Group 11 venture fund registers 16% loss in 2023 after markdowns
According to Group 11's reports, most of the decrease in the value of assets in 2023, amounting to $33.6 million, is due to markdowns of assets. The fund explains the decrease by saying that in the last year none of the fund's holdings IPO'd and none are expected to go public this year either
Dovi Frances is considered a successful Israeli venture capital investor and a charismatic television personality, but his investors would rather forget the last two years. Frances’ venture capital fund Group 11 lost almost $40 million on paper last year and is down by $43 million since the beginning of 2022. According to the fund's financial reports, the value of its assets at the end of 2023 was $204 million, after a decrease of $39 million compared to 2022. That is, the fund recorded a negative return of 16% in 2023 while the Nasdaq rose by 43.4%.
Group 11 invests in private companies that operate in the fintech field, at various stages, from the Seed stage to an IPO. Among the main investments made by the fund are mature companies such as the digital insurance company Next Insurance, traveltech company Navan (formerly TripActions) and the unicorn Tipalti. In addition, the fund invests in companies at earlier stages such as EquityBee and Fintastic.
According to Group 11's reports, most of the decrease in the value of assets in 2023, amounting to $33.6 million, is due to markdowns of assets. The fund explains the decrease by saying that in the last year none of the fund's holdings IPO'd and none of the holdings are expected to be issued this year either. The fund is also not expecting any significant fundraising rounds from its portfolio companies. The appraisals carried out by the fund reduced the value of the holdings in light of several objective elements such as interest rates level and investor sentiment. In a sense, Group 11 experienced in 2023 the decline in value that public fintech companies already experienced in 2022. The fund registered a loss in 2022 as well, amounting to $4 million.
Along with losses from markdowns, there are tangible losses from investments amounting to $2.2 million in 2023 as well as an operating loss amounting to $3.7 million.
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Institutional bodies invested in the fund explained that the loss came against the background of the sale of Papaya Global shares, one of Group 11's long-standing holdings, in the third quarter of last year. On July 28, 2023, Frances sent a letter to all shareholders in Papaya and offered for sale his package of shares in Papaya at a 90% discount on the value at the last funding round. The reason for the move was a disagreement with the founder of Papaya Eynat Guez, who came out against the legal reform and threatened to take the company's money out of Israel.
Frances's fund participated in all of Papaya's fundraising rounds and purchased shares for approximately $13 million in total, which gave it a holding of almost 3%. According to Group 11's updated portfolio, the Papaya holding is cataloged under "exited", meaning the fund no longer holds the shares.
Group 11, founded in 2012 by single General Partner Dovi Frances, is a partnership incorporated in the Cayman Islands that began trading on the TASE UP platform of the Tel Aviv Stock Exchange in November 2021 after raising $200 million for its Fund V. Among the investors in the fund are a number of prominent Israeli institutions, led by Migdal and Harel Investments, as well as Menorah Mivtachim, More Investment House, Hachshara Insurance, the investment management company True Capital Management and a number of family offices from the USA and Israel. In addition, the fund allocated $5 million for trading through the platform so that qualified investors will also be able to purchase holdings. The value of the unit today is NIS 4,000, while on the day of the launch the unit traded at a price of NIS 5,000.
The value of the assets of the limited partner (LP), i.e. the assets associated with institutions and investors outside the fund, is estimated today at $197 million. In the months after the opening of the fund, an upward revaluation of its assets was carried out to the extent of almost $53 million, but since then the revaluations have only been made downwards and returned the fund more or less to the zero point. Since its establishment, the fund has collected management fees of $9.6 million.
Last December, Group 11 said that it had partnered with StepStone Group, a global private markets investment firm, and with Industry Ventures, an investment firm focused on private technology investments, through a $20 million secondary transaction to acquire 12% of Group 11's second fund. The parties closed the deal directly, without the involvement of any placement agent or investment bank.
Last April, Group 11 partnered with StepStone Group through a $50 million secondary transaction to acquire 27% of Group 11's third fund.
