Merian Chrysalis, which invests in late-stage private companies preparing to float, has backed AI and fintech companies as part of its initial £65 million investment.
Stock pickers Richard Watts and Nick Williamson have revealed some of the unquoted companies they have backed with their recently launched Merian Chrysalis (MERI) investment company, including an artificial intelligence (AI) processor and a fintech firm.
The Citywire-rated fund managers have previously focused on smaller and medium-sized companies on the UK stock market, but in November raised £100 million for Merian Chrysalis, a Guernsey-based fund launched to target companies before they list on the London Stock Exchange.
A walk down Growth Street
According to recent updates, the managers have so far invested two-thirds or £65 million of the money raised in the initial public offer (IPO) in late-stage private equities, with a £5 million stake in fintech business Growth Street their latest transaction.
Growth Street aims to take the place of bank lending which collapsed in the small and medium-sized (SME) business space following the financial crisis.
Regulated by City watchdog, the Financial Conduct Authority, Growth Street was founded by its chief executive Greg Carter and serial investor Thomas Hoegh.
Its main offering is peer-to-peer platform GrowthLine, which focuses on replacing and extending bank overdrafts and invoice financing, having facilitated more than £80 million of borrowing since its launch in 2014.
Growth Street processes accounting, bank and credit data on a daily basis, enabling it to provide ongoing credit monitoring. This is intended to better help SMEs manage growth with the purchasing of stock, hiring new people and moving offices, for example.
GrowthLine users can borrow between £25,000 and £2 million and has so far attracted more than 2,000 lenders to its platform.
Citywire A-rated co-manager of the trust Richard Watts said: ‘Growth Street has built a differentiated product that provides flexible funds to SMEs, filling the vacuum created by the retrenchment of high-street banks in this space.’
Along with Merian, leading individual investors include Rob Rankin, former co-head of corporate banking and securities at Deutsche Bank and Peter Brodnicki, chief executive at the Mortgage Advice Bureau.
In December the pair also ploughed nearly £19 million into a $300 million (£231 million) funding round of Graphcore, which has developed an intelligence processing unit which aims to improve the efficiency and performance of AI applications by between 10 to 100-fold over existing hardware offerings.
Citywire AAA-rated co-manager Williamson said: ‘We believe the machine intelligence market will show substantial growth in the coming years and that Graphcore is well positioned to generate material revenues.’
The managers also invested £11 million in TransferWise, which facilitates low-cost money transfers abroad and £8 million in boutique hotel website Secret Escapes. Another £9.5 million was invested in The Hut Group, an e-commerce business behind brands such as beauty marketplace lookfantastic.com, which was previously backed by Artemis Alpha Trust (ATS).
Each of these three businesses comprised part of the initial Chrysalis portfolio highlighted in the trust’s prospectus before launch.
Watts, manager of the open-ended Merian UK Mid Cap fund, and Williamson, manager of Merian UK Smaller Companies , with colleagues invested around £3 million in the initial public offer (IPO). Other funds at their employer, Merian Global Investors, also backed the launch to take the group's stake to 22.75% after the company raised half its target from other investors.
Its biggest external backers are Seneca Investment Managers which holds 9% of the shares and Brooks Macdonald Asset Management which holds 5.8%, according to Refinitiv Eikon data.
Launched at 100p, the shares had moved to 102.5p at yesterday's close, a 4% premium over their net asset value of 98.5p.