Business Angels: the jackpot of the year – Issues

Madness, overheating, packing… Whereas, two years earlier, the global pandemic had cast a chill over the financing of start-ups, these words are resurfacing today to describe the insolent health of French tech. Record fundraising follows one another and no less than 25 companies have achieved the coveted unicorn status by obtaining a valuation of more than 1 billion euros. The latest example to date, the champion of refurbished electronics BackMarket announced a capital increase of 450 million euros and crossed the bar of 5 billion euros in valuation. A first for a French Tech start-up.

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In this ultra-dynamic context, business angels remain an essential link. Firstly because they are essential for financing the first steps of a business creation, before the funds come into play. Then, because they ran their financial commitments. “The amounts invested by business angels have increased,” notes Alexandre Korenfeld, marketing director of the Angelsquare network. Pierre-Edouard Stérin, the most active of French private investors, has thus doubled his investment, from 42 to 80 million in less than two years. Like him, other major sponsors – Xavier Niel, Bruno Rousset, Thibaud Elzière, