New breed of private equity fund plans to turn German startups into potential unicorns and bigger exits – TechCrunch
European startups have always suffered from the age-old startup problem: how to exit? However, in Europe the problem has always been particularly acute. How many major European industrial or commercial giants are acquiring or hiring? Not that much and not enough.
This is part of the reason why so many European startups end up heading to the US. The US, one of the few markets where you can achieve decent scale, also has the potential to exit either through a sale to one of the global tech platforms or through public markets.
Now a new, but slightly different German private equity fund hopes to solve at least part of the problem, and at least in Germany, which will be its main focus.
Private equity investor FLEX Capital (based in Berlin) said it has closed its second €300 million fund with the aim of effectively bringing together mid-sized German-speaking technology companies and giving these merged entities greater global scale. This is an unusual use of private equity funds and puts FLEX in a slightly different category than average private equity equipment.
Investors include funds of funds, institutional investors from Europe and the United States and the founders of some successful European companies, such as Christoph Jost, Peter Waleczek, Felix Haas, Jan Becker, Andreas Etten and Dr. Robert Wutke.
The opportunity seems to be there. In the DACH region (composed of Germany, Austria and Switzerland), there are an estimated 11,000 medium-sized Internet and software companies that generate between 5 and 30 million euros in turnover per year.
Christoph Jost, Managing Partner of FLEX Capital, sets out his thinking in a statement: “In order to achieve the necessary strengthening of our own software sector in the DACH region through innovation and growth, more capital and know-how must be invested in high-performance software and technologies. companies that are already leaders in their category… The new fund will allow us to do exactly that once again: invest in exceptional entrepreneurs and management teams who are looking for a competent partner for the future development of their software companies.
Since its inception in 2019, FLEX Capital has acquired thirteen mid-market software companies, including Nitrado (multiplayer game hosting); ComX, a B2B sales support platform; the EVEX group, for audioprosthetists and opticians; an OMS group, an output management software group.
One of FLEX Capital’s backers is Felix Haas, best known for co-founding Amiando and IDnow, as well as being the co-organizer and host of Bits & Pretzels, Germany’s largest founders event.
Haas explained the FLEX strategy to me in more detail: “We buy 51% to 100% of a company. We’ll focus on smaller software startups (eg, $15 million in revenue, $3 million in profit) and then combine them with two or three other competitors. Then there will be a much larger leader (for example a company with a turnover of 100 million euros and a profit of 20 million euros). Then the companies are big enough to go public or sell to more “normal” private equity firms.
If Haas is right, German startups have just had a potential new exit opportunity. And in this downward-sloping macro environment, that can’t be a bad thing, especially if you’re a struggling startup looking for exit doors.