In an innovative move set to reshape the European investment landscape, London-based Resurge Growth Partners has announced the launch of a €120 million “venture equity” fund aimed at supporting tech scale-ups that find themselves trapped in a growth limbo. This unique funding model targets companies that have outgrown traditional venture capital (VC) but have not yet reached the maturity required for private equity (PE) investment.

Resurge’s newly established fund is designed to fill the gap for what co-founder Oren Peleg terms "venture graduates." These are businesses that show significant potential yet struggle to secure funding due to mismatches between their growth trajectories and the criteria set by VC firms and PE investors. By acquiring substantial stakes in these companies, Resurge intends to provide not only capital but also operational expertise, thereby facilitating a transition to profitable, sustainable growth.

Bridging the Funding Gap

The venture equity model marks a notable evolution in investment strategies, recognizing the challenges faced by companies generating healthy revenues but falling short of the rapid growth expectations typically associated with venture capital funding. Nearly half of the capital for this initiative has already been committed from the firm’s founding general partners, including prominent family offices. Resurge aims to raise the remainder of its target through a selective approach involving additional family offices and high-net-worth individuals.

With a focus on acquiring stakes in high-potential companies across Europe and Israel, Resurge is particularly interested in those generating over €8 million in revenue. However, profitability is not a prerequisite for investment. “Many companies in our pipeline are currently loss-making, but we believe in their potential to become profitable with the right support,” Peleg stated. The firm plans to invest between €10 million and €25 million into these businesses, offering a lifeline to those trapped in a cycle of underwhelming growth.

A New Path for Scale-Ups

The Resurge strategy emphasizes operational control, aiming to help businesses shift away from reliance on ongoing fundraising and move towards a longer-term, profit-driven growth model. Co-founder Eyal Malinger articulated this vision, stating, “We’re targeting companies that may have the wrong cap table or those with misaligned investors. Our approach is to clean up their capital structure and enable them to unlock value from their businesses at an earlier stage.”

This venture equity model is particularly relevant in the current market climate, where many high-potential firms are facing difficulties securing necessary funding amid economic uncertainties. Peleg noted that in a bearish market, companies often find themselves unable to attract investment, while in bullish periods, they may grapple with complex capital tables that hinder growth. Resurge’s focus is on partnering with solid companies, regardless of external market conditions, to facilitate their path to success.

Embracing Technology in Investment

Resurge’s co-founders bring extensive experience to the table, having previously held senior roles at leading firms such as Oaktree Capital Management and Beringea. They are committed to leveraging advanced technology, particularly artificial intelligence, to enhance the efficiency and effectiveness of their investment strategies. Peleg highlighted how these AI tools enable the firm to make data-driven decisions, identify opportunities more quickly, and provide tailored support to their portfolio companies.

As the landscape of venture capital evolves, Resurge is positioning itself to capitalize on the emerging trend of venture equity. The firm’s focus on tech and tech-enabled businesses aligns with its mission to identify companies that have established product-market fit yet require additional resources to scale effectively.

Looking Ahead

With the potential for significant returns on investment, Resurge is set to explore a range of sectors but has indicated a preference for industries such as fintech, proptech, and consumer tech. These areas, once popular with investors, may be overlooked in favor of trending sectors like artificial intelligence and cybersecurity. By focusing on these markets, Resurge aims to uncover opportunities that others may have missed, fostering innovation in regions and industries that require renewed investment.

In conclusion, Resurge Growth Partners’ launch of its €120 million venture equity fund represents a strategic response to the challenges faced by scaling startups in Europe and Israel. By providing essential funding and expertise to companies that have outgrown the VC model, Resurge is committed to unlocking the potential of these firms, helping them transition to sustainable growth and profitability. As the investment landscape continues to evolve, Resurge’s innovative approach may well pave the way for a new era of funding that supports the future of high-potential businesses.