Afterpay-founded Touch Ventures in the red from investment impairments

A venture capital spin-off from buy-now pay-later (BNPL) company Afterpay has once again seen its bottom line plagued by impairments on its startup investments, with Touch Ventures (ASX: TVL) reporting a $15.4 million loss for the 2023 calendar year. 

The result is technically an improvement on Touch Ventures' $65 million loss in 2022, but it is driven by the same dynamic of impaired assets.

The company has reported valuations of zero on its investments in PlanPay and Till Payments, down from total investments of $27.3 million.

Travel-focused fintech PlanPay, formerly known as Play Travel and founded by former longstanding Fisher & Paykel Appliances executive Andrew Paykel, was Touch Ventures first-ever investment in February 2020 with $17.2 million worth of capital deployed since then as well as $5.1 million in loans supplied.

"We faced a challenging decision regarding our investment in PlanPay," CEO Hein Vogel says in Touch Ventures' annual report released today.

"Over the past 18 months, we supported PlanPay and its CEO as they rebuilt its enterprise travel product. Despite these efforts, PlanPay struggled to meet its revenue expectations and customer targets.

"As a result, Touch Ventures decided not to provide additional funding to PlanPay in September 2023 and has written down its investment in PlanPay to nil."

Vogel added that Touch Ventures did not receive any proceeds from the US$30 million ($46.3 million) sale of Till Payments to Nuvei (TSE:NVEI).

On a more positive note, the group reported $14.1 million of cash proceeds from the sale of its investment in Basiq as part of a company sale to Cuscal, while a further $800,000 is held in escrow for release over the next 15 months.

"Including the escrowed amount, the sale represents a 50 per cent return on invested capital of $9.95 million and an IRR (internal rate of return) of 19.7 per cent," Vogel says.

"We also took a net revaluation uplift in Sendle of $0.6 million following their capital raise in October 2023," he adds, although the carbon-neutral parcel delivery service Sendle is currently worth $15.9 million, or less than half the $36.5 million invested.

The devaluation of Sendle was a major part of Touch Ventures' impairments in 2022, also including Postpay, Till Payments and Chinese BNPL group Happay, as well as early-stage investments.

Touch Ventures' early-stage portfolio fell from a total investment of $19.1 million to $4.4 million by the end of last year. In contrast, its strategic investments have risen 19.5 per cent in value to $4.9 million, although they are down slightly on 2022.

Since its 2021 initial public offering (IPO) with $100 million raised at 40 cents per share (cps), Touch Ventures' experiment as an ASX-listed VC has eroded in value to just 7.5cps today. Key financial backers include Alex Waislitz's Thorney Technologies (ASX: TEK), US investor Woodson Funds and Gannet Capital.

Gannet, a Sydney-based private investor that was a cornerstone investor in Catch Group, became a substantial holder in Touch Ventures last month after buying Afterpay owner Block's 19.99 per cent stake in the VC, and then appointing Glenn Poswell as a non-executive director.

Touch Ventures cautiously deployed $4 million into equity investments in 2023, the largest being hospitality technology platform Ordermentum with a $3 million investment in September, with the remainder spread evenly across existing portfolio companies Sendle and fashion discovery app Wrapd.

"We are focused on utilising our available cash to develop a new vintage of portfolio companies with Ordermentum being our first investment," Vogel says.

"In line with our updated investment strategy, we look to establish a group of companies each with minimum revenue exceeding $5 million-plus.

"This threshold ensures a certain level of maturity and market traction before we invest. Our target investment size for new investments is between $3 million and $10 million with a wide sector focus that includes retail innovation, e-commerce enablement, finance/fintech, consumer, B2B software and data."

Vogel adds that other portfolio company founders have remained resilient and continue to grow top-line revenue across the board.

"Sendle, Refundid and Preezie have expanded their footprint in North America and we are excited to see them grow internationally," he says.

"We want to thank the founders of our portfolio companies for their continued dedication to their businesses in a challenging operating environment."