Sifted - The year of European secondaries?

Good morning there,

Last week I wrote about what I think is the biggest problem VCs and founders are grappling with in 2024: the lack of exits. It’s a big conundrum for investors who need to return cash to their limited partners (LPs), and for founders and employees who may be itching to make some money off of those company shares. Enter: the secondaries market.

VCs are increasingly looking to capitalise on what could be a booming secondaries market this year — where investors, employees and founders buy and sell existing stakes in a private company. Today I dig more into the trend and why secondaries could finally be catching on in a big way in Europe.

Elsewhere, we take a look at the most active Gulf investors in Europe, layoffs at Seedrs and the rise of downrounds in Europe last year. 

— Anne Sraders, senior reporter

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Why 2024 could be the year of European secondaries

Take one look at the market and it’s clear 2024 should be prime time for secondaries — where investors, employees or founders buy and sell existing stakes in a private company. 

It’s become a big market in the US, where numerous platforms, funds and strategies have emerged in recent years to facilitate equity holders wanting to cash out — be it VCs wanting to sell an entire stake in underperforming companies (or just get a little liquidity) or employees looking to make some money from their stock. But, historically Europe has been a bit behind the trend — last summer, Sifted reported secondaries were a bit sluggish as founders and VCs clashed on pricing. That appears to be changing, and investors tell me it could be a hotter space this year.

We’re seeing US firms raise billions to invest in secondaries, and some European specialist firms have also been raising secondaries funds in recent years. Yesterday, London-based firm Launchbay Capital announced it closed $25m of a target $100m new fund to invest in secondaries in growth companies. 

Alan Vaksman, Launchbay’s founding partner, tells me it’s planning to invest about 40% of the fund in companies outside of the US, with the biggest chunk of that being in Europe. “We've seen the demand for shorter investment [times] in growth, and we've also seen a demand for more active management” of portfolios instead of “sitting and waiting,” Vaksman says. As he also notes, the trend of companies staying private longer (the public listing, after all, has been boarded up) means growth investors can no longer bet on late-stage companies with the expectation that they’ll go public in the near future.

But it’s not just Vaksman’s wishful thinking. It looks like 2024 is shaping up to be a big year for secondaries in Europe. One managing partner at a US-based secondaries-focused VC firm tells me they have been in discussions with European firms and companies to buy stakes, adding that there is a “disproportionate amount of secondary activity in Europe compared to the relative number of firms and companies in each region.” They even told me that they’ve seen a European fund hire a “Head of DPI” (referring to distributions to LPs) — which “speaks to firms increasingly viewing secondaries as a viable option to get liquidity for their LPs”. 

Others, like Glen Anderson, CEO of US-based Rainmaker Securities, which facilitates secondaries transactions for private companies, tell me that overall “investor interest in the late-stage private stock market has increased substantially over the past six months”. 

Of course, it all makes sense — especially when you consider how desperate VCs are for exits right about now. As I recently discussed, exit value in Europe was down more than 70% in 2023. But naturally it all still hinges on what prices founders and VCs are willing to pay for that liquidity. 

I’m curious: do you think we’ll see more secondaries this year? If you’re a founder, are you planning to sell any shares? And if you’re a VC, have you been in discussions to sell any (or part of) your stakes this year? Do you know who else is raising a fund for secondaries? Send me a line.

— Anne Sraders, senior reporter

💰 The UK’s Smedvig Ventures has raised a new €115m fund to back B2B startups. While it’s the Smedvig family office’s first venture-specific fund, Smedvig Capital has been in the VC game since launching as a PE and fund backer in the late 90s, and has deployed €50m into startups over the past two years.

• Smedvig will write initial tickets of €4-8m, leading or co-leading rounds into startups which have found product-market fit and are looking to scale — 30-40% of the fund will be reserved for follow-on deals.

🇩🇪 Berlin-based graphic design software startup Kittl has raised $36m in Series B funding led by US fund IVP. The company is trying to bring together all of the elements that make up a “broken workflow” for graphic designers into one tool. 

• It has now raised $50m to date since being founded in 2020, from investors including Left Lane Capital and Speedinvest. It counts organisations like Warner Bros, Netflix and Penguin Random House among its clients. 

