An Introduction to the Deep Tech Fund

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• Where is the transcript for this webinar?

  Speaker 1:
  Good afternoon. Thank you for joining us today for this introduction and launch of the ABG Deep Tech Venture Club. My name is Stephanie King, and along with Mike Collins and Michael de Felice, we’ll be walking you through what you can expect as a member of this club.

  Each of you is an investor in our recently wrapped Deep Tech Fund, which invests in entrepreneurial companies solving some of the toughest challenges in areas such as AI and machine learning, blockchain and distributed ledger, robotics and drones, advanced materials, and longevity.

  While the Deep Tech Fund will provide you with a well-diversified portfolio of 20-plus companies across the spectrum of technology verticals, we also believe that many of you have a strong interest in learning more about venture investing with an eye toward becoming more involved in venture investing.

  In an effort to satisfy these interests, and in order to promote a more cohesive community experience, we have created this Deep Tech Venture Club. Before we get started, I just want to share a few ground rules with you:

  The audience will be on mute throughout the presentation. If you have any questions, we encourage you to enter those in the chat box. I’ll be back towards the end of the presentation, and we’ll go through some Q&A with the audience.

   

  Speaker 2:
  Thanks, Stephanie. And thank you to all of our investors who joined us today. I’m Michael de Felice, Executive Vice President of Alumni Ventures Group.

  We’re speaking today about the Deep Tech Fund, potential syndication deals, our new Deep Tech Venture Club, and our views of the associated landscape. Our presentation and this program are for informational purposes only and are not an offer to buy or sell securities. Such offers are only made pursuant to formal offering documents for any particular fund or syndication. Please review the important disclosures in any materials that we provide you associated with any deal.

  Today, we’re going to cover several topics. Initially, we want to give you a wrap-up on the Deep Tech Fund itself, which closed at the end of September. Then we’ll talk a little bit about the Deep Tech Venture platform, which is one of the newer initiatives we’ve started here at AVG.

  We’ll talk through syndication opportunities, how they work, and we’ll walk through a couple of examples of syndications that we’ve run in the past. Finally, we’ll have a few minutes for questions and answers. So as Stephanie said, if you have questions along the way, please submit them through the chat box and we’ll do our best to get to them at the end.

  The founder and CEO of AVG, Mike Collins, has been involved in almost every facet of the venture. He’s been an angel investor, a venture capitalist, an entrepreneur launching new businesses and new products, and he’s been an innovation consultant throughout his career.

  He launched the first AVG fund, the Green D Fund, in 2015, and we’ve grown the company ever since. That’ll take us through the recent wrap of the Deep Tech Fund. Here’s Mike Collins.

   

  Speaker 3:
  Thank you. We’ve got two Michaels today, so I’m going to go by Mike and we’ll use Michael when referring to Michael de Felice.

  Thank you, Michael, and thank you, Stephanie. Thanks to all of you who’ve given me a few minutes today. We’ll try to keep this succinct and hopefully value-add, but I think it’s an exciting thing that you’ll be interested in.

  Just a couple of notes on the Deep Tech Fund, which wrapped up a couple of weeks ago. The idea of “science striking back” clearly resonated with people. It was a very successful fund—just over and under $10 million—with over 200 investors in the Deep Tech Fund.

  Our promise is that our team of 100 is getting up every day making great investments. Our job is to deliver to you a portfolio of Deep Tech investments—25 to 30—diversified by sector, stage, geography, and lead investor.

  We’ve made, I think, five or six investments already into the fund. Some we can’t announce yet because the deals aren’t public, and companies are very careful about releasing that information. A few that we have: For Unlearn, Eight Eyes, Apata. We’re very excited about the deals we’ve done, and as soon as we can disclose them, we will.

  One of the things we’re excited about with this club platform is the ability to communicate with you in a more engaged, personal way. It’s a great fund just getting started, and it’s an amazing group of people who joined us as investors.

   

  The idea of the club is to learn more about venture capital. Importantly, this is about looking at particular deals and providing our investors with the ability to put more money into specific deals that have a Deep Tech angle.

  It’s formed with a club president—Michael. We hope to share with you 8 to 12 deals over the course of a year. There are special events that we have planned, like meeting portfolio company CEOs.

