It is no coincidence that primary and secondary venture investor TempoCap has been involved in five of the top 15 largest all-cash acquisitions of venture-backed technology companies in Europe since 2020.
“The view is that if you’re doing secondaries you’re just buying the assets that people don’t want, but that’s not true,” firm founder and managing partner Olav Ostin tells Venture Capital Journal. “There’s always a good reason why people want a bit of liquidity from good businesses, so what we said is, ‘Lets be good tech investors first,’ and that’s why we have so many exits.
“We can do a bit of primary when we like the companies, and if you’re a primary investor then suddenly you’re part of the ecosystem and entrepreneurs are happy to have you if you have a good reputation and you value-add.”
TempoCap, which closed on $135 million for TempoCap Growth Opportunities II earlier this year, is one of more than two dozen firms VCJ has identified as active dealmakers in venture secondaries. (See our Guide to VC Secondaries Buyers.) Secondaries firms have become an integral part of the ecosystem as traditional exits through IPOs and M&A have been muted for the past couple of years.
How it started
Based in London, TempoCap was founded as Tempo Capital Partners in 2006 to acquire portfolios and single technology growth companies based in Europe. It was then folded into the DFJ Network in 2012 to continue the strategy for DFJ, before spinning out as a standalone firm in 2016. Since that time, it has amassed an AUM of $270 million.
Ostin tells VCJ that the strategy hasn’t changed much since he started the first iteration of the firm nearly 20 years ago.
“We invest in secondary tech only, and we do direct secondaries, investing directly into the companies,” he says. “We don’t buy LP positions. We buy shares in very promising tech companies in Europe, mainly cybersecurity, fintech, cloud, and mainly in the UK, France and the DACH region which is Germany, Switzerland and Austria.”
The strategy has served TempoCap well, based on the exits it has notched. Its two largest exits so far are the $1.6 billion acquisition of mobile marketplace Depop by Etsy in 2021 and the $924 million acquisition of foreign exchange payments platform Currencycloud by Visa in 2021. The deals rank as the second and sixth highest-value all-cash acquisitions in Europe since 2020, according to data TempoCap shared with VCJ.
The firm first invested in Depop in 2018 via a $17.8 million Series B round, then did three rounds of secondary share acquisitions and another primary round in 2020. Depop’s sale generated a “10X return in three and a half years,” including “fantastic multiples on all the secondaries we did along the way,” Ostin says.
Currencycloud was a different story, with TempoCap declining to invest in “a couple” of its primary rounds because it thought the valuation was too high. It later acquired a stake in Currencycloud as part of its purchase of a portfolio of tech companies from Japanese technology conglomerate Rakuten in 2020.
“We bought that portfolio around Currencycloud,” Ostin tells VCJ. “We knew it was a very good price, and then six months before it was sold we did another secondary purchase. It was a champagne deal… We got a 296 percent IRR, which is insane.”
“Currencycloud was a champagne deal… We got a 296 percent IRR, which is insane.”
Olav Ostin, TempoCap
Other sizable exits for TempCap include the $650 million acquisition of identity verification platform Onfido by Entrust and the $500 million acquisition of counter-drone technology platform operator Dedrone by Axon, both of which happened this year, and the acquisition of HR software company TalentSoft by Cegid for an undisclosed amount in 2021.
TempoCap has also benefited from a number of smaller exits. “In Europe most of the deals are between $100 million and $300 million, so we’ve had quite a lot of other exits,” Ostin tells VCJ. “In Europe probably 90 percent of VCs never see a carry check in their entire life, so in this way we’ve been lucky enough to generate some carry.”
Importance of patience
TempoCap primarily invests in direct secondaries because it can take as much time as it wants to do its due diligence without the deadline of a primary round closing. Ostin tells VCJ that he and his team evaluated Depop for nine months before making their first investment through the secondary market.
The firm will acquire whole portfolios of technology assets, as it did with the portfolio that included Currencycloud, but Ostin says it only does that in specific instances.
“Portfolios are very different,” he explains. “If you start from scratch it’s tough, so most of the portfolios we do, we know the assets already. Because we have this single-asset strategy, sometimes some of the companies in the portfolio have already gone through our investment committee, which makes it much easier.”
Ostin notes that European LPs have historically complained about a lack of DPI from venture, long before the liquidity dearth of the past few years, and that was the driving force behind TempCap’s pursuing a secondary strategy in technology companies. The majority of his firm’s LPs are from France, Switzerland, England and Germany, all of them being institutional investors with no corporate LPs, Ostin says. He declined to reveal names.
TempoCap primarily sources its secondary deals from corporate venture capital arms, which Ostin says got too greedy during the market highs in 2021.
“In 2014 CVCs invested something like $18bn in venture tech, in 2021 it was 10 times more,” he tells VCJ. “People say the VCs went mad, but it’s really the corporates that went mad. Now they have a huge legacy of investments and now they’re all thinking ‘what are we going to do with these companies?’ The ones that don’t have a core business in tech are asking themselves what to do. I would say 80 percent of our dealflow comes from corporates.”
Ostin says his firm’s name is a nod to the importance of timing. “Timing matters when finding deals, but you also need to have different strategies for different times,” he explains. “If you operate now like in 2021, you’re just going to get killed. Timing is everything and our investors say they want money quickly, and that’s also a timing issue. The whole thing really revolves around the tempo.”
