Düsseldorf EQT wants to take advantage of the rating downgrades from well-known start-ups such as Klarna and Instacart. Now is the perfect time to get involved, in the opinion of partner at growth fund EQT Growth, Dominic Stein: “There are still deals out there and these are on better terms for investors.”
Some competitors are no longer as active. This means that there is much less money in the market than in the last two years.
The latest figures support Stein’s assessment. According to data provider Crunchbase, less venture capital flowed into start-ups in August than two years ago. According to Stein, this has a positive effect on the position of investors towards the start-up and the terms of the contract. “Companies are still good, the underlying trends like digitization hold true,” he said, explaining investor interest in EQT’s investment strategy.
In recent years, the few European investors who were able to participate in large rounds of funding have encountered well-known competitors from the United States and Asia in talks with start-ups.
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Among others, Japanese technology investors SoftBank – involved in GetYourGuide or CoachHub – and Tiger Global from London hit the headlines with investments in Berlin software company Contentful. According to EQT calculations, European investors were involved in only about 30 percent of all growth tours in Europe last year.
EQT invests 2 billion euros in start-up
Sweden wants to change that and be more involved. “We see an opportunity to create a stronger European Development Fund,” Stein says.
The Swedes, formerly known primarily for their private equity business, have closed their first development fund and managed assets worth 2.2 billion euros – more than the two billion euros originally targeted. EQT intends to use the capital for a total of about 20 investments in European start-ups and to provide between 50 and 200 million euros in each case.
Looking at the areas of enterprise, consumer Internet, healthcare and air conditioning, Stein says, “We are looking for companies that generate revenue, that are market leaders in their segments, already have many customers and a Good management team.” However, the scramble for these companies, which are expecting higher profits from the stake sale, is great.
Still, Stein is confident he’ll have a chance “as an active partner” with the right start-ups: “There are many European founders who appreciate the cultural closeness of European investors. This builds trust.” EQT Start -Up also takes a lot of time and knowledge about market penetration in other European countries helps.
no sales plans
Dutch payments service provider Molly and second-hand provider Vinted are among the smaller portfolios that have accumulated over the past year and a half. Stein says he helped Mollie find the head of Germany. A stake in Finnish food delivery service Vault, which passed into the hands of US industry leader DoorDash, has already been sold.
Now Stein doesn’t expect any more sales anytime soon. It will be bad timing right now: “This year is characterized by declining valuations and a focus on profitability. The crisis in Ukraine and the impending recession is making it worse.” Stein, however, isn’t worried: “We don’t want to sell anything at this point, we want to get involved.”
More: Venture capitalists are shutting down the money supply to tech start-ups