EU Repower EU plan, and this is the ETC expert view on the right there. So remember the Russian supply is 1,800 terawatt hours. The EU has an aspiration to displace more than half of that. We in the ETC think that's a bit optimistic, so our own sort of view is on the right there. And the IEA also doesn't believe that we'll be able to get more than half of the gas displaced. The interesting point here is the key levers are things like LNG. So there is a huge sort of motivation in Europe to increase the flow of imports. It's not they're building new terminals that will take a while, but it's just really going out to that market and getting more LNG. The point being, this is not reducing the cost. If you've got huge demand increase for LNG, the LNG price is going to go up. A more sensible thing to do is energy efficiency. So there are policies to try and increase energy efficiency in industry and homes.

50:58 Piped gas is also important. There is some acceleration in a few months you can do with renewables. Primarily 2022 is going to be about getting more gas to Europe, which is fine in the short term, but it's not going to resolve the price crisis. So this we get into the medium term sort of options. And this is really where for us as a venture investor thinking about clean technologies, this is where we think about how do we respond to these developments. So the message from the ETC which we fully endorse is this crisis, which is a security and price crisis, is an opportunity to actually live up to the previously stated goals in terms of energy transition. So renewables and hydrogen and storage allow you to create not just a grid that's is less sort of contributing to climate change, but also a more secure system for the entire continent.

51:56 So focusing on the medium term, so up to 2030, you can do both. Accelerate the transition and reduce risk. Key factors here we'll see in a moment are timescale. So how quickly, if you're a policymaker, can these things be implemented? And a really important point, and this has been a fairly sort of dire talk so far, but the good news is, as gas gets more expensive, renewables become comparatively much more attractive. Renewables have not got more expensive. There are some input commodity pressures, but the overall trend in wind and solar and hydrogen and batteries has been significant price declines that have been sustained for decades now. So this stuff is getting cheaper at a time when fossil alternatives that contribute to climate change have suddenly got much more expensive.

52:43 In terms of policymakers, and there's a lot of dialogue between the ETC and the EU and to some extent with the UK governments, there are obvious win wins, I'll talk about those. There are some trade offs and there are some things that would be counterproductive. New oil and gas E and P does not look sensible. I'll talk about that in a minute. Germany should stick to its guns and abandon coal. Abandoning net zero targets is just long term foolish. And if if I look at the overall crisis, some of the stuff like The UK selling off its gas storage capacity with short termism, we should have stopped doing short term thinking around energy. Climate is coming, and this is an opportunity to align both security and climate together. So taking short termism out of energy thinking has never been more important. Again, apologies, another complicated chart. The real message of this is the stuff at the top of this chart is primarily around renewables and it's easy to implement. So the particular things, so rooftop solar, onshore wind, large solar deployment, is all possible in only a few years with political will. I mentioned policy, so you need political stakeholders like the new German government aligned with this, because there is nimbyism and the usual sort of planning and permitting sort of blockages.

53:57 But in terms of financing, there's a huge demand to invest in these projects, and we really can roll out significantly more renewables in Europe. Things like fracking, LNG terminals, gas interconnections take time. So it's possible to get more gas from new EMP fracking. In Europe, which is a crowded, more or less democratic place, fracking will be slow and it won't produce an awful huge amount of energy. I'll talk briefly about nuclear. We've talked about fusion earlier. Fusion and we think frankly other nuclear is a 2030s solution. And just a fact about nuclear: these are huge upfront CapEx projects. No one is going to finance such a project without some sort of guarantee around the pricing offtakes. So even that element of building new nuclear power plants needs to work through and does take years. So you cannot turn on a switch and start deploying your nuclear. What we can do is try and make sure the existing fleets France I mentioned and potentially Germany, operate for longer.

54:56 The 2030s is really and this is a lot of analysis in report which you can download focused on renewables, storage and hydrogen. So what are the implications of economically? On the left here, there's some analysis that we did last year around the cost of renewables. So this is an average number for Europe. There's a lot of detail again from the ETC website. But cost of new build onshore wind and solar is now less than €50 a megawatt hour, a levelized cost of energy. It's by far now the cheapest form of energy. And that sounds obvious to people like me, but it isn't obvious to all policymakers. There's an opportunity to really double down on that source of energy. A less obvious thing is the cost of balancing. So again, we published on this last year.

55:41 Most of balancing is lithium ion batteries. It's no more complicated than that. That's happening already in this country. It can do most of the balancing requirements. There is a seasonal demand and there are various options for that again, as I said in our report. What does that mean? It adds between 15 and €30 a megawatt hour to the cost of that renewable. So if you've got solar at 50, you can have firm solar at 65 to 80. And that is way cheaper than gas at the moment. So you can have a very high renewable penetration, stable firm system. And particularly when we're looking across Europe, we have great resources from solar in the South to wind in the north of the continent. And in order to do this, Europe only really has to sort of deploy according to current policies. This is not about some grand new sort of plan that needs to be worked through. So there's a Fit for 55 policy that was published in 2019 and that basically needs about 60 gigawatts of wind and solar deployed every year and that will make a huge difference to the resilience of the European system and price of energy.

56:48 So what does that look like? So this is how much gas consumption could you displace. So the 2019 number is sort of 4,500. You get down to 3,400 under that Fit for '55 plan. What's in there? There's obviously renewables, but I mentioned also hydrogen efficiency gains and heat pumps are really important areas in terms of reducing demand as well. In response to the Russian invasion of Ukraine, a new plan called Repower EU was developed in the early part of this year and that sees a further acceleration of the same areas. So particularly use of more biomass and more hydrogen and more energy efficiency.

