Tern Plc (LON:TERN), the investment company specialising in supporting high growth, early-stage, disruptive Internet of Things technology businesses, has announced that, further to its announcements on 27 December 2023 and 28 December 2023, Device Authority Limited, a company in which Tern had a 35.7% shareholding at 28 December 2023, has completed an additional Second Closing of Tranche One of the Series B type fundraising round, securing a further US$2.0 million in new equity investment from Mercato Partners, a private equity firm in Cottonwood Heights, Utah, USA.
Highlights
· Device Authority and the investor group in the first closing from late December 2023 (T1) have agreed to a further US$2.0 million to be invested in addition to the planned US$7.3 million Fundraising announced on 27 December 2023. This brings the new planned total Fundraising to US$9.3 million. The US$2.0 million Second Closing has been secured and is in addition to the US$3.7 million from Ten Eleven Ventures and US$0.3 million from Alsop Louie Capital 3, L.P via conversion of short-term loans secured in the first closing of T1 on 28 December 2023.
· The total Device Authority Fundraising remains intended to provide Device Authority with sufficient funding to enable it to grow in line with its strategy beyond the end of 2024. This encompasses the expansion of its activities in the United States.
· From completion of Second Closing of T1 of the Device Authority Fundraising, Tern now holds 31.7% of Device Authority’s equity (before any dilution on exercise of share options), valued at approximately US$7.5m (approximately £6.0m) at the valuation implied by the Device Authority Fundraising issue price.
· On acceptance of the National Security and Investment Act 2021 approval by Ten Eleven Ventures and completion of Tranche Two of the Device Authority Fundraising (as announced on 27 December 2023), Tern will hold 26.7% of Device Authority’s equity (before any dilution on exercise of share options), which would be valued at approximately US$7.2 million (approximately £5.7 million) at the valuation implied by the Device Authority Fundraising issue price.
· Device Authority has been in the process of making non-executive director additions to its Board, with recent appointments including:
o Dave Palmer, General Partner of Ten Eleven Ventures and co-founder and former Chief Product Officer of Darktrace;
o As Device Authority’s new Chairman, Tim Eades, Chief Executive Officer and Co-Founder at Anetac and a General Partner and Fellow Founder of Cyber Mentor Fund. A 20 year cyber security Silicon Valley serial entrepreneur; and
o Grace Cassy, co-founder of cybersecurity investment firm CyLon Ventures and former foreign policy advisor to UK Prime Minister Tony Blair.
Device Authority Series B type Fund raise
Prior to the Second Closing, Tern had a holding of 35.7% in Device Authority. As at 30 June 2023, the date of Tern’s last published book valuation in its interim results, this investment had an unaudited book value of £11.9 million.
Device Authority has secured US$2.0 million in new equity investment from Mercato Partners in the Second Closing. The remaining T2 of US$3.3 million, remains contingent on approval pursuant to the NASI and acceptance of the approval by Ten Eleven Ventures. T2 will be completed at such date as may be notified by Ten Eleven Ventures (in their absolute discretion) to Device Authority on or prior to 30 September 2024, provided that such date shall be: (i) no earlier than the fifth Business Day after NSIA approval has been obtained; and (ii) no later than the fifth Business Day after the date that Device Authority was notified by Ten Eleven Ventures.
Following the Second Closing of the Fundraising, Device Authority is now valued in total, at the price implied by the Device Authority Fundraising, at US$23.7 million on a post-money basis and Tern will have a holding of 31.7% in Device Authority (before any dilution on exercise of share options), with an unaudited book valuation of approximately US$7.5 million (approximately £6.0 million).
On acceptance of the NSIA approval by Ten Eleven Ventures, Device Authority will be valued in total, at the price implied by the Device Authority Fundraising, at US$27 million on a post-money basis and Tern will hold 26.7% of Device Authority’s equity (before any dilution on exercise of share options), which would have an unaudited book valuation of approximately US$7.2 million (approximately £5.7 million) at the valuation implied by the Device Authority Fundraising issue price.
Commenting Ian Ritchie, Chairman of Tern, said: “We are pleased with Device Authority’s ability to attract high calibre US investors as it continues to secure new logos. Device Authority’s progress will be further accelerated with this significant investment from another US investor and the additional funding will allow Device Authority the flexibility to be more opportunistic in the marketplace.
“We believe the additional capital and resources from Mercato Capital will enable a broader expansion of Device Authority’s go-to-market programs in the US that we believe will ultimately have an effect on the multiples for exit valuations. The global cyber security market segment is continuing to experience double digit growth and establishing a substantial presence in the US should result in a greater return for Tern’s shareholders.
“Mercato Partners has a history of providing operational support to develop technology businesses to the stage when a valuable exit can be achieved. We look forward to working with the Mercato team and the other investors in the syndicate to accelerate the growth of the business to maximise the investment value for Tern shareholders. I look forward to making further announcements in due course.”
