Founders of Wise and Skype raise $436 million to build tech giants in Europe
The partners of European venture capital firm Plural, from left to right: Ian Hogarth, Taavet Hinrikus, Carina Namih, Sten Tamkivi and Khaled Helioui.
Plural
The founders of Wise, Skype and Songkick have raised 400 million euros ($436.4 million) for a new fund to back technology startups in Europe. It seeks to compete with established funds like Atomico, Balderton Capital and Creandum with its founder-led focus.
Plural Fund II, the firm’s second to date, arrives just 18 months after the firm raised its last fund, a 250 million-euro vehicle. Its co-founders include Taavet Hinrikus, co-founder of fintech firm Wise, Ian Hogarth, co-founder of concert discovery service Songkick, Sten Tamkivi, co-founder of communications platform Skype, and Khaled Helioui, former CEO of Bigpoint Games.
Hinrikus told CNBC that Plural could serve as a better partner to startups in Europe than most venture capital funds, given that it was started by people with the “scar tissue” of proven entrepreneurs. Only 8% of VCs in Europe are former founders, he says, much lower than the 60% in the United States.
“If we look at a lot of VC funds, you have lots of people who have done great work with spreadsheets, not with startup life,” Hinrikus told CNBC in an interview. “In our case, it is seen as a core criteria for choosing our partners that they’re totally unemployable.”
“It feels like it’s world war three, and we’re in the trenches together as one of the founders. So, if we look at the track record, and our ability to get the deals done, I think that all seems to say that this is really missing in Europe,” Hinrikus added.
Plural raised the funds from a mix of limited partners, including British and American university endowments, U.S. foundations and insurers, strategic family offices in Europe and the United States. The firm said it saw “significant appetite” from LPs — limited partners, the institutional backers of venture funds — for its new fund and exceeded its own fundraising target, despite being in the “toughest environment” for raising a fund.
“The fact that, in a difficult fundraising environment, we’ve been able to raise a fund of this scale, with a huge amount of appetite from LPs, just shows you that some of the most sophisticated investors in the world are really recognising the opportunity in Europe, and really want to see a fund the shape of Plural,” Carina Namih, partner at Plural, told CNBC in an interview.
“I think it’s a real testament against the sort of macro backdrop that we’ve raised a fund of this size and scale so quickly,” she added.
The ‘unemployables’
Plural plans to invest at a pace of two to three investments per investor per year with its new fund. The firm has five partners in total, whom it dubs the “unemployables,” owing to the fact that they wouldn’t readily join a VC firm, or be employable at a startup. Each of the partners is an active angel investor.
Plural has made 27 investments in total, backing companies including law-focused artificial intelligence firm Robin AI, nuclear fusion power plant developer Proxima Fusion, and most recently drug discovery platform Sano Genetics. Its largest sectors by investment are AI (31%), frontier technology (16%), and climate and energy (14%).
Hinrikus said Plural isn’t interested in finding the next major software-as-a-service name in Europe, referring to companies that make software for businesses to ease the burden of storing data, accessing infrastructure, and carrying out data analytics. It’s more interested in deep tech, focusing on founders looking to solve fundamental scientific problems around energy, unlock AI “superpowers,” and make groundbreaking progress in health care.
Building tech giants in Europe
Plural says it wants to build technology giants in Europe, identifying winners in emerging categories that other funds may tend to ignore, such as deep tech and clean tech.
Carina Namih, a biotechnology entrepreneur-turned-partner at Plural, said she wouldn’t be surprised to see major technology names on a par with U.S. and Chinese giants start to emerge in Europe in the not-too-distant future.
She noted technological breakthroughs are happening much faster now, boosted by key developments around AI and more established pools of capital.
“Look at how quickly OpenAI burst onto the scene with ChatGPT,” she said, adding it’s taking shorter amounts of time for new technologies to hit major milestones. “Clearly, the big tech companies have a lot of advantages and are entrenched in many ways. But I think now is a time more than ever, where new players and emerging players can come in and dominate entirely new spaces that didn’t exist a year ago.”
Namih previously worked on applying AI to mRNA-based medicine at her former startup HelixNano.
Plural’s new fund launch adds to the wave of startup activity that’s been happening in Europe in the last decade or so.
A report from venture capital firm Accel late last year showed that $1 billion-plus unicorn firms often serve as catalysts for startup creation, with 1,451 new startups being founded by former employees of European and Israeli unicorns.
Of that new batch of startups, a great deal of them tend to come from fintechs, according to the report, with 70 fintech unicorns producing 423 startups.
“In the last 10 years, the whole ecosystem really has become an ecosystem, whereas before, we were just wild game hunting,” Harry Nelis, partner at Accel, told CNBC. “There was one here, one there, there was no ecosystem.”
“It’s a lot easier to start a company than before. The engineering has been done before, the marketing has been done before,” he added. “That is a flywheel that we have never had in Europe, that we now do have.”
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro Computer could be headed down a path to getting kicked off the Nasdaq as soon as Monday.
That’s the potential fate for the server company if it fails to file a viable plan for becoming compliant with Nasdaq regulations. Super Micro is late in filing its 2024 year-end report with the SEC, and has yet to replace its accounting firm. Many investors were expecting clarity from Super Micro when the company reported preliminary quarterly results last week. But they didn’t get it.
The primary component of that plan is how and when Super Micro will file its 2024 year-end report with the Securities and Exchange Commission, and why it was late. That report is something many expected would be filed alongside the company’s June fourth-quarter earnings but was not.
