German VC Fund Equation Acquires Betterfront Technologies

German fund of funds, Equation, announced its acquisition of VC fundraising software startup, Betterfront Technologies. Both companies, based in Munich, have not disclosed the details of the acquisition.

Equation supports emerging European VC managers, while Betterfront digitises the VC fundraising process, supporting managers to share documents and track record analytics with potential Limited Partners (LPs). Betterfront has also developed a marketplace for the sale of stakes in VC funds, known as secondaries.

Equation’s Interest in Betterfront’s Secondary Market

Equation’s managing partner, Mark Schmitz, stated the firm’s interest in Betterfront’s secondary market. Schmitz believes Betterfront’s track record visualisation and data room are essential to making fundraising more efficient for General Partners (GPs) and LPs.

Schmitz, referring to his time as a VC investor at Lakestar, and Betterfront founder Michel Geolier’s time working on the LP side at Siemens-backed Next47, explained the struggle of VC managers to convince investors to back their funds. He believes the entire process can be more efficient through the use of data and smart platforms.

Equation plans to use the secondary marketplace and the managers the firm supports will have the option to use Betterfront’s services. However, managers can also choose not to use it. Equation will not have any special rights as a buyer of secondaries through the platform.

Consolidation in German VC Ecosystem

The acquisition comes in the wake of German early-stage investor La Famiglia partnering with US VC heavyweight General Catalyst. In a tight fundraising environment, consolidation can provide venture investors with an edge over others in the ecosystem.

Demand for Secondaries Amid Few Exits

Schmitz noted the importance of facilitating secondary transactions, particularly at a time when VC managers are struggling to return cash to their LPs due to a lack of exits. The market for secondary stakes in VC funds has remained relatively small and opaque in Europe.

In the current market environment, where VCs face challenges returning cash to LPs, Schmitz believes it is difficult for LPs to recommit to a VC firm. He further explained that while large VC funds can easily find a new home for a stake, there is a significant number of secondary opportunities that are currently unserved. These include smaller stakes held by angels or at smaller funds.

Equation has already completed two secondary transactions, one in a B2B software fund and one in a deeptech fund, facilitated by existing relationships. The goal is to enable more people to discover interesting secondary opportunities and improve the precision of the matchmaking over time.

What’s Next?

As part of the transaction, Betterfront’s Geolier will take the title of VP of business development at Equation, while also heading up Betterfront. Equation has so far backed 19 funds, including Possible Ventures and Visionaries Club, and typically invests no less than €2m per fund. Betterfront customers include Cherry Ventures and Partech Partners.