3 questions to Mailys Ferrere, Head of Large Venture Investment Activity at Bpifrance
1) What is your feeling about the dynamism of the French Tech industry? Do you feel a certain momentum in the markets?
Once again this year, the dynamism of the French Tech industry has been highlighted at the Las Vegas CES in early January, where more than 200 French start-ups were showcased. These innovative, connected and consumer-oriented companies got huge exposure throughout the show, thanks to a tremendous media coverage. However, this dynamism is strong in other Tech sectors, such as software, on-line marketing, Medtech, e-health (gene therapy, immuno-oncology etc.).
Such entrepreneurial energy, that attracts more and more young graduates (30 to 40% of students say they want to work for a start-up), is fueled in terms of capital by individual financing, as well as institutional funds, prior to potentially turning to the capital markets.
Several figures illustrate this venture capital momentum:
In France, the average size of investment funds has increased from €78m in 2008/2012 to €138m in 2013/2015. Several asset managers manage now more than €1bn (Cathay, Partech, Sofinnova etc.). The profitability of these funds has also increased.
In 2016, CB Insights reported a 62% growth in capital raised compared to 2015 with nearly €2bn being raised, and a doubling of the number of deals. According to CB Insights figures, France is just behind the UK, but ahead of Germany in terms of transactions.
The French Tech industry has increasingly raised its profile internationally, and has been acknowledged by Silicon Valley! Accordingly, the Financial Times headlined last December with several recent great French fundraising stories: such as Criteo, Blablacar, Devialet, Doctolib, Sigfox…
Regarding the financial markets, the trend has been pretty clear for the last three or four years, even though the number of listed companies declined in 2016. It’s important to note that 2015 was a very good year in terms of IPOs and capital raised (29 new Tech IPOs, €2.8bn raised, significant capital raising from Parrot with €300m and ShowroomPrivé with €250m). Despite difficult macroeconomic conditions, significant operations were successfully carried out in 2016, especially in healthcare sector throughGensight’s IPO (€45m raised), Genfit (€130M in two operations) or Carmat (€50m raised). Outside the health sector, 2016 saw the several digital business, such as Witbe and Kerlink, introduced to the markets.The outlook for 2017 is positive, with quite a few ongoing operations and a solid pipeline of upcoming projects.
2) How does Bpifrance help the Tech sector?
Bpifrance helps out in many ways:
- By extensively financing young start-ups from the very beginning and all the way along their development; from the “French Tech Bourse” (a €30,000 aid provided by Bpifrance to help entrepreneurs to start their business) to cornerstone equity investments once companies raise dozens of millions euros. The large territorial network of Bpifrance with 42 offices across the French territory, its 150 business officers and 50 sectoral experts,helps a lot of entrepreneurs to get financing solutions. Overall, 3,500 young companies were funded by Bpifrance in 2016, compared to 1,500 in 2012.
- In terms of equity, Bpifrance helps a company both indirectly through its fund of funds activity (200 growth capital funds funded) and directly by taking stakes in the company’s capital. For instance, in 2016, Bpifrance directly invested €200m in start-ups from the seed phase up to the late venture, through the funds Bpifrance manages. This kind of aid has increased 50% since 2013.
- Bpifrance is particularly active in financing, but we also care about watching and supporting Tech companies’ growth. For two years, we have developed a range of services, from the PassFrenchTech to several accelerator programmes dedicated to very promising companies (‘Les Accélérées du HUB’). We also provide a special training to help start-up entrepreneurs to meet investors, and have a strong focus on international, which is a key for the long term growth of Tech companies.
Beyond these funding and support services, Bpifrance ultimately aims to break down the barriers between start-ups and large companies, and promoting the French ecosystem, which is quite unique and very enviable for a lot of people!
3) What kind of advice would you give to a Tech investor?
My first advice would be to be patient. When someone decides to invest in Tech sector, he must understand that he will face young companies that have little market history data, and sometimes no data at all. Moreover, Tech companies are not always set up in their market, and does not have solid market shares. Their main strengths are their agility and their capacity to change their business model if necessary. These companies would offer in return significant growth prospects either on existing markets or by creating new ones.
Investing in Tech companies means taking more risks than in mature sectors. In a difficult macroeconomic context, specific risks linked to the technology developed by the company can add up. I would thus recommend a diversified portfolio approach.