The Nasdaq delisting process represents a crossroads for Super Micro, which has been one of the primary beneficiaries of the artificial intelligence boom due to its longstanding relationship with Nvidia and surging demand for the chipmaker’s graphics processing units.
The one-time AI darling is reeling after a stretch of bad news. After Super Micro failed to file its annual report over the summer, activist short seller Hindenburg Research targeted the company in August, alleging accounting fraud and export control issues. The company’s auditor, Ernst & Young, stepped down in October, and Super Micro said last week that it was still trying to find a new one.
The stock is getting hammered. After the shares soared more than 14-fold from the end of 2022 to their peak in March of this year, they’ve since plummeted by 85%. Super Micro’s stock is now equal to where it was trading in May 2022, after falling another 11% on Thursday.
Getting delisted from the Nasdaq could be next if Super Micro doesn’t file a compliance plan by the Monday deadline or if the exchange rejects the company’s submission. Super Micro could also get an extension from the Nasdaq, giving it months to come into compliance. The company said Thursday that it would provide a plan to the Nasdaq in time.
A spokesperson told CNBC the company “intends to take all necessary steps to achieve compliance with the Nasdaq continued listing requirements as soon as possible.”
While the delisting issue mainly affects the stock, it could also hurt Super Micro’s reputation and standing with its customers, who may prefer to simply avoid the drama and buy AI servers from rivals such as Dell or HPE.
“Given that Super Micro’s accounting concerns have become more acute since Super Micro’s quarter ended, its weakness could ultimately benefit Dell more in the coming quarter,” Bernstein analyst Toni Sacconaghi wrote in a note this week.
A representative for the Nasdaq said the exchange doesn’t comment on the delisting process for individual companies, but the rules suggest the process could take about a year before a final decision.
A plan of compliance
The Nasdaq warned Super Micro on Sept. 17 that it was at risk of being delisted. That gave the company 60 days to submit a plan of compliance to the exchange, and because the deadline falls on a Sunday, the effective date for the submission is Monday.
If Super Micro’s plan is acceptable to Nasdaq staff, the company is eligible for an extension of up to 180 days to file its year-end report. The Nasdaq wants to see if Super Micro’s board of directors has investigated the company’s accounting problem, what the exact reason for the late filing was and a timeline of actions taken by the board.
The Nasdaq says it looks at several factors when evaluating a plan of compliance, including the reasons for the late filing, upcoming corporate events, the overall financial status of the company and the likelihood of a company filing an audited report within 180 days. The review can also look at information provided by outside auditors, the SEC or other regulators.
Last week, Super Micro said it was doing everything it could to remain listed on the Nasdaq, and said a special committee of its board had investigated and found no wrongdoing. Super Micro CEO Charles Liang said the company would receive the board committee’s report as soon as last week. A company spokesperson didn’t respond when asked by CNBC if that report had been received.
If the Nasdaq rejects Super Micro’s compliance plan, the company can request a hearing from the exchange’s Hearings Panel to review the decision. Super Micro won’t be immediately kicked off the exchange – the hearing panel request starts a 15-day stay for delisting, and the panel can decide to extend the deadline for up to 180 days.
If the panel rejects that request or if Super Micro gets an extension and fails to file the updated financials, the company can still appeal the decision to another Nasdaq body called the Listing Council, which can grant an exception.
Ultimately, the Nasdaq says the extensions have a limit: 360 days from when the company’s first late filing was due.
A poor track record
There’s one factor at play that could hurt Super Micro’s chances of an extension. The exchange considers whether the company has any history of being out of compliance with SEC regulations.
Between 2015 and 2017, Super Micro misstated financials and published key filings late, according to the SEC. It was delisted from the Nasdaq in 2017 and was relisted two years later.
Super Micro “might have a more difficult time obtaining extensions as the Nasdaq’s literature indicates it will in part ‘consider the company’s specific circumstances, including the company’s past compliance history’ when determining whether an extension is warranted,” Wedbush analyst Matt Bryson wrote in a note earlier this month. He has a neutral rating on the stock.
History also reveals just how long the delisting process can take.
Charles Liang, chief executive officer of Super Micro Computer Inc., right, and Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024.
Annabelle Chih | Bloomberg | Getty Images
Super Micro missed an annual report filing deadline in June 2017, got an extension to December and finally got a hearing in May 2018, which gave it another extension to August of that year. It was only when it missed that deadline that the stock was delisted.
In the short term, the bigger worry for Super Micro is whether customers and suppliers start to bail.
Aside from the compliance problems, Super Micro is a fast-growing company making one of the most in-demand products in the technology industry. Sales more than doubled last year to nearly $15 billion, according to unaudited financial reports, and the company has ample cash on its balance sheet, analysts say. Wall Street is expecting even more growth to about $25 billion in sales in its fiscal 2025, according to FactSet.
Super Micro said last week that the filing delay has “had a bit of an impact to orders.” In its unaudited September quarter results reported last week, the company showed growth that was slower than Wall Street expected. It also provided light guidance.
The company said one reason for its weak results was that it hadn’t yet obtained enough supply of Nvidia’s next-generation chip, called Blackwell, raising questions about Super Micro’s relationship with its most important supplier.
“We don’t believe that Super Micro’s issues are a big deal for Nvidia, although it could move some sales around in the near term from one quarter to the next as customers direct orders toward Dell and others,” wrote Melius Research analyst Ben Reitzes in a note this week.
Super Micro’s head of corporate development, Michael Staiger, told investors on a call last week that “we’ve spoken to Nvidia and they’ve confirmed they’ve made no changes to allocations. We maintain a strong relationship with them.”
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