Sifted - Private equity is hungry for startups

Good morning there,

We spend a lot of time talking about VCs in this newsletter, but lately there’s another type of investor being discussed in startup circles: private equity. PE firms typically look to buy up more steady, lower-growth or traditional businesses, but their eyes are being drawn more to European tech startups. Today, my colleague Freya Pratty and I dig into the trend of PE firms snapping up VC-backed companies — and whether it’ll last.

Elsewhere:

• The most active investors in France 
• VC trolling: what is it good for?
• Gourmey submits the EU’s first-ever application to sell cultivated meat

— Anne Sraders, senior reporter

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Are private equity firms hungrier for startups?

In conversations with investors and lawyers in recent months, my colleague Freya Pratty and I have been hearing more about a certain type of investor encroaching on the startup world: private equity. VCs have told us they’re noticing more interest from PE firms in buying up startups, and there have been a few notable buyouts of VC-backed companies in recent months. But Freya and I wanted to know: is this a bigger trend, and, if so, why is it forming? 

Zoom out: a couple of things have happened since the downturn started a few years ago. VC firms encouraged their startups to buckle down and cut costs to get to profitability faster; the growth-at-all-costs mentality was out.

At the same time, the exit window — for example, IPOs — has been challenging. That’s created a pressure cooker where VC firms are desperate for liquidity so they can give money back to their investors, while for some startups a buyout from a PE firm may look more attractive than any other exit path right now.

Some growth-minded PE firms are “finding more and more [companies] that are hitting our sweet spot coming out of VC firms,” Jonathan Wulkan, director at British PE firm Hg, told us.

The data: PE firms bought up VC-backed European tech companies worth a combined $2.3bn in the second quarter of this year, the second quarter in a row that figure increased and the highest quarter by deal value since Q2 2022, according to data provided to Sifted by PitchBook. The last time deal value was on the up for two consecutive quarters was in 2021. That said, deal count was the lowest since late 2020, indicating there are bigger but fewer deals happening.   

And private equity firms aren’t looking for just any old startups. You can dig into the whole story here — including what bankers and investors say PE firms want and what they think might happen next. 

But I’m curious to hear from you, founders: Have you been having more conversations with private equity firms lately? Are you reaching out to them? And VCs, are your portfolio companies engaging in more conversations with PE firms? Are you encouraging those conversations? What are the valuations looking like? I’m all ears.

— Anne Sraders, senior reporter

🔬 French startup Gourmey has submitted the EU’s first ever regulatory application for the sale of cultivated meat. The foodtech, which makes a cultivated duck foie gras, has also got applications pending for its product in the UK, Switzerland, Singapore and the US. 

• The milestone application comes just weeks after UK startup Meatly became the first in the world to gain regulatory clearance in the UK for its cultivated chicken pet food product. 

Sifted reporter Sadia Nowshin is digging into foodtech regulation more broadly in the coming month. What could the Gourmey news mean for the cultivated meat sector in Europe? Are we about to see a raft of new products on our shelves? What are the bottlenecks still holding up foodtech regulation? Get in touch. 

📚 New listing rules come into force in the UK today. The changes — which have been put in place by the country’s financial regulator, the FCA — are a bid “to make the regime more attractive to a wider range of companies,” the FCA’s head of capital markets, Helen Boyd, told Sifted.

They include:

• Merging the ‘premium’ and ‘standard’ listing segments, which previously had different requirements to list;
• More flexibility around enhanced voting rights — such as dual-class shares, which give certain shareholders (such as founders) more voting sway than others. When Deliveroo IPO’d in 2021, and saw its share price swiftly plummet, many suggested that its poor performance was partly due to concerns public markets investors had around its dual-class share structure. “Dual-class shares are appropriate in some circumstances,” said Boyd. “It isn’t a model we think needs to be prevalent but we didn’t want to preclude it. It’s there so the founder-led industry feels like they have options on how they might structure their business.”  
• Removing listing requirements for historical financial information, a revenue track record or a clean working capital statement — although these will still be required by prospectus rules (which are set by legislation). 

Will it be enough to encourage tech companies to list in London? “It’s definitely only part of the puzzle,” said Boyd. “I do think more needs to be done — but that’s for the market and other bodies to decide.” What do you think, readers? Have European tech companies written off London as a listing location? Get in touch. 

🇫🇷 France’s most active pre-seed and seed investors.

🤝 How to work with government.

👀 Why making fun of VCs is good for (almost) everyone.

📣 Readers, we want to hear from you. What’s the best thing on European tech you’ve read recently? Drop us a line.

Call for entries: Europe’s leading startup hubs 2025

We’re inviting all business incubator and accelerator schemes to take part in the second year of our ranking with the FT & Statista. This ranking will celebrate how Europe is now competing with the US in backing a new generation of innovators. Want to get involved?

July 31 | Online. M&A is an exciting prospect for any startup. But as your business grows, so does your global workforce, potentially delaying a deal.  In our next Sifted Talks, panelists from Babbel, Deloitte, Herbert Smith Freehills LLP and Omnipresent will discuss the complexities of selling a scaling international business. RSVP.

August 21 | Online. Subscriptions 101: What you need to know. Want to turn one-time customers into lifelong advocates? Looking to boost your recurring revenue? The key could be subscriptions. Join us for our next free Sifted Talks to learn the ropes of a successful subscription strategy. RSVP.

September 4 | Online. Pond-skipping: How to navigate M&A in the UK & USA with ease. M&A remains a pivotal cornerstone for founders looking to successfully build and exit their businesses — so where do you begin? In this Sifted Talks, we're weighing up the key differences between the UK and USA markets to sketch out the many paths your business can take. RSVP.

London-based Fractile, which is developing chips to improve the performance of large language models, raised $15m in seed funding. Kindred Capital VC, NATO Innovation Fund and Oxford Science Enterprises led the round and were joined by investors including Inovia Capital and Cocoa.

Stockholm-based Greenely, an app that allows households to monitor their energy use, raised €8m in Series A funding. Korys led the round and was joined by investors including Luminar Ventures.

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

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