Highlights from the 2018 Kensington Investor Conference

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The annual Kensington Investor Conference is a time for our investors to catch up and find out what’s happening with us. This year, over 100 people filled the Telus Harbour Centre in Downtown Toronto to spend the day with us. The day began with an overview of private markets from senior management, which is summarized in our latest post, reflecting and getting excited for 2019.

For the rest of the day, we had a variety of sessions that involved discussion panels and portfolio showcases. If you did not manage to make it to our Kensington Investor Conference, here are a few highlights.

Benjamin Tal, Deputy Chief Economist of CIBC World Markets Inc.

Benjamin Tal, our keynote speaker, captured the audience with his passionate presentation about the current state of the global economy and what he foresees in the future. He believes that the next recession will be a policy driven recession and not the usual cyclical story. He also touched on the fact that this is the second longest expansion we have experienced due to the fact that it was very muted.

“We are currently in the 4th inning of the cycle, not the 9th inning. “ says Tal.

One of the reasons that the expansion is still progressing is because the current wage mechanism is broken in North America with a few contributing factors such as demographics and job skill mismatch. Benjamin Tal finished by touching on the trade environment experienced by the world in 2018 and the future of the Canadian economy.

From Left to Right, Richard Nathan, Managing Director, Kensington Capital Partners | Peter Van Der Velden, General Partner, Lumira Capital | Justin Lafayette, Managing Partner, Georgian Partners | Paul Lee, Managing Partner, Vanedge Capital

In our Trends in Venture Capital panel, Peter Van Der Velden, Justin Lafayette, and Paul Lee joined our Managing Director, Richard Nathan on stage to answer the question that is on everyone’s mind, valuation and pricing in the private equity and venture capital markets.

The discussion took the audience through the landscape of venture capital in the last few years. All three mentioned that in the last couple of years, the markets have been quite efficient and savvy determining what a good company is and weeding out the bad. But, three or four years ago, many people were not discounting inefficient companies (sometimes known as the FOMO stage) where everyone was investing in everything. Now, we see that the discount is quite severe, and the good companies will keep getting higher valuations while the bad companies remain untouched.

At the end of the day, all things considered, the panel agreed that it is strategically possible to avoid frothy markets and get into companies at appropriate valuations if, first, you get to know the company early and understand who you are really backing, understand the efficiency of the business and, lastly go where the market is under served.

Jamil Jaffer, Vice-President of Strategy and Business Development, IronNet Cybersecurity

Another topic that is always appearing on the news is Cybersecurity. Jamil Jaffer, from our portfolio company, IronNet Cybersecurity had the chance to explain the inner workings of the company and how their incoming data is analyzed. The main takeaways from the presentation are attack opportunities are growing due to the growing amount of device per user, attacks are happening faster and the defenders available are comparably slower.

The cost of cyber crime is estimated to be $6 trillion in 2021, says Jaffer.

Throughout the presentation, IronNet Cybersecurity stressed on collective defense, where increased industry sectors and public-private partnerships can improve defensive efficacy and deliver a more unified response.

From left to right, Eamonn McConnell, Managing Director, Kensington Capital Partners | Frederic Lalonde, Founder and CEO, Hopper | Mike Wagman, Co-Founder and CEO, Ace Hill

To finish off our conference, we had the CEO of Hopper and Co-Founder of Ace Hill Beer join our Managing Director, Eamonn McConnell on stage to chat about their steps of achieving a strong brand and the struggles they faced as entrepreneurs. A conflict that is often experienced by entrepreneurs, as they both mentioned, was the need for constant change in skills. The skill set needed to run a company is very different than the skill set needed to be a good founder, commented Frederic Lalonde. That is why a lot of founders leave.

Founder teams are accustomed to using their creativity to maintain balance with their daily tasks. As the company grows, the founders usually have a hard time stopping themselves from doing other people’s jobs which is very contrarian thing to say as a start up. If you do not stop, the downside is that the company processes will get damaged.

You don’t want to become a company that is slow and doesn’t innovate, says Frederic Lalonde.

There are very few founder teams that can find a balance between growing the company and innovating at the same time and some problems experienced by founders can only be understood by a few which sometimes can be very lonely.

The focus and problems change quickly when you are growing quickly, says Mike Wagman

A compelling thought from Frederic Lalonde was that companies who do incredibly well have CEOs that are customer focused. More importantly, working backwards from its target customer is the key. This is so important because currently, we see a chasm between generations and their behaviours. For example, the generation of millennials behave entirely different, and due to this shift in behaviour, entire brands can succeed or fail very quickly.

Therefore, companies who understand this gap and are customer focused dominate some of the larger brands that we know today.

We want to thank all the presenters for coming out and supporting us. We would also like to thank everyone who took time out of their busy schedules to join us this year. We look forward to connecting with you all next year!

Visit us at www.kcpl.ca for more information. Follow us on Twitter @kensingtonfunds.

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Kensington Capital Partners Limited
Kensington Capital Partners Limited

We're a leading Canadian alternative asset manager with $2.8 billion in assets under management in #PrivateEquity #HedgeFund #VC | www.kcpl.ca