Mike Edwards (LXV)

In an exclusive interview to CEO.CA, LX-Ventures (LXV) CEO Mike Edwards asks investors for patience and defends his company's execution in light of its recent 60% share price fall. Edwards says LXV has no plans for future acquisitions or financings until a "business model validating event' occurs whereby one of LXV's portfolio companies is sold or receives third party funding. Edwards is hopeful that can happen inside of 18 months.

LX-Ventures is naked.

This from Brent Holliday, CEO of Garibaldi Capital, B.C.’s leading technology investment banking firm.

Brent is referring to how everything LXV does is under the intense scrutiny of the public markets, whereas in private early stage technology venture capital, companies only leak information when it is to their benefit.

This provides a slight challenge to LXV, a publicly traded firm founded in 2012 which aims to acquire, accelerate and exit early stage technology companies. The company is led by CEO Mike Edwards, an experienced technology venture capitalist.

For a quick primer on LXV, the company has bought into four startups to date (Correction: the company has invested in 10 startups since inception however only four are talked about now).

The one that has caused the most stir is Mobio, a platform for connecting celebrities, brands and fans.

LXV press releases, which are frequent, often tout the latest celebrity to join Mobio, such as Kim Kardashian or Cristiano Ronaldo.

What the company neglects to say in the news releases is how much celebrities are paid to join the platform.

On the other hand, Mobio has had phenomenal growth since it launched three months ago. It had hoped to sign ten celebs and reach a million page views. By the 7th week over 30 celebrities were using the services and over 13 million page views were generated.

LXV also acquired Strutta, a contest platform, in November 2013. Strutta brings relationships to 12000 brands, revenues of $1M per year, and a development team to LXV.

Strutta, which monetizes traffic, and Mobio, which generates it, have obvious synergies, although the two companies will continue to operate independently, LXV CEO Mike Edwards told CEO.CA in a Skype interview Friday.

The third asset in the LXV portfolio is Copper.io, a business analytics software as a service company, similar to somewhere like SDLC Partners and other software-based businesses.

The fourth is Sosido, a healthcare portal.

LXV does not plan to make more acquisitions in the near term, Edwards said, unless the opportunity to acquire talent or a business is too good to pass up.

Edwards and I were introduced last week after a mutual friend complained our coverage of the company was too negative.

I was impressed with Edwards communication skills on the call, but detractors have been arguing LX Ventures isn’t great at communication with its existing investor base.

Mobio, for all it’s growth, is in an early stage company with negligible revenue and, likely, expensive development costs. Strutta’s revenues look good, but there’s no public talk of what it costs to operate. Copper.io’s financial side is a mystery, and Sosido rarely enters the discussion.

It is difficult for Edwards to communicate specific upcoming milestones for LXV. The business model is geared towards “acceleration” and making exits, rather than timelined stock price catalysts. No drill results here, no 43-101’s to lean on.

That leaves the stock at the mercy of naysayers and short sellers, who continually ask for proof of success as the company asks for shareholder faith.

Shares in the company have fallen over 60% since Mobio’s launch, despite the platform’s early traction.

Edwards asks for patience.

“It’s a false premise that people could think we could launch and sell in a couple months. It takes time and people to build a company.”

Shareholders in LXV want three things, Edwards said: growth in the number of users, growth in revenues, both of which the company is delivering. The third, profits.

“You can’t ask for all three today.”

But shareholders also want to know they’re not about to run out of money, and when LXV launched a $3m financing round after a significant share price fall and after two big acquisitions, shareholders wanting assurance that the bank account isn’t empty have not received any.

The share price has continued to wobble.

LXV data by YCharts

LXV was a high flying venture stock in fall and winter 2013. The company, which debuted just over a year ago and was originally financed at $0.10 per share, soared past $0.90 on expectations that Mobio was going to be a hot tech property leading up to its launch.

Since the debut of Mobio, shares in the company have been going in the wrong direction.

Keir Reynolds, a Vancouver stock promoter who had founded the company and helped to raise its profile in the capital markets, resigned from the board of directors two weeks ago.

I pressed Edwards on LXV’s strategy to promote its share price in the post Keir era.

The company has recently hired the Liolios Group, an investor relations firm, to help reach out to prospective shareholders, particularly in the US.

Edwards sees Investor Relations (IR) being an obvious strength of the technology and marketing savvy company.

Continuous content creation by the LXV management team is also a big part of the company’s IR, getting the word out and generating new investor leads.

Edwards says he will leave no stone unturned to create awareness for his stock.

Regarding the current $3 million financing, Edwards tells me the plan is to stretch that capital until the business model has a “Validating Event” whereby one of LXV’s plays gets sold or receives funding by other major technology investors. Edwards believes that can happen inside of 18 months.

Detractors raise questions about the wisdom of taking money at a low share price (LXV sits at around $0.335 currently, down from a high nearly three times that in December), and stock dilution as the shares outstanding push towards 100m.

“You can’t fundamentally analyze LX right now,” Edwards said. “Ultimately we trade on the TSX-Venture for a reason. We are a blue sky company that is executing and growing very quickly, and reacting to market conditions.”

Edwards says LXV has a strong team of technology leaders including 8 developers and says the company has not had difficulty finding talent.

“Developers ultimately want to work on interesting stuff, in a cool environment, and they want to get involved in growth stories.”

I told Edwards I’d like to hear more from the development team in the company’s corporate communications, and he was open to the suggestion.

“Retail investors in venture stocks typically don’t have the patience required to grow an early stage technology business,” Garibaldi Capital’s Brent Holliday told me.

Holliday, who is not an investor in LXV, but advised the company on the Mobio acquisition, heartfeltly complimented its CEO.

“I know Mike well enough to know he will run through a brick wall to see this succeed.”

Holliday concluded that hard work, good execution, and a little bit of luck will be required for LXV to have its business model validated.

Edwards laughed when I asked him if he regretted pursuing this business model in a public vehicle.

“Depends on the day, depends on the hour, depends on the minute.”

LX-Ventures trades on the TSX-Venture Exchange under the symbol LXV. The company has a market cap of approx. $25.6 million with 75.2 million shares outstanding -- All figures via Stockwatch and prior to Feb 25th announced financing.

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