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latent

Acquired by Waymo (a Google subsidiary)

What drove us to invest?

Latent Logic originated within Oxford University’s award-winning machine learning department and was founded in 2017 by leading academic, Professor Shimon Whiteson and robotics expert Dr. Joao Messias. The company is at the cutting edge of imitation learning and artificial intelligence (AI), building autonomous systems which understand humans, deep learned from real data, over millions of test cases which can then be applied to autonomous vehicles.

We initially invested in February 2018 at the point when the company had just spun out of the university. Prior to our investment, Latent Logic had only a very high-level proof of concept, and no commercial team or pipeline. With our funding, the company proceeded to build a viable version of their simulation including realistic driver behaviour.

How did we deliver an exit for our investors?

There were a number of factors that led towards Latent’s eventual exit – the driverless car market is expected to be worth nearly $7 trillion by 2025. The monumental size of the opportunity is why some of the leading global tech brands (e.g. Apple, Uber, Google) and automotive brands (e.g. Mercedes, Tesla, GM), are all involved in the race to be first. It is this demand that led Latent Logic to be acquired very quickly.

We worked with the management team and Oxford Sciences Enterprises (co-investor) to identify companies to approach for a potential acquisition. Waymo (Google’s driverless vehicle business) was seeking a partner to enter the European market and develop its first European engineering hub. Through this acquisition, Waymo made its first permanent footprint into Europe, in Oxford.

From our initial investment the company exited in less than two years, significantly less than the average investment (we aim to exit a company within 5-7 years) and from an investor perspective it delivered high IRR returns extremely quickly.

The UK is at the forefront of the machine learning and AI market and Latent Logic is now one of several leading companies, in addition to Deepmind (acquired by Google) and VocalIQ (acquired by Apple), that have been acquired by US tech giants in recent years.

Estimated reading time: 2 min

 

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  1. You could lose all the money you invest
    1. If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
  2. You are unlikely to be protected if something goes wrong
    1. Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
    2. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
  3. You won’t get your money back quickly
    1. Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
    2. The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
    3. If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
  4. Don’t put all your eggs in one basket
    1. Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
    2. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
  5. The value of your investment can be reduced
    1. The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
    2. These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.