European startups always suffer from the constant startup problem: how to get off? However, in Europe, the problem has always been very serious. How many of Europe’s biggest industrial or corporate giants will get it or stay? Not that many, and not enough.
One of the reasons why many European startups are heading to the US is that the US is one of the few markets where they can reach a good level, and have the potential to sell or exit on international technology platforms. For public markets.
Now a new but slightly different German private equity fund hopes to solve the problem at least partially and at least in Germany, which will be its main focus.
Private investor FLEX Capital (Berlin-based) says it has closed a second fund of 300 million euros, aiming to effectively bring together medium-sized German-speaking technology companies and give these merged entities a larger global footprint. This is an unusual use case for PE funds, and puts FLEX in a slightly different category to the average PE outfit.
Investors include money funds, institutional investors from Europe and America and founders of some successful European companies, such as Christoph Jost, Peter Waleczek, Felix Haas, Jan Becker, Andreas Etten and Dr. Robert Wutke.
Chances are there. In the DACH region (which includes Germany, Austria, and Switzerland), there are an estimated 11,000 medium-sized Internet and software companies that generate annual sales of 5-30 million euros.
Christoph Jost, managing partner of FLEX Capital, expressed his opinion in a statement: “In the DACHA region, more capital and knowledge should be invested in successful software in order to get the necessary reinforcement for innovation and development of our own software sector.” Technology companies that are already category leaders… The new fund allows us to do the same again: to invest in outstanding entrepreneurs and management teams who are looking for a qualified partner for the further growth of their software company.
In the year 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; The EVEX team, audiologists and optometrists; and OMS Group, a software group for results management.
One of the backers of FLEX Capital is Felix Haas, known as the founder of Amiando and IDnow, as well as 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%-100% of a company. We focus on the smaller software startups (e.g. 15 million euros in revenue, 3 million euros in profit), and then pair them with two or three other competitors. Then it will have a very large leader (for example, a company with 100 million euros in revenue and 20 million euros in profits). The companies are then either good enough for an IPO or sold to more ‘regular’ private equity firms.
If Haas is right, the German upstarts have a new outlet. And in this downward-sloping macro environment, that might not be a bad thing, especially if you’re a startup struggling to scale up and looking for exit doors.