  Some of you attended the webinar we had with David Sinclair, who’s doing important research into longevity. We have an upcoming one on the interface between brains and computers that I think will be really interesting.

  The thing I also want to stress to the team is that this is really a beta. Many of our people who come from technology are aware of that concept. The platform we’re developing right now is going to be a work in progress.

  I want to set expectations that we’re hoping this community can help give us feedback so we can enrich it and make it better over time. That’s the big picture.

  There’s no charge—it’s completely voluntary. Some people may not be interested at all, and that’s cool. But we think there will be some fun and interesting things that will lead people to want to participate.

  The centerpiece of this is really the idea of syndications. What do I mean by syndications? These are deals we’re doing that are going into the Deep Tech Fund, but where our team, our sponsor organization, or our sponsor fund is able to get a larger allocation.

  The right size for a deal for the Deep Tech Fund might be $300,000 to $400,000, but sometimes there’s a $2 million piece available. We love to bring that to our community, share all our due diligence, make the management team accessible, and basically make everything we have available to you.

  You can then make an independent investment decision to decide if you want to add that to your portfolio or not. A good rule of thumb: whatever number you put into the Deep Tech Fund, you can divide it by 30.

  For example, if you made a $30,000 investment, you have about $1,000 at work in any particular investment. If a particular company really resonates with you, you may feel you’d like more exposure to that specific deal. It’s entirely optional.

  Part of being a member of this club is that the minimums to participate in syndications are only $10,000. It’s a chance to learn, build this muscle, and build your portfolio.

  With that, I’m going to turn it over to Michael to run things from here.

   

  Speaker 2:
  Thanks, Mike. I need you to stay on. So, how do venture clubs work?

  As we indicated at the outset, everyone who invested in our Deep Tech Fund is automatically granted membership in the club. The core of the club is the syndication investment opportunities, as Mike indicated.

  When you go to the platform—and you all will be granted access and information on how to do that shortly—you’ll see information about the club and its leadership. There will be a section with announcements, which may be about upcoming syndications or webinars.

  There’s also a learning and education component. At the center, you’ll see syndication opportunities: ones that are currently live and those that have occurred recently.

  As Mike said, you can expect to see 8 to 12 of these a year.

  Speaker 2:
  So roughly one a month, maybe one every six weeks. It’ll give you the opportunity to allocate materially more capital to particular deals that will already, for the most part, be part of the Deep Tech Fund portfolio.

  The processes for investing are typically run with an investment window of five to seven days. Typically, you’ll get a heads-up on a Monday or Tuesday that we’ll be opening a syndication on Wednesday. We’ll typically have a session with the CEO or another senior executive of the company, who will make a presentation about the company.

  You’ll have access to a data room, which will have all the information about the company that we have available: the investor presentation, financials, information about legal standing, and the like. Very importantly, you’ll also have access to AVG’s due diligence memorandum.

  When our investment teams evaluate these companies and opportunities, they write up a memorandum that gets submitted to our investment committee. That is the basis on which the determination of whether or not to invest is made. You’ll have that memo available to you. As much information as we can give you, we make available for you to read through, consider, and make an investment decision.

  As Mike said earlier, when you receive a syndication investment opportunity through this club, the minimum investment requirement is $10,000, which compares favorably to the $25,000 minimum set for the at-large syndication community.

  You’ll also continue to see syndication opportunities outside of the club as an at-large member. So, you will see non-Deep Tech syndications or occasionally other opportunities. Those would still have the $25,000 minimum and may be for an e-commerce company, a telemedicine company, or some other new venture that’s not technology-focused. You’ll have access to both.

  If we can go to the next page—

  Speaker 1:
  That’ll be great. Okay, coming. Here we go.

   

  Speaker 3:
  So, evaluating the opportunity: As I said, through the club portal, the first thing you’ll do when you receive the email announcing a new syndication opportunity—if you’re not interested and don’t want to be bothered with more emails about it—there’s a button you can click to opt out of additional email traffic related to that particular deal.

  Assuming you’re interested in at least evaluating it, you go to the club portal, click on the syndication (which will be front and center), and you can go into the data room and access all the due diligence materials I described a minute ago.

  You’ll have a chance to participate in the webinar, and you can register for that as soon as you receive the first email announcing the syndication.

