European startups have always suffered from persistent startup problems. But in Europe, this problem has always been especially acute. How many big or big companies in Europe are buying or buying? Not so many, hardly enough.
This is one of the reasons many European startups end up heading to the US. The U.S. is one of the few markets that can achieve decent scale, and may exit through one of the global tech platforms or a sale to the public market.
A new, but slightly different German private equity fund hopes to solve at least part of the problem, and that will be its main focus, at least in Germany.
Private equity investor FLEX Capital (based in Berlin) has effectively wound up medium-sized German-speaking technology companies, with the aim of expanding the global scale of these combined companies with the It said it had closed its second fund of €100 million. This is an unusual use of his PE funds and puts FLEX in a slightly different category than your average PE.
Investors include Funds of Funds, European and American institutional investors, and successful European companies such as Christoph Joest, Peter Waleczek, Felix Haas, Jan Becker, Andreas Etten and Dr. Robert Wuttke. Founder included.
Opportunity seems to be there. The DACH region (composed of Germany, Austria and Switzerland) is estimated to have 11,000 medium-sized Internet and software companies generating annual sales of €5 to €30 million.
FLEX Capital Managing Partner Christoph Jost outlined their thinking in a statement. Companies that are already category leaders… The new fund will enable them to invest in outstanding entrepreneurs and management teams looking for qualified partners for the further development of their software companies. ”
Since its founding in 2019, FLEX Capital has acquired 13 mid-sized software companies, including Nitrado (multiplayer game hosting). ComX, a B2B sales enablement platform. For EVEX Group, hearing care professionals and opticians. OMS group, a software group for output management.
One of FLEX Capital’s backers is Felix Haas. Felix Haas is co-founder of Amiando and IDnow, and co-organizer and organizer of Bits & Pretzels, Germany’s largest event for entrepreneurs.
Haas elaborated on their FLEX strategy. Focuses on small software startups (e.g. €15m in revenue, €3m in profit) combined with a couple of his other competitors. Then comes the much larger leader (say, a company with €100 million in revenue and he has €20 million in profit). That way the company will be big enough to either do his IPO or sell to a more ‘normal’ private his equity firm. ”
If Haas is right, German startups have another exit opportunity. And in this downtrend macro environment, that’s not a bad thing. Especially for startups that find funding difficult and are looking for an exit door.