Lukáš Konečný, Junior Partner of Ventures
4 min read
Who doesn’t love a celebration or milestone achievement? We’ve got one to share, not just for Y Soft, but for our long-standing partners at Sewio.
Halfway through 2024, we popped open the champagne as Texas-based giant HID welcomed Sewio Networks to its team. This startup acquisition resulted in the first-ever venture exit for Y Soft Ventures.
A turning point for Sewio.
A successful acquisition by HID.
A historic milestone for Y Soft.
... And a story that doesn’t end just yet 🥂
But let’s start with some general information about venture capital and exits.
The Stages of a Venture Capital (VC) Life Cycle
A venture exit is, to no one’s surprise, among the last stages of venture capital life cycles.
The exit mechanism of venture capital is a deal that removes the ownership stake of a company. It occurs when a portfolio company is acquired or publicly floats on the stock market, generating a return on investment (ROI) for the venture capital firm and its investors.
On average, venture capitalists need to hold onto their investments for seven to ten years before a business becomes sustainable, viable, and profitable. This timeline depends on the industry.
But what happens before then? The venture capital (VC) life cycle follows a well-trodden path to help guide startups from inception to exit.
Here’s how the cycle runs:
- Deal Sourcing
Step one in the life cycle is sourcing potential deals. This involves searching networks and other sources of deal flow from the ecosystem and enquiring about suitable investment opportunities.
- Due Diligence
Once you’ve identified opportunities, it’s time to conduct due diligence. This involves an in-depth look at the startup’s product, market, business plans, competition, and team to assess its potential, viability, and possible ROI.
- Investment Decision
Once the business has undergone rigorous scrutiny, the VC firm decides whether or not to make the investment. In addition to offering much-needed liquidity to help the startup progress, the VC firm often also provides expertise and guidance to help the startup grow.
- Support
Support can take many forms. From HR advice to product development and manufacturing support to sales and go-to-market advice, this strategic support helps the startup progress, building revenue and profitability faster than it would otherwise manage.
- Exit
Once the startup has reached maturity, there are a few ways in which it can exit the venture agreement. At this point, investors and startup founders will aim to make a significant ROI on their initial investments.
While several exit strategies are available, most take one of two routes:
- Initial Public Offerings (IPOs): Selling shares of stock to the public
- Mergers and Acquisitions (M&As): Selling a company to a larger business
Why Acquisitions are a Common Exit Strategy
Startup acquisitions are often a great win-win exit strategy. It has become the statistically more likely route for VCs and founders compared to IPOs. In comparison to IPOs, the benefits of an exit via M&A (like the acquisition of startups) are mainly as follows:
- Speed – Much quicker exit for investors than IPOs
- Predictability – More certain outcomes in terms of valuations being met
- Market conditions – During times of economic and market uncertainty, acquisitions are often more feasible for completion than IPOs
- Synergy – The acquiring company can purchase startups that strategically complement and strengthen others within its ownership portfolio
Key Considerations for Acquisitions
Acquisitions can bring benefits to startup founders, VC firms, and the acquiring companies when the following considerations are made:
- Valuation—Is the company's valuation fair?
- Timing – Are market conditions right for an acquisition?
- Due diligence – Do the acquirers have the means to complete the acquisition at the agreed price? Equally important, is the startup fully prepared for being scrutinized?
- Strategic fit – Does the acquirer align with the company’s vision? Is there a clear synergy and will the acquired company provide long-term value?
A Ventures Portfolio Exit: The Acquisition of Sewio
Enough of the pre-lecture. Let’s talk celebration!
It starts with Milan Šimek and Ľubomír Mráz who met at the Brno University of Technology in the Czech Republic. They founded Sewio Networks in 2014.
The business develops a real-time location system (RTLS) drawing on the founders' expertise in ultra-wideband technology. The system is used for indoor location tracking by manufacturers, warehouses, distribution centers, and more, including Volkswagen, Škoda, ENEL, Budweiser Budvar, and Toyota Peugeot Citroën Automobile (TPCA).
In September 2015, Y Soft Ventures invested in Sewio Networks in exchange for a 20% share. This marked Y Soft Ventures' first investment after Miloš Sochor became the managing partner.
In close collaboration with Y Soft Venture’s representatives (Miloš Sochor and Lukáš Konečný) and our executive management team, Sewio fuelled new global ambitions. They leveraged Y Soft’s manufacturing facilities and support in key business areas like strategic planning, financial management, and go-to-market strategy to enhance their business activities.
📖 Read on → Strategic Management Helping Startups
Although the business was already making revenue in 2015, Y Soft's involvement helped Sewio’s revenue skyrocket in 2017, when its turnover hit nearly €1 million.
For nine years, we helped Sewio grow from a startup to a globally operating business. In August 2024, the joyous announcement that Sewio had been acquired by HID was out.
Texas-based HID, a member of the Assa Abloy group, moved to acquire Sewio to facilitate the expansion of HID’s RTLS portfolio. With over 4,500 employees and activity in over 100 countries, HID – itself acquired by Assa Abloy in 2000 – will allow Sewio to massively expand its market exposure in the future.
The successful acquisition was completed in July 2024, marking a historic moment for Y Soft with our first-ever venture capital exit. Even more, it’s a turning point for HID and Sewio–and a celebratory moment for the South Moravian innovation ecosystem.
Why We Fund Start-Up Ventures
Simply put, the Y Soft Ventures arm exists to help guide younger businesses through the minefield of establishing themselves in often competitive and overcrowded marketplaces.
By identifying ambitious entrepreneurs and high-potential startups that could provide investors with a substantial ROI, Y Soft Ventures can provide much-needed expertise to smooth the transition from a fledgling market newcomer to an established success.
Life as a startup is undoubtedly hard, and many lack the budgets and resources required to invest in product development, HR, marketing, sales, and financial management, to name just a few critical business areas for growth.
Looking at Sewio, this transaction is a showcase for Y Soft's investment strategy of partnering with hardware startups and supporting them by sharing our manufacturing capabilities. Similarly, it is another demonstration of the strengths of the South Moravian innovation ecosystem.
Final Points
After initially purchasing a 20% share in Sewio in 2015 and completing a successful divestment less than a decade later, Y Soft’s first venture capital exit is a genuine success story of venture capital investment.
Guided by Y Soft’s corporate know-how, this sale to a US multinational illustrates that with the proper backing, support, and guidance, even the most challenging sectors can see successful transitions from startup to global business.
We’re beyond proud of the Sewio team. Working with this team over the past few years has been a truly rewarding experience. We’ll continue to follow their journey and celebrate their wins within HID Group 👏🏼
Interested in learning more about Y Soft Ventures?
