We raised an $18.4 million Series A1 funding round at a $330 million valuation. Here's why.

We're very excited! Last week we closed a funding round of $18.4 at a post-money valuation of $330 million led by the UAE firm called Chemie Tech. The round also saw participation from some of our key employees including myself and also from 4 of our clients, to whom we are very grateful. There is no greater gift than having our customers as investors.

This round is still open. We are in the process of raising another $25 million from two large global conglomerates. We will announce it when the round is closed.

## **Why raise from corporates?**

I spent a decade helping European tech startups raise VC funding. Venture capitalists have a 10-year time horizon because that's the general longevity of the fund. That is not long enough for us. Many of the investments we make and the systems we build will pay off over decades.

Venture capital funds typically make around 50 investments and hope that 2 or 3 of them turn out to be breakouts and provide a 1,000x return. The realigning is expected to fail and fall off their radar. They also find it difficult to raise follow-on rounds.

The US technology space is experiencing a revert back to normal after 2 years of stupendous growth, and many VC funds themselves might find it hard to raise capital. We do not want to be at the mercy of someone else's ability to raise capital.

Growth is great but growth at any cost makes us uncomfortable, especially since we manage money. We would rather be prudent with growth. Because of these, we have decided to raise capital from corporates only with whom we can have more synergies outside just money and who have no intention to sell their investment for a quick return.

## **What will the money be used for?**

We raised a seed round of $17 million in 2020, all of this money sits in our bank accounts. From our operations, we generated revenue of $12 million and spent around $11 million in 2021.

Given the tough times ahead, we want to be sitting on cash reserves that we can use to hire good talent laid off by other companies and also capture market share from other companies that may fail.

We may also have to invest more capital in our portfolio companies in case they land on hard times.

## **How does this affect the fund?**

Equipment finance is currently 12% of the fund. We have been quite successful in this. Our equipment holdings have returned 32% annually on a cash-on-cash basis.

However, our holdings have been concentrated in the medical equipment space. Post-COVID-19, the healthcare space attracted a lot of institutional capital. Hospital chains and diagnostic centers rushed to expand their services and upgrade their technology. We capitalized on this by buying MRI machines, CT scan/PET machines, fillers (machines used to fill vials and cartridges with medicines), and robotic surgical systems and leasing them out.

Although this is a great business, we are observing early signs of a slowdown in healthcare while oil & gas is picking up given high crude prices. Chemie Tech is a leader in the Middle East in servicing the oil industry. The company gives us a platform to diversify our equipment portfolio beyond medical equipments and into oil and gas.

Please expect us to invest more in equipment financing to generate low-volatility cash yields. This will allow us to provide returns uncorrelated to the stock markets.

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— Alexander Cavendish, CEO, alex@hedonova.io

Hedonova closed a funding round of $18.4 million at a post-money valuation of $330 million. The round was led by UAE firm Chemie Tech and included participation from key employees and four clients, highlighting the valuable support of their customers as investors. The funding round is still ongoing, with plans to raise an additional $25 million from two global conglomerates.

The decision to raise capital from corporates rather than venture capitalists stems from Hedonova's long-term perspective. Many of their investments and systems are expected to yield returns over decades, which aligns better with corporate investors who can provide more than just financial support. Unlike venture capital funds with shorter time horizons and a higher failure rate, Hedonova seeks synergies with corporates and values their long-term commitment.

The funds raised will be used strategically, considering the challenging times ahead. Hedonova aims to build cash reserves to capitalize on opportunities, such as hiring talent from struggling companies and gaining market share from potential failures. Additionally, they may invest further in their portfolio companies if needed.

While equipment finance currently constitutes 12% of their fund, Hedonova has achieved success in this area, particularly in medical equipment leasing. However, they anticipate a slowdown in healthcare and a rise in the oil and gas industry. With Chemie Tech's expertise in servicing the oil industry, Hedonova plans to diversify its equipment portfolio beyond medical equipment and venture into the oil and gas sector. The goal is to generate low-volatility cash yields through equipment financing, providing returns independent of stock market fluctuations.

We raised an $18.4 million Series A1 funding round at a $330 million valuation. Here's why.

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