European startups have at all times suffered from the perennial startup drawback: how to exit? However, in Europe the issue has at all times been notably acute. How many massive European industrial or company giants purchase or acqu-hire? Not that many, and not almost sufficient.
It’s half of the rationale so many European startups finish up heading to the U.S. The U.S. is one of the few markets the place you possibly can obtain respectable scale, as nicely has have the potential to exit both by a sale to one of the worldwide tech platforms or to the general public markets.
Now a new, however barely totally different, German non-public fairness fund hopes to resolve at the least half of the issue, and at the least in Germany, which shall be its predominant focus.
Private fairness investor FLEX Capital (based mostly out of Berlin) says it has now closed its second fund of €300 million with the purpose of successfully rolling up medium-sized German-speaking tech corporations and giving these merged entities higher international scale. This is an uncommon use of PE funds, and places FLEX into a barely totally different class to the typical PE outfit.
Investors embrace fund of funds, institutional buyers from Europe and the U.S. and the founders of some profitable European corporations, similar to Christoph Jost, Peter Waleczek, Felix Haas, Jan Becker, Andreas Etten and Dr. Robert Wuttke.
The alternative seems to be there. In the DACH area (comprised of Germany, Austria and Switzerland) there are estimated to be 11,000 medium-sized web and software program corporations that generate between €5-30 million in gross sales a 12 months.
Christoph Jost, managing accomplice of FLEX Capital, outlines their considering in an announcement: “In order to obtain the mandatory strengthening of our personal software program sector within the DACH area by innovation and progress, extra capital and know-how should circulation into profitable software program and tech corporations which can be already class leaders… The new fund will allow us to just do that when once more: to put money into excellent entrepreneurs and administration groups who’re in search of a reliable accomplice for the additional growth of their software program corporations.”
Since its basis in 2019, FLEX Capital has acquired 13 medium-sized software program corporations, together with Nitrado (multiplayer recreation internet hosting); ComX, a B2B gross sales enablement platform; EVEX group, for listening to care professionals and opticians; and OMS group, a software program group for output administration.
One of the backers of FLEX Capital is Felix Haas, greatest identified for co-founding Amiando and IDnow, in addition to being the co-organizer and host of Bits & Pretzels, Germany’s largest founders’ occasion.
Haas defined the FLEX technique extra totally to me: “We purchase 51%-100% of an organization. We will deal with the smaller software program startups (e.g. €15 million income, €3 million revenue), then mix them with two or three different opponents. Then could have a a lot bigger chief (for instance an organization with €100 million income and €20 million revenue). Then the businesses are large enough for both IPO or to be bought to the extra ‘regular’ non-public fairness corporations.”
If Haas is true, then German startups simply obtained a potential new exit alternative. And on this downward-leaning macro atmosphere, that may be no unhealthy factor, particularly if you’re a startup discovering it troublesome to elevate and are in search of the exit doorways.