57:33 And these are sort of pretty thoroughly worked through plans. There's a good technocratic capability in Brussels. So this is a deliverable plan and it certainly would save European consumers huge amounts in terms of the cost of space and the cost of that gas. So what does all this mean for a clean tech investor? These are areas I would say that we have been looking at for the last five years, because from a long term point of view, if you believe in a net zero two thousand and fifty, these are essential parts of what that energy system looks like. I would say the difference is a little bit in focus, and particularly on the focus between now and 2030. 2030 is very important in terms of the whole Russian gas crisis and the broader gas crisis.

58:19 2030 is also critical in terms of climate change in general. If you want to keep temperature below, never mind 1.52 degrees, we have to kind of more or less halve emissions, and particularly from Europe, by 2030. So the 2030 focus is not new. What's been helpful in a way is these events have really focused policymakers' minds on actually delivering on these things. So I mentioned green hydrogen electrification efficiency. Residential comes into focus in a very strong way. That hasn't been a great area, but I think that's changing. We're seeing people working in that space. And finally, power, which is fundamentally about renewables, starts to become even more important. So what do we have? Existing portfolio. Some of our companies that we already have are going to benefit from this.

59:07 We referred to this new company from Australia, Hisata, which has the world's most efficient electrolyzer. That science was recently published in Nature. That's a very, very exciting company. And because the technology there, the Hisata stack, is plastic, it's injection moldable plastic, the ability of that company to scale into this demand is really quite distinctive. So that's a very, very exciting company. We're just doing a funding round into them. Mixergy is a company, which is a spin out from Oxford, we've been into for a while and that was all about, up until recently, the fairly sort of mundane area of domestic heat. Domestic heat suddenly become really important. So Mixergy has the best sort of hot water tank. We think globally and certainly in The UK there's a huge opportunity for them to pivot their approach, which is a digital platform, into heat pumps.

59:57 And heat pumps are about to become a huge part of the solution. Then in terms of power, I mentioned was a enabling big part renewables. So RFC Power, which is a spin out from Imperial founded by Nigel Branden, one of the founders of Power, has very relevant long duration storage technology to manage sort of inter seasonal challenges. And Magnematics, which is a long standing investment up in Sheffield, has a very interesting transmission technology for offshore wind. So all of those companies are seeing a lot more demand as a result of the crisis and we're very excited about their prospects. We also have a very, very active pipeline. So there are a couple of deals that we're going to announce. Greg mentioned earlier we want to make clean tech and the transition a real area of focus for the portfolio.

1:00:47 So there's a big announcement next month about that. And there are two deals: one's around ammonia. Ammonia is if you like a convenient form of hydrogen. So we're going announce the details of that joint venture. We talked about it in Glasgow but the actual company and the plans there will be announced shortly. And there's a heat pump technology. Mixergy is about the control of heat pumps. There's a fundamental new solid state heat pump technology we just invested in, which we're going talk about more next month, which would be very relevant to that domestic side of things. And then I'll just give you a snapshot of the current pipeline. It's very busy, so we're working hard on sort of triaging lots of deals but there's a lot of stuff in there now. So different forms of hydrogen. White hydrogen is a new area. Won't go into too much detail now because we're under some confidentiality here. Very exciting.

1:01:36 Hydrogen storage, HVAC, so air conditioning incredibly important. Building based stuff, so sort of PV on roofs will be an area of focus and are very exciting. Built environment, so how do you sort of fundamentally build new build with low embodied carbon? There's an AI based way of doing modular house building that we're looking at. Heat battery, domestic inter seasonal energy storage. All of these technologies we looked at a year and a half ago and these markets are hard, the markets have just changed. So that whole domestic side is really exciting. And then finally on renewables, we have existing technologies in renewables, so silicon photovoltaics and conventional wind turbines. That industry is going to get so large that companies that provide, if you like, picks and shovels into that renewables gold rush can be very attractive. So several things there where it's sort of how do I reduce the O and M costs of large wind turbines And finally, boosting the productivity of photovoltaics is another area of great excitement. So we've got very busy, it's a big opportunity and the team is kind of growing as a result.

1:02:48 So final key takeaways. So this is a fossil energy crisis and we are here in Europe, you know, in the main stage of that. It's not about renewables, it's about fossil resources. Short term thinking has been a real problem and we're sort of feeling the pain of that short term thinking now as consumers. The invasion of Ukraine is a massive tragedy, but it has galvanized action in Europe and that's very important for clean tech. There's going be a lot of LNG this year, I think that's fine. Gas is less carbon intensive than coal, but the medium term opportunities where we're focused as IP GROUP, as clean tech, there's an opportunity to reduce the cost of energy and make it more resilient And that's what we're going be 100% focused on for the next sort of eight years.

1:03:35 Renewables are cheap and a key message which we published on but hasn't landed entirely is you confirm renewables. And there's a 200 page report on the ETC website and how you do that. We're pretty confident on it. We've worked very closely with National Grid in producing that report. So it is economically affordable to have firm renewable power and that's going to be a huge area of investment over the next decade. And so what areas that mean for cleantech investors? Hydrogen is even more important. We've done a lot in hydrogen before. That's going to be a big part of the solution. Solar comes back into focus. Solar and batteries. Most domestic solar now in places like Germany comes with a battery. People just put batteries in, they work really well. Energy efficiency should always have been a priority. It's now becoming much more into focus.

1:04:22 And heating and cooling of buildings, a massive issue in this country, which has just been the sort of climate elephant in the room in terms of our plans, has suddenly come back to focus. So really, in conclusion, energy's got real. We, with all the clean energy stuff that we do, can make a real contribution to delivering secure energy as well as low carbon energy. Thanks very much.