  As Mike said, we’re sort of in a beta phase. We’re growing these venture clubs, and the portal is new technology for us and a new concept. We’re constantly improving, constantly adding features.

  As we go, we hope to add more capabilities that might allow people to interact with each other within the club to share their thoughts about particular deals. Underlying all of this is our desire to help you learn more—both about the technologies involved with the companies and the entire process of making a venture investment decision—to help you become a better investor.

  Speaker 1:
  Jennifer, we can go to the next one.

  Speaker 3:
  Closing your investment is as simple as closing your fund investment in the Deep Tech Fund. Closing investments on syndications works the same way: when you go into the deal portal and read the summary of the deal, at the bottom of that page there’s a box that allows you to indicate how much you want to reserve, and then click enter.

  Funding is required within two weeks of that date. We try to get everybody the full allocation they’ve requested.

  The reason we use a reservation system is that oftentimes these deals are oversubscribed. As a result, we need to prorate everyone’s allocation to make it fair so that everybody who’s interested at least gets some opportunity to invest.

  We’ll let you know pretty quickly after the reservation window closes what your allocation is and, therefore, what you would need to fund within the next couple of weeks.

  Speaker 1:
  Yeah. Oops.

   

  Speaker 3:
  That’s closing—boom.

  Speaker 1:
  There we go.

  Speaker 3:
  And then we might have to find someone else to fill this role—you might have to focus on other things.

  Going forward, how do you follow your investment?

  The first thing you’ll notice is that in your investor portal, which is personal to you, you’ll see that this investment in one of these syndications has been added to your portfolio of AVG investments. You’ll see your Deep Tech Fund investment and your investment in any syndications you’ve participated in.

  Additionally, as news and information comes out about portfolio companies, we do our best to get that information out to our investor community as quickly as we can.

  Certainly, as specific events occur that relate to the company—whether it’s raising capital or other significant events—we make that available to you.

  As President, and with Stephanie (who we met earlier, the Vice President), a big part of our job will be keeping you as up-to-date as possible.

  Speaker 3:
  And then, of course, we will have formal investor statements that are put out once or twice a year. One of the things that everybody should already be aware of—but I’ll mention it again—is that all of these companies are private companies.

  There’s no ticker to turn to and say, “Ah, the company traded at $20 today.” We only get hard information when some form of capital event occurs at the company. It’s difficult for us to let you know how a particular investment is performing until significant events occur.

  Part of our investing model is that we do not sit on the board and we do not take an active role in overseeing the company. So we can only share information when we receive it. When we do, we share it.

  But this isn’t going to be like your retail public broker account, where all of your investments have a mark-to-market on a trade-by-trade basis, multiple times a day. Unfortunately, that’s not the nature of this type of investment. That holds true for the fund investment as well as each of these syndication investments.

   

  Speaker 2:
  I’ll just give an example here. This is a deal that we syndicated pretty recently—two or three weeks ago—called Luminus. As many of you know, we’re starting to run up against some limits in physics with Moore’s Law, and Luminus is addressing that through photonics.

  It’s potentially a difference-maker in chips with a really amazing team and positive progress. We had an opportunity to syndicate it, and we went out to a group of our investors.

  As Michael mentioned, we had a data room, shared everything we had, and had people who loved it and invested, and others who passed on it. It was a classic case of a company where, regardless of whether they invested, people found it interesting and enjoyed reading about it and hearing from the team.

  Other examples include deals in quantum computing, Shine—a very interesting company out of the Midwest with high tech and advanced manufacturing. This can be tricky when it comes to producing radioisotopes, which are essential in much of modern medicine.

  These are really interesting companies with important technologies—hard stuff. One of the common characteristics of a Deep Tech deal is looking at the team: the number of highly technical people on the core management team and the size of their technical departments are strong indicators of whether it’s simply a good company using technology, or truly a technology-driven company that is the fulcrum of change.

  Speaker 2:
  What’s next? Today was just a heads-up to our community and a thank you for participating in our fund. Venture capital is not like baking cookies—when we have a Deep Tech syndication deal, we’ll let you know.

  It could be in a week, a month, or two months—we just don’t know. When we do, we’ll let you know.

