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Adjustments as an opportunity

Adjusting, downsizing, tweaking. The new normal in the startup and venture capital scene is particularly evident in company valuations. The most recent example was Stripe, which raised $6.5 billion at the end of March, nearly halving its valuation to $50 billion.

Startups and growth companies around the world have been making such moves for months, and they are painful for everyone involved: the founders and employees of the companies, but also for their investors, who invested at much higher valuations in the past and now have to adjust their values.

At the same time, the new circumstances open up new opportunities – for example, for mergers and acquisitions within the industry. According to the European Venture Report published by PitchBook, almost one in three of the 198 exits in the first quarter was an acquisition.

There is no denying that the bulk of sales will likely continue to go to corporations and strategists, but the opportunities for startups with enough of a financial cushion and/or access to fresh capital are real. If you extrapolate the number of European exits to the whole year, the result of 792 is even higher than the pre-Covid boom of 2019 (741). However, the volume is down by more than two-thirds, from €17.5 billion to €6.6 billion.

The latest example of an acquisition within the industry is the Heliad portfolio company Razor Group, which acquired its competitor Stryze Group in mid-April in an all-share deal. As part of the deal, the e-commerce roll-up provider also raised a Series C with a total volume of €80 million.

The transition to the new normal is by no means subject to entertainment tax. But venture capitalists can add real value with their valuation expertise, especially when it comes to acquisitions of their portfolio companies. And in doing so, they can ease their way back to growth and expansion after the painful process of adjusting, downsizing, and tweaking.

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