The value of high-tech companies around the world has fallen by tens of percent since the beginning of the year, which has led many companies planning to go public with an IPO to realize that the current market isn't giving them equal value as in the past, especially if they do not make a profit. This means that many shareholders who thought they would get liquid assets soon realize they need to look for an alternative. A new venture capital fund wants to do just that, and along the way, also help entrepreneurs.
"The situation will wipe out companies that don’t have an economic base"
Titan Capital Partners today (Tuesday) announced a new global fund, amounting to $100 million, which combines the purchase of holdings in companies and funds in second-hand transactions (investments in secondary shares) and investments as part of capital raising rounds. Alongside the central fund, Titan manages several side funds through which it plans to raise an additional $100 million over the next three years.
"Our fund allows some of the pressure exerted onto management by shareholders to be released so that management can focus on the continued, healthy growth of the company rather than seek early sales. Following the decline in the market, there are financial organizations that hold too large a part in private holdings compared to their public ones within their portfolio, so it is expected that they will have to sell their private holdings soon," says one of the fund's founding partners, Ben Topor, in a conversation with Geektime.
Titan was established in late 2021 and began operations after making an initial funding closure. The fund's investors include five billionaire family firms from the U.S., UK, Australia, and South Korea. This is in addition to the wealth management groups of three global investment banks from the U.S. and Switzerland.
Since completing the fund, the group has made a $14 million investment in Unicorn Verbit, as it partakes in traditional investment rounds but also secondary transitions in the form of purchasing shares. The fund is expected to execute between 10 and 15 transactions, with an investment of up to $15 million per transaction. It will focus primarily on software and Internet companies, raising capital from Round B onwards, that can reflect excellent financial performance of at least $10 million in sales and at least 80% annual growth.
Topor tells us that in his opinion, the change that is coming to the markets is actually healthy since 2021 was such a crazy year. "It's going to clear the market of companies that have no economic base and will strengthen those that have a strong position in the market because they will have less competition. I also think the change has brought investors and entrepreneurs back to focus on profitability and not just growth. Companies are measured by customer quality and not only quantity and scope of customers, so investors will perform much more due diligence from the recent period about the relevant product and market."
"Companies are not interested in Russian money"
He clarifies that the fund also invests in companies in exchange for equity, alongside the liquid assets of various shareholders - whether these are first-time investors who want to return the money to invest in other companies, funds that need to close or ‘lock in the results’ to raise a follow-up fund or entrepreneurs and employees who have personal needs for the liquid assets such as to buy their first apartment. Recently we are seeing a lot of employees wanting to liquidate, more than ever before, and companies are required to initiate a secondary funding event for their employees,” Topor says.
Recently, it has been repeatedly reported that Russian money has made its way into the Israeli economy, as the country's rich have tried to escape after the invasion of Ukraine at the end of February, which has led to significant economic sanctions. We asked Topor if he noticed if Israeli companies reacted differently to him since the invasion.
He said that the fund meets with management teams of high-tech companies that are planning to enter the stock market in the coming years and sees a significant change on their part: "They are not interested in receiving money from these [Russian] investors. If they are already shareholders from past investments, the companies are encouraging the sale of holdings to other investors to reduce ties with Russia. This is an excellent opportunity for our fund, to invest in Israeli high-tech companies at more favourable prices since the entrepreneurs are not trying to maximize the value of the companies as part of the move."
Titan was founded by Topor, who previously worked at the Cukierman & Co, and was a managing partner at the Catalyst Investments, where he led deals at BlueVine and Trax. Along with Topor, Omer Schloss serves as a senior partner. Schloss has been operating in the field of private equity in London for the past six years. The fund has additional partners located in New York and Los Angeles.