Draper Esprit VC Fund
Type: Stock
Ticker: (LON: GROW)
Current price (May 2, 2018): 468 pence (Note: Share prices on the exchange are listed in pence, not pounds)
Buy up to: 520 pence
Dear Member,
Today’s recommendation is a first for us. It’s a publicly traded venture capital (VC) firm.
The company is Draper Esprit (LON: GROW), which trades on the London Stock Exchange. By investing in this fund, you get exposure to some of the fastest-growing tech companies in the world. Draper Esprit’s portfolio includes Ledger, one of crypto’s most attractive private enterprises.
I’ve been watching Draper Esprit since it went public in 2016. I’ve seen it add to existing positions, take profits on others, and initiate new positions in promising young companies. I’ve watched the share price rise from 3 pounds to 4.52 pounds (about $4 to $6). Last year alone, the value of its core holdings increased an impressive 119%.
I’m convinced this is one of the best ways to gain access to a large portfolio of private “hypergrowth” technology companies.
Gaining exposure to fast-growing tech companies is harder than ever, mainly because the best companies stay private far longer than they used to. Two prime examples are Uber (worth around $60 billion) and Airbnb (worth around $35 billion).
Even when “hot” companies like Facebook do go public, they’re already worth $40 billion or more. So most of us are missing out on some of the world’s best growth opportunities.
It wasn’t always like this. Amazon went public with a market cap of $438 million. Microsoft went public with a market cap of just over $500 million. So everyone had a chance to get in early and make hundreds of times their initial investment.
Draper Esprit gives members an excellent way to invest in today’s hypergrowth opportunities.
The firm is well-positioned in Europe as one of the leading VC funds. And Draper Esprit focuses on “growth stage” companies. At this stage, these companies have proven themselves worthy of significant capital investment. It’s early enough that there’s plenty of money to be made, but not so early that the companies are likely to fail. I consider it the “sweet spot” in private markets.
The Crypto Angle
In January 2018, Draper Esprit led a $75 million investment in Ledger. You may be familiar with Ledger already. The French company makes hardware wallets and software for the cryptocurrency industry. Hardware wallets allow crypto owners to store their private keys offline (making them virtually impossible to hack).
Hardware wallets are widely regarded as the most secure way to store cryptocurrency and tokens. And Ledger has sold more than 1 million units so far.
Ledger’s most popular products are the Ledger Nano S and the Ledger Blue (currently out of stock). Ledger has also announced it will sell an institutional product, the Ledger Vault, which helps institutions safely store large amounts of cryptocurrency for themselves or their clients.
Ledger is extremely well-positioned to benefit from growing interest in crypto from both retail and institutional investors. You can read more about Draper Esprit’s investment in Ledger here.
Just a Taste
Ledger is just a taste of what an investment in Draper Esprit offers. The firm is laser-focused on finding the best investment opportunities across the U.K. and EU. And due to the fact that there are far fewer VCs in Europe (compared to Silicon Valley, where if you throw a rock you’re likely to hit one), Draper Esprit has the luxury of being picky about the companies it invests in. More than 2,500 companies approach Draper Esprit for funding each year, and the firm selects only the most promising prospects.
Here’s a peek at Draper Esprit’s performance:
- 116% growth in gross primary portfolio in 2018
- 70% growth in gross primary portfolio in 2017
- Value of core holdings increased 119% in 2018.
Typically, you need to be a “limited partner” (investor) to get access to a VC fund investment like Draper Esprit. That means writing a very large check with lots of zeros. But because Draper Esprit chose to go public, anyone can invest. It’s a rare opportunity that’s not on most people’s radars.
Draper Esprit has a chance to become a legendary company – a “digital Berkshire Hathaway.” If it continues to exercise good judgment and make smart investments, this could be one of the best long-term investments of the next few decades.
The fund has more than 22 portfolio positions with successful “exits,” meaning an acquisition or IPO.
Here’s how Draper Esprit describes its vision and model.
