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European startups have at all times suffered from the perennial startup drawback: the way to exit? Nonetheless, in Europe the issue has at all times been significantly acute. What number of giant European industrial or company giants purchase or acqu-hire? Not that many and never practically sufficient.
It’s a part of the explanation so many European startups find yourself heading to the US. The US one of many few markets the place you possibly can obtain respectable scale, as nicely has have the potential to exit both trough a sale to one of many world tech platforms, or to the general public markets.
Now a brand new, however barely totally different, German Non-public Fairness fund hopes to resolve not less than a part of the issue, and not less than in Germany, which might be its primary focus.
Non-public 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- talking tech corporations and giving these merged entities higher world scale. That is an uncommon use of PE funds, and places FLEX right into a barely totally different class to the typical PE outfit.
Buyers consists of fund of funds, institutional buyers from Europe and the USA, and the founders of some profitable European corporations, reminiscent of Christoph Jost, Peter Waleczek, Felix Haas, Jan Becker, Andreas Etten and Dr. Robert Wutke.
The chance seems to be there. Within 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 yr.
Christoph Jost, Managing Companion of FLEX Capital outlines their considering in an announcement: “In an effort to obtain the required strengthening of our personal software program sector within the DACH area by innovation and progress, extra capital and know-how should movement into profitable software program and tech corporations which are already class leaders… The brand new fund will allow us to just do that when once more: to put money into excellent entrepreneurs and administration groups who’re searching for a reliable associate 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; an OMS group, a software program group for output administration.
One of many backers of FLEX Capital is Felix Haas, greatest recognized 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 are going to give attention to the smaller software program startups (e.g. €15m income, €3m revenue), then mix them with two or three different rivals. Then could have a a lot greater chief (for instance an organization with €100m income and €20m revenue). Then the businesses are large enough for both IPO or to be bought to the extra “regular” personal fairness corporations.”
If Haas is correct, then German startups simply received a possible new exit alternative. And on this downward-leaning Macro atmosphere, that may be no unhealthy factor, particularly in case you are a startup discovering it troublesome to lift and are searching for the exit doorways.
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