A brand new form of PE fund plans to roll-up German startups into potential unicorns and larger exits • TechCrunch

European startups have all the time suffered from the perennial startup downside: methods to exit? Nevertheless, in Europe the issue has all the time been significantly acute. What number of massive 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 may obtain respectable scale, as nicely has have the potential to exit both trough a sale to one of many international tech platforms, or to the general public markets.
Now a brand new, however barely completely different, German Non-public Fairness fund hopes to resolve at the least a part of the issue, and at the least in Germany, which will likely be its predominant focus.
Non-public fairness investor FLEX Capital (primarily based out of Berlin) says it has now closed its second fund of €300 million with the goal of successfully rolling-up medium-sized German- talking tech firms and giving these merged entities larger international scale. That is an uncommon use of PE funds, and places FLEX right into a barely completely different class to the common PE outfit.
Traders contains fund of funds, institutional traders from Europe and the USA, and the founders of some profitable European firms, comparable to 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 firms that generate between €5-30 million in gross sales a 12 months.
Christoph Jost, Managing Associate of FLEX Capital outlines their pondering in an announcement: “So as to obtain the mandatory strengthening of our personal software program sector within the DACH area by means of innovation and development, extra capital and know-how should stream into profitable software program and tech firms which might be already class leaders… The brand new fund will allow us to do exactly that when once more: to spend money on excellent entrepreneurs and administration groups who’re in search of a reliable accomplice for the additional improvement of their software program firms.”
Since its basis in 2019, FLEX Capital has acquired 13 medium-sized software program firms, 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, finest 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 absolutely to me: “We purchase 51%-100% of an organization. We’ll give attention to the smaller software program startups (e.g. €15m income, €3m revenue), then mix them with two or three different opponents. Then can 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 offered to the extra “regular” non-public fairness corporations.”
If Haas is correct, then German startups simply obtained a possible new exit alternative. And on this downward-leaning Macro atmosphere, that may be no dangerous factor, particularly in case you are a startup discovering it tough to boost and are in search of the exit doorways.