EQT was previously known primarily for private equity, but now also invests in start-ups with a fund.
(Photo: IMAGO/MASKOT)
Dusseldorf EQT wants to take advantage of the downturn in ratings from well-known start-ups such as Klarna and Instacart. In the opinion of the partner at the growth fund EQT Growth, Dominik Stein, now is exactly the right time to get involved: “There are still deals and these on better terms for investors.”
Some competitors are no longer as active. This means that there is much less money in the market compared to the past two years.
The latest figures support Stein’s assessment. According to the data provider Crunchbase, less venture capital flowed into start-ups in August than it was two years ago. According to Stein, this has a positive effect on the position of investors towards start-ups and the contract conditions. “The companies are still good, the underlying trends such as digitization are right,” he said, explaining the investor interest in EQT’s investment strategy.
In recent years, the few European investors who were able to get involved in large rounds of financing have encountered well-known competitors from the USA and Asia in negotiations with start-ups.
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Among others, the Japanese technology investor Softbank – involved in GetYourGuide or Coachhub – and Tiger Global from London with investments such as in the Berlin software company Contentful dominated the headlines. According to EQT calculations, European investors were only involved in around 30 percent of all growth rounds in Europe last year.
EQT invests two billion euros in start-ups
The Swedes want to change that and get more involved. “We see an opportunity to build a strong European growth fund,” says Stein.
The Swedes, previously known primarily for their private equity business, have closed their first growth fund and have managed assets of 2.2 billion euros – more than the originally targeted two billion euros. EQT wants to use the capital for a total of around 20 investments in European start-ups and provide between 50 and 200 million euros in each case.
Partner at the growth fund EQT Growth, Dominik Stein.
(Photo: EQT)
“We are looking for companies that generate revenue, are market leaders in their segment, already have many customers and a good management team,” says Stein, looking at the areas of enterprise, consumer internet, healthcare and air conditioning. However, the scramble for these companies, which are hoping for high profits from the sale of the stake, is great.
Nevertheless, Stein is convinced that he will get a chance “as an active partner” with the right start-ups: “There are many European founders who appreciate the cultural proximity of European investors. That creates trust.” EQT also takes a lot of time for the start-ups and helps with knowledge about market entry in other European countries.
No sales planned
The small portfolio accumulated over the past year and a half includes the Dutch payment service provider Mollie and the second-hand provider Vinted. Stein says they helped Mollie find the head of Germany. The stake in the Finnish food delivery service Wolt, which went into the hands of the US industry leader DoorDash, has already been sold.
Now Stein doesn’t expect further sales any time soon. That would be bad timing right now: “This year is characterized by declining valuations and a focus on profitability. The crisis in Ukraine and the looming recession are making this even worse.” Stein isn’t worried though: “We don’t want to sell anything at the moment, we want to get involved.”
More: Venture capitalists are turning off the money supply to tech start-ups