Iran-born investor Tchenguiz injects capital in Singapore-listed, Israel-based incubator Trendlines

The company says it has raised more US$75 million ($101.8 million) in funding, excluding government grants, since it started in 2017. It also has a Singapore-based medical technology start-up incubator called Trendlines Medical Singapore, which it established with German medical device company B.Braun at end-2016.

The company has been beefing up its capital base significantly in recent months. On July 22, it announced that an entity called Librae Holdings planned to invest $10.88 million in the company by buying 103.6 million new shares at 10.5 cents each. Upon completion of this transaction on Aug 6, Librae Holdings became the largest shareholder with its 14.55% stake. Less than two months later, on Sept 26, Trendlines announced a one-for-nine rights issue, also at 10.5 cents each. At this level, it was at a premium to the company’s last traded price of 8.8 cents.

On Nov 19, Trendlines shareholders approved the rights issue at a special general meeting. Following this, Librae has committed to subscribing for its full entitlement of the rights shares. It will also take up the rights shares that other Trendlines shareholders do not want. In an extreme scenario in which no other Trendlines shareholders subscribe for the rights shares, Librae will end up assuming control of the company with a stake of 23.04%.

According to Trendlines, Librae is owned by Tchenguiz Three Trust, whose sole discretionary beneficiary is Iranian-born British businessman Vincent Tchenguiz, described by Trendlines as an owner of a “multibillion-pound” real estate portfolio in the UK.

In the past three years, the Tchenguiz Three Trust has been diversifying its investments from real estate into biotechnology and green technologies. The trust has built a US$350 million technology venture capital portfolio with investments spread across Europe, Israel and the US in incubators, venture funds, and several medical companies in Israel. In an interview with the Financial Times in February, Tchenguiz explained why he was moving away from property into technology. “You never know how we are going to make some money in the future.”

Trendlines is linked indirectly to Tchenguiz via Trendlines non-executive director Zeev Bronfeld, who is a shareholder in Capital Nature, an Israel investment firm focused on funding and accelerating early-stage ventures as well as academic research in renewable energy in the country. Tchenguiz, via a separate trust from Tchenguiz Three Trust, indirectly holds a significant stake in Capital Nature.

In a filing with the Singapore Exchange, Trendlines says it “believes that Librae Holdings’ numerous life science investments in Israel and around the world make [it] more than a financial investor, but an investor with the ability to provide strategic value”. The recent placement to Tchenguiz raised Trendlines’ cash and cash equivalents from US$6.4 million a year ago to US$12.8 million as at Sept 30. This level will further increase upon completion of the rights issue. “While the company does not have an urgent need to raise funds, it believes it can put the funds to good use to further build shareholders’ value,” notes Trendlines.

The money from Tchenguiz has already been earmarked to fund Trendlines’ latest venture fund — Trendlines Agrifood Innovation Centre. Together with Librae's investment, Trendlines received conditional commitments of up to US$22 million from Temasek and a Southeast Asian investor. Through this platform, the company will invest in agrifood tech companies in Singapore and abroad. It is a partner of the Startup SG Equity scheme, the investment arm of Enterprise Singapore.

Clear mission

While its business model appears similar to that of a venture capital firm, Trendlines co-chairman and co-CEO Todd Dollinger asserts that it does not act as such. For one, the company hothouses the start-ups at its facilities, he says, adding that his team handholds them every step of the way — and does not merely provide funding.

The ultimate aim is the same, though: to make money. “We have a clear mission, which is to create and develop companies to improve the human condition. We are deeply focused on combining this mission — which informs our decision making — with a strong focus on profits,” Dollinger tells The Edge Singapore during a recent visit to the city state.

The Trendlines team shortlists potential investments by first identifying a market need and then assessing whether the economic opportunity is sufficient. “You’ll also be looking at the competition and who can acquire it later, because most likely you’re going to want to go to a large company and talk to them about distributing the product,” he says. So far, Trendlines has cashed out from eight of its portfolio companies and two of its portfolio companies have gone on to list in Israel’s Tel Aviv Stock Exchange.

Owing to the similarity of their business, Trendlines has often been compared with another SGX-listed company: Taiwan-based Hotung Investment Holdings, whose portfolio companies are technology firms based in Taiwan, China and Silicon Valley. Its companies work primarily in the areas of e-commerce, smart-home components, biotechnology and agriculture. It has brought some 200 companies to the public market over the course of the past two decades and has consistently generated earnings, save for the difficult years during the global financial crisis. As at Sept 30, Hotung’s portfolio was valued at NT$5.46 billion ($240 million).

For 3QFY2019 ended Sept 30, Hotung reported earnings growth of 89% y-o-y to NT$160 million on the back of higher fair-value gains. So far this year, Hutong’s shares remained unchanged and closed at $1.69 on Dec 12. At this level, the company s valued at $162.7 million.

By contrast, Trendlines shares have dropped 2.25% year to date to close at 8.7 cents on Dec 12. This values the company at $61.98 million. It launched its IPO in November 2015 at 33 cents a share.

For 3QFY2019 ended Sept 30, Trendlines was US$2.6 million in the red. In the year-earlier quarter, it reported earnings of US$3.2 million. On a fully diluted basis, this translates into a loss per share of 3.8 UScents, from a 5.2 US cent gain previously. This comes from a loss of income of US$2.6 million, following a 13% y-o-y dropin the number of portfolio companies being serviced by the group. The group also had a 68.9% drop in income from its R&D services, owing mainly to fewer services being provided by the group’s labs. Aside from these, the group was hit by a 71.7% drop in its financial income on the back of lower exchange rate differences between the US dollar and the Israeli new shekel.

Dollinger adds that the company had to lower the fair market value of its portfolio by US$5.3 million, following the write off of two companies and less favourable terms to fundraising exercises. As at Sept 30, Trendline’s portfolio was worth US$94.6 million, excluding the Singapore-based companies treated as subsidiaries.

‘In love with market’

For now, Trendlines is looking to deepen its presence in the healthcare sector through its new focus: longevity. With increasing life expectancy around the world, Dollinger says there is a demand for services to assist both the aged and their caregivers. To this end, a new company specialising in medical technology for elder care has just been formed. It will use non-intrusive and non-invasive sensors to monitor the level and type of activity as well as the eating habits of the elderly.

The platform will also be customisable based on the needs of the elderly, says Dollinger. For instance, if a person has diabetes, it will focus on food intake and the amount of insulin pumps taken. All information collected will be monitored by healthcare professionals and made available to caregivers. “We are in love with market opportunities, so all we do is in response to true market needs,” says Dollinger. There has been a growing demand for elderly care technology, with forecasts by US-based BCC Research that the market will grow from US$5.6 billion to US$13.6 billion from 2017 to 2022. For now, Dollinger says the technology will be rolled out in Israel at the beginning of next year; it will subsequently be customised to the needs of Asian markets and will hit the region in 1H2020.

The latest focus on longevity comes on top of the company’s existing investments in related areas such as urology, neurology, cardiology, diagnostics and women’s health. The company is also working on “more robust technology” in the agri-food tech space, especially through its recently established food centre. In addition to its five investments in the aquaculture sector, the group is now looking for more opportunities to deepen its presence in this field. This is in a bid to create alternative sources of protein, says Dollinger. With countries around the world looking to alternative protein sources as a means to increase food supply, he has reason to believe that Trendlines is on the right track.