Venture capital firm Molten Ventures (GROW ) has written down its stake in UK fintech company Revolut, according to its annual results, following Schroders taking a similar step earlier in the year.

The trust formerly known as Draper Esprit, which has gross assets of £1.3bn, cut its £91.3m stake by 40% to £54.5m over the 12 months to the end of March.

The write-down implies a valuation of $19.8bn (£15.6bn) for the London-based neobank, which has struggled to gain approval for a banking license in the UK. At the peak of the technology boom in July 2021, it was valued at $33bn.

In April, Schroders Capital Global Innovation Trust (INOV ) was the first to slash its valuation of Revolut, cutting it by 46% to £5.4m.

Speaking at a Citywire event last month, manager Tim Creed said the company was a ‘very high-quality business’ and one of ‘Europe’s best venture-capital-backed companies’, emphasising the cut was made by the valuation team, which is separate from the investment team.

The move comes in line with the significant reduction in multiples for technology investments over the first half of the year as rising interest rates create a more ‘challenging environment’ for unprofitable companies.

Martin Davis, chief executive of GROW, noted that valuation cuts amounted to £293m, or 16%, across the portfolio of 75 funds over the 12-month period, the first gross portfolio value decline since floating in June 2016, despite the ‘continued revenue growth in the underlying’ companies. In the previous year, valuations climbed 37%.

Other big cuts were made to the valuations of machine intelligence semiconductor company Graphcore, a core holding that was slashed 67.2%, or £78.4m, to £37.2m, and capital markets platform PrimaryBid, which was lowered by 40%, or £9.9m to £14.7m.

The scale of the falls caused by the selloff across the technology sector is reflected in the trust’s shares, which plummeted 65.7%, or 530p, to 274p. Since the period end, they have re-rated 6.3% to trade at what remains a whopping 64.2% discount to net asset value (NAV), according to Numis data.

With Molen prevented from issuing shares because of the discount, it syndicated part of its fund-of-funds programme to Castlegate Investments, providing €13m (£11.2m) in additional capital under management and ongoing management fees totalling £23m.

Analysts at Peel Hunt estimate the fund is now trading at a circa 50% discount to actual invested capital, ‘which feels far too much’.

Although they are cautious in the short term, pencilling in zero NAV growth for 2024 and a slow expansion to 2026, they point to potential for ‘substantial upside’ in the shares, which they rate a ‘buy’.

‘Its assets are exciting. There have been some big names that have had write-downs (eg, Revolut and Graphcore), but private tech is about taking bets,’ they said.

Shoring up the balance sheet

With debt costs rising over the period and lower flotation and merger and acquisition volumes, Molten strengthened its balance sheet by reducing exposure to liquid-listed holdings.

‘I am pleased we have been able to generate more capital from realisations than we have deployed in the second half of the year,’ Davis said.

Molten deployed £138m over the period, far lower than the previous year’s £311m, reflecting a focus on cash preservation and balance sheet management. With a portfolio focus on technology, specifically climate technology and artificial intelligence, it invested in cyber companies Vaultree and Worldr, digital health companies Aktiia and Clu,  and climate tech names BeZero and Altruistiq.

‘We believe the cash requirement of the portfolio over the next reporting period will be in the region of £20m and are continually monitoring how to best fund future investments, including by issuing further debt or similar securities,’ Davis said.

Realisations totalled £48m, a third of 2022 levels, driven by the partial sell-down of Trustpilot and a full sell-down of UiPath and Minit through its Earlybird Fund VI, and the sale of Roomex to Fleetcor Technologies.

Over the period, £61m was invested in new companies and £41m into follow-ons. A total of £148m was committed to new and existing seed funds, including Sisu Game Ventures III, an early-stage venture capital fund focused on games, and Educapital Fund II, a leading pan-European fund specialising in the future of education and work.

At the end of March, the trust held £23m in cash. There was £48m in cash across its EIS and VCT funds available for investment and £60m available on its new £150m revolving credit facility with JP Morgan and Silicon Valley Bank.

Post the period end, Molten agreed a secondary sale for 10% of its Earlybird investment, realising £13m.