How Successful Outcomes Create the Flywheel for Future Innovation
When Cognigy was acquired by NiCE for US$955m in July 2025 – Europe’s largest AI transaction at the time – the headlines focused on the deal itself. But for Nenad Marovac, the founder of DN Capital, an early VC investor in Cognigy, the real significance lies in what happens next: the cascading effects that major exits create across an entire startup ecosystem.
Europe has long suffered from an “exit gap” relative to the United States. Fewer IPOs, smaller acquisitions, and a shallower pool of successful outcomes have constrained the continent’s ability to recycle capital, talent, and knowledge into the next generation of companies. Understanding why exits matter, and how they create compounding benefits for ecosystems, is essential for anyone seeking to strengthen European tech.
The Flywheel Effect: How Exits Create More Startups
Major exits do not simply reward the founders and investors involved. They set in motion a flywheel that accelerates the entire ecosystem around them.
The most immediate effect is the creation of new founders. Employees at successful startups, who have experienced hyper-fast growth, learned what excellent execution looks like, and often accumulated meaningful wealth and connections across the startup ecosystem, become the founders of and investors in the next generation of companies. They bring pattern recognition, operational expertise, and the confidence that success is possible.
“Every major exit creates dozens of potential founders. People who’ve seen what good looks like, who understand the journey from Series A to IPO, and who now have the resources and confidence to start something of their own. That’s how ecosystems compound.”
Nenad Marovac, DN Capital
Creating New LPs: The Capital Recycling Effect
Beyond creating founders, successful exits create investors. Founders and early employees who achieve liquidity events often become angel investors and LPs venture capital funds, recycling their capital and expertise back into the ecosystem.
This capital recycling effect is well-documented in Silicon Valley, where generations of successful founders have become prolific angel investors and fund backers. The “PayPal Mafia” is the canonical example: early PayPal employees and founders went on to start or fund companies including Tesla, LinkedIn, Palantir, YouTube, and dozens of others.
Europe has historically lacked this depth of recycled capital. Fewer exits has meant fewer wealthy founders; fewer wealthy founders has meant less angel investment and fewer LPs for European venture funds. The result is a capital ecosystem that remained dependent on institutional investors and family offices rather than benefiting from the operational expertise that founder-LPs bring.
This is changing. The wave of European IPOs in 2021, including DN Capital portfolio companies AUTO1, HomeToGo, and Mister Spex, created a new generation of potential LPs. The Brigit and Cognigy exits in 2024 and 2025 have added to this pool. As the individuals behind these firms and exits deploy capital into funds and angel investments, the ecosystem’s capacity for risk-taking expands.
“When we return capital to investors, it doesn’t disappear. It goes back into the ecosystem – into new funds, angel investments, and accelerators. Exits are how ecosystems grow their capital base.”
Nenad Marovac, DN Capital
Network Effects: Why Success Attracts Success
Major exits also strengthen the intangible networks that make ecosystems function. Successful founders become advisors, board members, and mentors to the next generation. They make introductions to customers, partners, and investors. They lend credibility to nascent companies simply by association.
The AUTO1 exit illustrates this network effect in action. Christian Bertermann and Hakan Koç, the co-founders, have become significant figures in the Berlin startup ecosystem. Their experience scaling a company from Series A to a multi-billion-dollar public listing is invaluable to founders attempting similar journeys. The investors, advisors, and executives who worked with AUTO1 carry that pattern recognition into their subsequent roles.
These network effects are difficult to measure but essential to ecosystem health. They explain why startup activity clusters geographically even in an era of remote work: the density of relationships, the ease of warm introductions, and the ambient knowledge that comes from proximity to successful companies all matter.
The Talent Magnet: How Exits Attract Global Capability
Successful exits also help ecosystems attract and retain talent. The prospect of meaningful equity upside draws ambitious individuals to startup employment; the demonstration effect of actual liquidity events validates that prospect.
For years, Europe struggled to compete with Silicon Valley for top technical and commercial talent. The perception, sometimes accurate, was that European startups offered lower compensation, fewer equity upside opportunities, and a lower likelihood of meaningful exits. Talented Europeans frequently move to the United States to pursue startup careers.
Major European exits are changing this calculus. When employees at European startups achieve life-changing wealth, it sends a signal to the broader talent market: you can build a successful startup career in Europe. This signal is particularly powerful for attracting talent back from the United States (or indeed preventing them from moving over in the first place) and for convincing top graduates to choose startup employment over consulting or banking.
The Policy Dimension: Why Governments Should Care About Exits
Policymakers have increasingly recognised the importance of startup ecosystems for economic growth, job creation, and innovation. But policy discussions often focus on inputs: funding for early-stage companies, tax incentives for investment, support for accelerators – rather than outputs.
Marovac argues that exit-focused policies deserve more attention. Reforms that make IPOs more accessible for European companies, that simplify acquisition processes, or that reduce tax friction on equity compensation all contribute to a healthier exit environment. The Draghi report on European competitiveness, published in 2024, highlighted many of these structural barriers.
Stock option taxation is a particular pain point. In many European jurisdictions, employees face tax liabilities on equity compensation before they can actually sell their shares, creating cash flow challenges that make startup employment less attractive than it should be.
“Governments focus heavily on startup formation, but the exit environment matters just as much. Exits are what prove the model works. They create the capital, the talent, and the confidence for the next generation. Europe needs more of them.”
Nenad Marovac, DN Capital
The Road Ahead: Building Exit Momentum
Europe’s startup ecosystem has made remarkable progress over the past decade. Funding for early-stage companies has grown substantially. Technical talent is increasingly choosing to stay in or return to Europe. Success stories like AUTO1, Cognigy, and the likes of Lovable and ElevenLabs demonstrate that world-class companies can be built on the continent.
But the exit gap remains. Europe still produces fewer IPOs and large acquisitions relative to its startup activity than the United States. Closing this gap is essential for the ecosystem’s continued development.
“We’re at an inflection point for European tech. The talent is here. The capital is increasingly here. What we need now is more exits that validate the ecosystem and create the flywheel for the next generation.”
Nenad Marovac, DN Capital
For founders, the message is clear: building toward a successful exit is not just about personal wealth creation. It is a contribution to the ecosystem that made your company possible: a way of paying forward the capital, talent, and knowledge that you benefited from. The health of European tech depends on founders who understand this responsibility and investors who help them achieve it.