It is no coincidence that primary and secondary venture investor TempoCap has been involved in five of the top 15 largest all-cash acquisitions of venture-backed technology companies in Europe since 2020.
“The view is that if you’re doing secondaries you’re just buying the assets that people don’t want, but that’s not true,” firm founder and managing partner Olav Ostin tells Venture Capital Journal. “There’s always a good reason why people want a bit of liquidity from good businesses, so what we said is, ‘Lets be good tech investors first,’ and that’s why we have so many exits.
“We can do a bit of primary when we like the companies, and if you’re a primary investor then suddenly you’re part of the ecosystem and entrepreneurs are happy to have you if you have a good reputation and you value-add.”
TempoCap, which closed on $135 million for TempoCap Growth Opportunities II earlier this year, is one of more than two dozen firms VCJ has identified as active dealmakers in venture secondaries. (See our Guide to VC Secondaries Buyers.) Secondaries firms have become an integral part of the ecosystem as traditional exits through IPOs and M&A have been muted for the past couple of years.
How it started
Based in London, TempoCap was founded as Tempo Capital Partners in 2006 to acquire portfolios and single technology growth companies based in Europe. It was then folded into the DFJ Network in 2012 to continue the strategy for DFJ, before spinning out as a standalone firm in 2016. Since that time, it has amassed an AUM of $270 million.
Ostin tells VCJ that the strategy hasn’t changed much since he started the first iteration of the firm nearly 20 years ago.
“We invest in secondary tech only, and we do direct secondaries, investing directly into the companies,” he says. “We don’t buy LP positions. We buy shares in very promising tech companies in Europe, mainly cybersecurity, fintech, cloud, and mainly in the UK, France and the DACH region which is Germany, Switzerland and Austria.”
The strategy has served TempoCap well, based on the exits it has notched. Its two largest exits so far are the $1.6 billion acquisition of mobile marketplace Depop by Etsy in 2021 and the $924 million acquisition of foreign exchange payments platform Currencycloud by Visa in 2021. The deals rank as the second and sixth highest-value all-cash acquisitions in Europe since 2020, according to data TempoCap shared with VCJ.
The firm first invested in Depop in 2018 via a $17.8 million Series B round, then did three rounds of secondary share acquisitions and another primary round in 2020. Depop’s sale generated a “10X return in three and a half years,” including “fantastic multiples on all the secondaries we did along the way,” Ostin says.
Currencycloud was a different story, with TempoCap declining to invest in “a couple” of its primary rounds because it thought the valuation was too high. It later acquired a stake in Currencycloud as part of its purchase of a portfolio of tech companies from Japanese technology conglomerate Rakuten in 2020.
“We bought that portfolio around Currencycloud,” Ostin tells VCJ. “We knew it was a very good price, and then six months before it was sold we did another secondary purchase. It was a champagne deal… We got a 296 percent IRR, which is insane.”
“Currencycloud was a champagne deal… We got a 296 percent IRR, which is insane.”
Olav Ostin, TempoCap
Other sizable exits for TempCap include the $650 million acquisition of identity verification platform Onfido by Entrust and the $500 million acquisition of counter-drone technology platform operator Dedrone by Axon, both of which happened this year, and the acquisition of HR software company TalentSoft by Cegid for an undisclosed amount in 2021.
TempoCap has also benefited from a number of smaller exits. “In Europe most of the deals are between $100 million and $300 million, so we’ve had quite a lot of other exits,” Ostin tells VCJ. “In Europe probably 90 percent of VCs never see a carry check in their entire life, so in this way we’ve been lucky enough to generate some carry.”
Importance of patience
TempoCap primarily invests in direct secondaries because it can take as much time as it wants to do its due diligence without the deadline of a primary round closing. Ostin tells VCJ that he and his team evaluated Depop for nine months before making their first investment through the secondary market.
The firm will acquire whole portfolios of technology assets, as it did with the portfolio that included Currencycloud, but Ostin says it only does that in specific instances.
“Portfolios are very different,” he explains. “If you start from scratch it’s tough, so most of the portfolios we do, we know the assets already. Because we have this single-asset strategy, sometimes some of the companies in the portfolio have already gone through our investment committee, which makes it much easier.”
Ostin notes that European LPs have historically complained about a lack of DPI from venture, long before the liquidity dearth of the past few years, and that was the driving force behind TempCap’s pursuing a secondary strategy in technology companies. The majority of his firm’s LPs are from France, Switzerland, England and Germany, all of them being institutional investors with no corporate LPs, Ostin says. He declined to reveal names.
TempoCap primarily sources its secondary deals from corporate venture capital arms, which Ostin says got too greedy during the market highs in 2021.
“In 2014 CVCs invested something like $18bn in venture tech, in 2021 it was 10 times more,” he tells VCJ. “People say the VCs went mad, but it’s really the corporates that went mad. Now they have a huge legacy of investments and now they’re all thinking ‘what are we going to do with these companies?’ The ones that don’t have a core business in tech are asking themselves what to do. I would say 80 percent of our dealflow comes from corporates.”
Ostin says his firm’s name is a nod to the importance of timing. “Timing matters when finding deals, but you also need to have different strategies for different times,” he explains. “If you operate now like in 2021, you’re just going to get killed. Timing is everything and our investors say they want money quickly, and that’s also a timing issue. The whole thing really revolves around the tempo.”