Buy a share in Draper Esprit, and you’re getting access to Europe’s technology innovators, years of investor expertise and a sustainable investment model. We focus on four sectors and keep our portfolio diverse.
As our companies grow, we provide follow-on capital to build our stakes. 70% of our portfolio value is distributed in the top 10 to 15 companies, representing our core holdings. When the companies exit, cash goes back to the balance sheet – so we can reinvest it in new opportunities. Sustainable growth, for the long term.
It’s a model similar to Warren Buffett’s Berkshire Hathaway, but instead of industrials and banks, Draper Esprit invests in the tech companies poised to be tomorrow’s giants.
Portfolio
Draper Esprit has a large, diverse and fast-growing portfolio of more than 45 companies. Here are a few of my favorites.
- Revolut – Revolut is a digital bank and wealth management service with more than 2 million clients. To a certain degree, it’s the European version of Robinhood. It offers discount trading and banking to millennials and other digital-first clients. And it’s growing rapidly. See recent coverage from CNBC here.
- Lyst – Lyst is a leading search engine for fashion products with more than 65 million annual users. Draper Esprit’s investment of 2.6 million pounds is now worth 18.3 million pounds, or about $24.5 million.
- Graphcore – Graphcore is a hardware computing company building custom chips designed to accelerate machine learning and artificial intelligence. It recently raised $50 million. Draper Esprit has invested 2.3 million pounds in Graphcore, and that stake is now worth 23.4 million pounds, or $31.4 million. Read more here.
- Crowdcube – As the U.K.’s leading equity crowdfunding portal, CrowdCube is well-positioned to dominate this market for decades to come. The U.K.’s equity crowdfunding market is more well-established than our system in the U.S., and Crowdcube is an excellent way to gain exposure to this market.
- Seedrs – Draper Esprit also owns shares in Seedrs, another leading equity crowdfunding platform in the U.K. Seedrs is Crowdcube’s primary competition in the U.K.
- Realeyes – Realeyes is a cutting-edge tech company that uses software to read people’s emotions. The applications for this are broad, but include more powerful advertising and entertainment experiences. More info here.
- Droplet Computing – Droplet is expanding the ways that companies can run and host applications. More information here.
These are just a few of the exciting growth-stage companies you buy a piece of through an investment in Draper Esprit. You can view the entire Draper Esprit portfolio here.
How to Invest
Draper Esprit trades on the London Stock Exchange under the ticker GROW. I mentioned earlier that this investment is under the radar of most investors, and I wasn’t exaggerating. In fact, I was only able to find one online broker in the U.S. that lists GROW.L. That broker is Interactive Brokers.
If you don’t have an account at Interactive Brokers, you can sign up for one here. You’ll need to fund the account in the way that works best for you. Interactive Brokers is one of the most popular online brokerages in the U.S. among both professional and retail investors. It has excellent pricing and service as well.
If you need help setting up your IB account, please contact their U.S. customer service at 1.877.442.2757. If you’re outside the U.S., you can find contact information here.
If you have an account at Merrill Lynch, Morgan Stanley, JPMorgan, Goldman Sachs, etc., your broker should be able to acquire shares for you. Tell them you wish to purchase shares of Draper Esprit, which trades in London under the ticker GROW.
Notes
- Shares of Draper Esprit are relatively thinly traded (there’s not a ton of volume). So please use limit orders and not market orders. I recommend making your offer a few dollars above the current price, and it should get filled relatively quickly.
- Please be aware that there is a U.S.-listed stock that trades under the ticker GROW. This is NOT Draper Esprit (Draper Esprit trades on the London Exchange). The U.S.-listed GROW stock is U.S. Global Investors and is not the stock we’re recommending here.
Additional Resources
- Draper Esprit results and reports
- Draper Esprit on Yahoo Finance
- Draper Esprit 2018 Annual Report (full of useful info)
- Draper Esprit homepage
- Draper Esprit investor information
- Draper Esprit portfolio
Good investing,
Adam