😬 Seedrs has laid off 15% of its European workforce following “challenging market conditions”. As part of the restructuring, the crowdfunding platform, which was acquired by US-based investment platform Republic in 2021, will leave the Spanish and Swedish markets, which it entered last year.

• “We expect to see sustainable growth as a result of this course of action,” a Seedrs spokesperson tells Sifted.

📉 VNV Global has decreased the value of its shares in micromobility startup Voi by 9% since the end of the third quarter last year, according to its latest financial report.

💰 The most active Gulf investors in Europe.

🤔 What European executives really think about GenAI. (Sponsored by BCG X).

Startups in Europe were more than twice as likely to raise a downround in 2023 compared to their fellow startups in the US, according to a new report from equity management platform Ledgy, which surveyed 2,500 companies across 10 markets. 

• Nearly 22% of all funding rounds in Europe in 2023 were downrounds — meaning startups raised new capital at a lower valuation than the company’s previous round — compared to about 9% for US startups, according to the report.  
• That may be in part because US companies raised a larger portion of funds during the booming times of 2021 and 2022, and therefore may have had more cash in the bank than European companies, the Ledgy report suggests. 
• More than a quarter of all the funding rounds in Germany, the Netherlands and Finland were downrounds in 2023, according to the report; startups in Switzerland and Denmark fared better, with only 12% and 14% of rounds raised at a lower valuation than their prior fundings, respectively.

🛍 Today at 12pm GMT, Sadia Nowshin will be joined by Stripe’s Fanny Talagrand, Synthesia’s Steffen Tjerrild, Creandum’s Lars Nordwall and eMed's Oliver Mayes to dive into the latest strategies, tools and frameworks startups are using to drive profitable growth. RSVP.

🌳 Come along to our climate tech pitch event. Join us virtually on January 30 to hear from Nossa Data, HeyCharge, Blykalla and ReBlade, early-stage startups in VCs’ new favourite vertical: climate tech. RSVP.

💼 On January 31, Tim Smith will be joined by Notion’s Robbie O’Connor, Index Ventures’ Paula Garcia Domingo, Figma’s Siobhan O’Reilly and Octopus Energy’s Ashley Firth to find out how founders can understand, engage and empower Gen Z workers to fuel the next growth phase of their startup. RSVP.

Stuttgart, Germany-based Instagrid, which manufactures portable batteries, raised $95m in Series C funding. Teachers’ Venture Growth led the round and was joined by investors including Morgan Stanley Investment Management, Energy Impact Partners, SET Ventures, blueworld.group and High-Tech Gründerfonds.

Copenhagen-based Monta, an operating platform for EV charging for participants like EV drivers and manufacturers, raised €80m in Series B funding. Energize Capital, GreenPoint Partners and the Export and Investment Fund of Denmark led the round and were joined by investors including Headline, byFounders, AENU, Creandum and Quantum Light.

Berlin-based Qdrant, a vector database for AI applications, raised $28m in Series A funding. Spark Capital led the round and was joined by investors including Unusual Ventures and 42CAP.

Berlin-based Morressier, which provides tools for scholarly research publishers to verify, protect and publish their work, raised $16.5m in Series B funding. Molten Ventures led the round and was joined by investors including Redalpine, Owl Ventures and Cherry Ventures.

Cambridge, UK-based Sano Genetics, a platform for precision medicine clinical trials, raised $11.4m in funding. Plural led the round and was joined by investors including MMC Ventures, Episode 1 and Seedcamp.

Paris-based ALDORIA (formerly Share My Space), which monitors space situational awareness data to protect critical assets in space, raised €10m in Series A funding. Startquest Capital led the round and was joined by investors including the European Innovation Council Fund, Bpifrance, Expansion Ventures, Space Founders France and Wind Capital.

Paris-based Beedeez, a mobile training platform for employees, raised €8m in funding. Arkéa Capital led the round and was joined by investors including Wille Finance family office and SWEN Capital Partners.

Helsingborg, Sweden-based Acorai, which is developing a non-invasive device for heart failure management, raised $4.5m in seed funding. Solardis Health Ventures led the round and was joined by investors including KHP Ventures and Carma Fund.

Stockholm-based Qvalia, a platform for businesses to manage transactions like invoices, raised €4m in funding. Stella Capital led the round and was joined by Spiltan Invest.

If you’d like to submit a deal, get in touch. 

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