Emerging companies have historically been backed by venture capital funds, but as Europe’s startup scene matures, involvement by more traditional private equity investors is growing, particularly in the tech, consumer, and digital health sectors. The number of PE investments in emerging companies has increased year on year, with investments in companies such as Wolt, Moonbug Entertainment, Zwift, Klarna, Epic Games, and Oatly demonstrating the range of opportunities available to PE sponsors in this space. While PE investors are increasingly familiar with VC deal dynamics, they are also pushing to align growth-deal terms more closely with traditional buyout concepts.
Relinquishing Control
Investors typically invest in a growth company as a minority investor at the top of a stack of existing institutional investors, meaning they are unable to exert the level of control usually seen in buyout deals. One board seat and a limited set of reserved matters are likely to be the limits of their influence. Alignment with fellow investors is therefore an important dynamic, and something that we are seeing deal teams consider at the outset of the transaction.