  I think the platform adds an additional dimension that will be of great interest. It will be a great place to track the Deep Tech portfolio and hear news. We want to create opportunities for our community to interact with some of our portfolio companies.

  We’ll also be doing webinars and roundtables. You can help us by giving constructive feedback on the platform so we can make it a better, more engaging, and enriching experience for you.

  At the end of the day, it’s about deals. This is what we live for here at ABG. Many of you love looking at companies—it should be an exciting year of evaluating them and deciding whether you want to add to your position.

  With that, I see a lot of questions flowing in. I got a note that Stephanie’s computer crashed, so we’ll just wing it here.

  The first question I wrote down is: Are we able to ask questions about the syndicated deal? The answer is yes. Michael will be the club president, Stephanie will be involved, Anton (our CIO), and me.

  You can absolutely send in questions. We’ll do our best to track down the answers. The timing of these things is about a week. Sometimes we know the information, sometimes we need to get it, but we’ll do our best. That is one of the purposes of being a member of the club.

  Another question came in: Do we vote as a club, or do we make independent decisions? Mike, you want to take that one?

  Speaker 3:
  The answer is that everybody is investing for their own account and, therefore, makes their own decisions. The point of the club is to bring different perspectives and viewpoints based on different backgrounds to help you make a more informed decision.

  But at the end of the day, you’re investing for your own account. You make the decision for your account. You might invest, while the person next to you does not—or vice versa.

  Speaker 2:
  There’s also a question about structure: Is this similar to investing in the fund in terms of fund formation fees, carry, those kinds of things?

  Speaker 3:
  The answer is yes—it’s very similar to the fund. You’re essentially investing in a special purpose entity that will hold shares in the target company and nothing else.

  The fee structure is the same as the fund: a 2% annual management fee and a 20% carried interest on profits. It’s structured as a 10-year investment, so it’s essentially identical to the fund.

  Speaker 2:
  Another question: When will we see our first deal?

  ABG is a very active venture capital firm. We have 16 alumni funds, each sourcing and creating portfolios. We’re completing 15 to 20 deals a month. A fair number of those have Deep Tech characteristics.

  One or two a month will probably go into the Deep Tech portfolio. We’re trying to provide good diversification by sector, stage, and geography. Only a segment of those deals will have an allocation available for syndication.

  It varies by time and deal flow—it’s not entirely predictable. The best estimate is that we’ll have 6 to 10 syndicated deals within this fund.

  I’d hope that by November, we’ll have a live example to work on together with the community. That will bring the platform and community to life—when we’re discussing a deal in the portfolio and why we invested.

  People have also asked about communication with other members and scoring deals. That’s probably from someone familiar with ABG: we are very rigorous about evaluating deals. We use scorecards, we’re very transparent, and one of the things people enjoy is seeing how we score deals and why.

  Speaker 2:
  We hope you’ll score deals. We think it’s a great way to develop that muscle and create opportunities to break out into small groups, discuss deals, ask questions, and learn from each other. We believe that’s really important and part of what we hope this will be.

  There was also a question about wanting to see non-tech deals. You will. By being a member of Alumni Ventures Group, you’re automatically part of what we call our “large group.” We share roughly a deal a month with our investors, where they can exercise their own discretion to see if it’s something they’d like to add to their portfolio.

  So, you’ll definitely see deals through the Deep Tech Fund, but also other opportunities that may or may not be a good complement for your individual portfolio.

  I want to be sensitive to everyone’s time. Today was informational. I apologize again for the small glitch, but we overcame it pretty quickly.

  There’s nothing you need to do right now. Feel free to email us with any questions about the Deep Tech Club, and stay tuned—we’ll be excited to share a syndication with you shortly.

  Michael, any closing thoughts?

  Speaker 3:
  Yes. I just want to thank you, Stephanie—I hope we can get you back from the ether—and of course, thank our audience for their time today.

  You can expect to receive a follow-up email with more information. We’ll also be sharing the recording of today’s event.

  Finally, you’ll be prompted to complete a short, two-question survey at the end of this webinar. This helps us make these events better, so please take 30 seconds to fill it out. We appreciate your feedback.

  With that said, we look forward to seeing you in the portal and in our first syndication. Thanks for joining.