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Why private equity is betting on startups
Private equity betting on startups, Vinted is Lithuania's first tech unicorn, and more...
SearchVentures
August 07, 2024
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The investors saving EU startups
Private equity firms have invested $4.5 billion in European startups so far this year. Despite this being an increase from 2023, fewer startups are receiving these investments.
Why are startups turning to private equity for funding?
This Week’s Trends
PE is taking over the startup market
A fashion startup worth $4.5 billion
UK fintech comeback and more
Read Time 4 minutes
The Startup Trend
European PE Investment Growth
Private equity firms invested $2.3 billion in VC-backed European startups in the second quarter of this year, the highest quarter by deal value since Q2 2022. Despite this, the deal count in the second quarter of 2024 was the lowest since late 2020 — indicating firms are spending more per deal on average.
“VCs are making sure their companies are maybe slowing growth a little bit and burning less; at which, the PE funds look and say, 'Oh, that company is starting to look like more my investment type'”
> 56% of European VCs haven’t returned capital to their LPs in the last 12 months, making them more open to receiving instant liquidity with a PE buyer.
> Exit options, like IPOs, are becoming less viable for startups, making selling to PE firms a better option.
💡 According to private investors, PE firms are opting for European startups with a 25% to 50% growth range that can be compounded sustainably while also driving cash flow.
Startup feature
How This Fashion Startup Scaled to $4.5 billion
CEO Thomas Plantenga
Vinted has become Lithuania's first tech unicorn, transforming from a struggling startup into Europe's largest online marketplace for second-hand fashion.
Founded in 2008 by Milda Mitkute and Justas Janauskas, Vinted began as a small platform for friends to swap clothes. Today, it has over 100 million users across 21 countries.
The Humble Beginnings
The idea for Vinted was born out of necessity. In 2008, Milda Mitkute was moving and had a wardrobe full of clothes she no longer needed. Teaming up with Justas Janauskas, they created a platform for friends to swap clothes.
In its early years, Vinted struggled to find a sustainable business model. It took 8 years until the founders were finally at the right time to scale in 2016. With an increasing trend towards sustainable fashion, they decided to change their business plan, eliminating seller fees and introducing a buyer protection fee. The founders had decided to focus on growth rather than profitability.
“When it was time to scale we realized that it was a game of cat and mouse. We needed to support the sellers first to attract buyers, and we needed buyers to get the sellers”
With this, Vinted implemented an aggressive marketing strategy while focusing all its attention on improving the user experience, finally raising the startup into popularity across Europe.
Raising Capital to Scale
Vinted's growing popularity in Europe attracted substantial investment; in 2019, the company raised €128 million, unlocking its unicorn status at a valuation of over €1 billion. With a core focus on growth, and expanding across European markets the founders raised another $303 million from private equity-backed investors in 2023, valuing Vinted at $4.5 billion.
Using Capital to Fuel Growth
The capital raised by Vinted was strategically used for several acquisitions, including the German second-hand platform Rebelle, and the Nordic fashion marketplace Trendsales. In addition, they also invested in their new service Vinted Go, a shipping service using lockers and parcel shops to streamline delivery and reduce carbon emissions.
Vinted's decision to make aggressive investments paid off whereby in 2023, the startup reported a 61% increase in revenue to €596.3 million while remaining profitable.
"Our performance in 2023 proved that we can deliver strong growth and lead a market with immense potential”
Looking Ahead
With over 100 million users across 21 countries, Vinted continues to explore new growth opportunities. The startup is now making significant investments in expanding new products like Vinted Go in France, Belgium, and the Netherlands, aiming to extend its luxury verification service to more markets.
"We’re not just changing how people shop; we’re making second-hand the first choice for fashion globally."
Headline News
This Week In Startups ✍️
Founders
> MYNE, a Berlin-based proptech startup raises €40 million to further scale co-ownership of premium vacation homes.
> Riverlane, a Cambridge-based quantum startup raises $75 million Series C for quantum error correction technology.
> Dcubed, a German spacetech supplier, has closed its Series A funding, which was 26% oversubscribed.
Investors & VCs
> Here are the 15 most active investors in Europe so far in 2024.
> UK fintech investment up nearly threefold to $7.3 billion in the first half of 2024 amid the global downturn.
> M&A deals among startups are on the rise due to interest rate cuts, disappearing runways and an increase in venture debt deals.
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Cheers,
Odin Lund & Hari Mohandas
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