92 The state of valuations in the current market and what they mean for investors with John Glencross of Calculus

The EIS Navigator

Valuations are always a popular topic. With much discussion about whether we are at the bottom of the current cycle, it seems a good time to revisit and we invited back someone who has experienced several market cycles: John Glencross, co-founder of Calculus Capital.

We had a great discussion on how the current market, how this compares with recent times and how a fund manager handles them. Topics discussed include:

• how companies are accepting lower valuations
• the danger of growth at any price
• where there are still bubbles and what the consequences of these might be
• how to manage investing when valuations are high
• the psychology of down rounds
• preferential return structures and what John is seeing in the market
• real unicorns versus valuation aberrations
• how valuation matters for investing
• how Calculus values existing portfolio
• John's sense of valuations in the EIS & VCT market and where he thinks the discrepancies are
• how close we are to the bottom of the valuation cycle

Talking with someone who has seen several downturns gave a great perspective on all these topics and there's lots for all advisers and investors. Enjoy!

01:00 John introduces himself

04:30 recent exit patterns

06:00 companies accepting lower valuations attraction of investment vs exits

07:30 avoiding growth at any price - US vs UK

10:15 where there is still bubbles

13:15 investing when valuations are high - changed pace of investments in recent years

16:45 the psychology of down rounds

18:45 preferential return structures and the general tightening of terms in market

26:00 when are unicorns a market aberration?

28:30 how valuation matters for investing

31:10 portfolio valuation - lags, being realistic and getting a good process

35:00 how EIS managers are using unrealised performance as marketing, but its not similar to exits

41:00 what is an acceptable band of uncertainty? How exits matter

44:15 are we at the bottom of the valuation cycle?

48:45 favourite questions

Links

Calculus Capital website: https://www.calculuscapital.com/

Subscribe to the EIS Navigator podcast on most services here: https://the-eis-navigator.captivate.fm/listen

Suggested books and media

Sunshine & Shadows

The Four Agreements by Don Miguel Ruiz

Sing as We Go by Simon Heffer

Bio

John Glencross

Chief Executive and Cofounder, Calculus Capital

John co-founded Calculus with Susan McDonald in 1999, creating one of the UK’s most successful, independent private equity firms focused on investing in entrepreneurial young British companies. John has over 30 years’ experience in private equity, corporate finance, and operational management. During that time, he has invested in, advised on or negotiated more than 100 transactions and served on publicly quoted and private corporate boards. Before co-founding Calculus, John served as a European Corporate Finance Director at UBS and, prior to this he was Head of Mergers and Acquisitions at Phillips and Drew, a 100-year-old London-based financial institution. At the start of his career, John qualified as a Chartered Accountant with Peat Marwick (subsequently KPMG), where he then went on to be recruited as a founder member of Deloitte’s newly established consultancy practice in the Gulf Region and then Corporate Finance practice in London. John graduated from Oxford University with an MA (Hons) in Philosophy, Politics and Economics.