“Too many startups are getting trapped on the VC treadmill and then, all of a sudden, find themselves either falling off the end or become too exhausted to keep running.”
Eyal Malinger’s 25-year career began as a software engineer but he has since seen many companies come and go as an experienced investor and board member.
A former partner at Beringea and former vice president at Oaktree Capital, he has sat on the boards of many promising UK startups, including Lantum, Simplestream, Poq and CGHero. He also currently sits on the board of London & Partners, the growth agency for the UK capital.
Now managing partner at Resurge Growth Partners, Malinger is pioneering a new model for scaling tech businesses with Oren Peleg, former managing director of Oaktree Capital Management and former CEO of international gym chain Fitness First.
Coined as ‘venture equity’, Resurge is creating a “new blueprint for brilliant companies that no longer fit the VC model but aren’t yet ready for traditional private equity”, says Malinger (pictured, left, with Peleg, centre, and Matt Jarmolkiewicz, the firm’s VP for private equity).
“We want to offer British companies a new pathway to success and sustainability,” Malinger tells BusinessCloud after announcing a €120 million vehicle to back tech scaleups in Europe and Israel.
“In the UK, we have a thriving startup scene, but a huge number of high-potential companies don’t make it through to the growth phase. The low number of unicorns and exits we see emerging from the British tech sector is testament to this, particularly in comparison to the US.
“Our team is very excited about the UK market – it will form a core part of our strategy and we believe we can make a real impact here.”
He adds: “Myself and the team have backed, grown and led British businesses, so we know just how deep the talent pool is here and how much promise the market holds. In fact, we’ve just offered one of our first term sheets to a UK company.”
The €120m vehicle will be used to back high-potential businesses over the next three years, with nearly half of the capital already committed from the founding GPs and a leading family office. The remaining funds are sourced from a select group of family offices and high-net worth individuals who are committing capital on a deal-specific basis.
It is targeting firms with more than €8m in revenue through buyouts, recapitalisations or strategic partnerships with existing investors and lenders. It says this approach provides founders with an opportunity to unlock value from their businesses at an early stage, clean up their cap table, free them from an endless cycle of fundraising, and transition to a longer-term, profit-focused growth strategy that works for the company and its team.
Peleg adds: “There’s a huge gulf between the types of companies a VC will back and those who are ready for private equity. The market isn’t currently serving these ‘venture graduates’ and they are hitting a wall.
“We take leading positions in these companies and then dedicate a huge amount of time and energy into unlocking their potential, with the goal of becoming profitable and self-sustaining. Our approach gets them off the VC fundraising merry-go-round and onto solid ground.”
Malinger concludes: “When the market turns bearish, many high-potential companies find themselves stranded, unable to secure the funding they need. Conversely, in times of abundant capital, founders often end up with a convoluted cap table that hinders long-term success.
“We partner with ‘good companies who have the wrong cap table’; businesses with strong fundamentals but misaligned investor base or ones with an operational model that no longer appeals to existing investors.
“There’s huge potential here, both for the companies and the investors willing to back them in the right way.”
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