A stellar performance of a small number of listed tech companies is largely responsible for the recent recovery in public stock markets. For Ben Prade, partner at international tech investor GP Bullhound, it remains to be seen whether this can serve as a full market revival. Nevertheless, he is upbeat about the prospects for private tech investments, saying 2023 can become “one of those really great vintages”.
GP Bullhound is an international technology advisory and tech investment firm that opened an office in Luxembourg a year ago. Investment Officer caught up with its partner Ben Prade and its Luxembourg director Alek Jakima, discussing the current state of artificial intelligence (AI), its impact on investment trends and the role of Luxembourg’s ecosystem.
Prade, whose firm handles more than billion euro in tech investments, cautioned about the bubble-like nature of the AI landscape, highlighting the misconception that AI is a recent invention, when in fact, companies have been utilising AI technologies like natural language processing and machine learning for the past two decades.
AI ‘quite frothy’
“It feels actually quite frothy already in AI for us,” Prade said. “While we have been an AI investor for many years, a lot of people think AI just got invented with ChatGPT. But actually, companies have been using AI for 20 years, you know, whether you call it natural language processing or machine learning, it’s been out there for a long time.”
While acknowledging the growing interest and investment appetite in AI, Prade emphasised the importance of not getting caught up in hype cycles. GP Bullhound has already made investments in the AI space, including Ravenpack, a Spanish AI company that leverages natural language processing to provide hedge funds with sentiment analysis on individual stocks. Another investment is ConnexOne, a UK-based company that uses AI to understand customer dialogue and assist businesses in pricing strategies and marketing initiatives.
Prade’s tech advisory and investment firm opened up its Luxembourg office in April last year and is established as Alternative Investment Fund Manager, or AIFM. The firm now employs six people here, led by Jakima on the investment side. The Luxembourg team now also includes a mergers and acquisition banker, Yuriy Sheyko, who acts as dealmaker.
“He’s there very much to work on an advisory basis with technology companies, both in Luxembourg, and around Luxembourg, to help them think about mergers and acquisitions or fundraising transactions. And that’s separate to our investment portfolio,” said Prade.
GP Bullhound VI
Since 2018 GP Bullhound has launched all its new funds from the grand duchy, preferring its “more regulated and safer environment” as opposed to its earlier offshore presence in Jersey, said Prade. “It’s been good for us,” said Prade. “We see it as a very fertile, very fair, well run place with lots of you third party providers that are very helpful.”
The firm has recently launched its sixth fund, GP Bullhound VI. Its “fund six” has already raised 110 million euro in a first “friends and family close” and expects to “bust through” its target of 300 million euro by the third quarter, said Prade. These funds then will be invested over the course of the next three years, placing it as growth stage investors in about 16 to 18 companies.
Prade is upbeat on its prospects, talking about the year 2023 as “one of those really great vintages” for venture capital funds.
‘Influx of capital’
“People are beginning to see that valuations in the growth space are very attractive at this point. You can invest in the same kind of companies you could two or three years ago at maybe 60, 70 percent cheaper,” he said. ”During the last year, people were definitely concerned about the environment. What we’ve seen over the last few months is an influx of capital back into our space.”
The changing investment landscape, with rising interest rates, inflation and unexpected volatility stemming from geopolitics, is giving investors a different perspective on private long-term investments such as those made via GP Bullhound’s funds. “We’ve found that investors are looking for more, I would say, a more constructive relationship with GPs,” he said. “They don’t just want to be silent money. They want to get to know us. They want to learn about the space. They want to see co-investment opportunities where they can invest alongside the fund.”
Asked about the growing role of the retail market for private funds, largely on the back of a new EU legal regime for long term investment funds known as Eltifs, Jakima said this is a development that holds GP Bullhound’s interest and that could be a topic for its 2024 roadmap. Offering funds to retail investors requires a different approach that enables GPs to work with thousands of investors, not the hundreds it works with now.
GP Bullhound currently has several hundred investors in its funds, with about 250 of them also being tech entrepreneurs themselves, both from Europe and the US.
“We’re really at the heart of the tech ecosystem at every single level,” said Jakima. “That is why we are different from our competitors.”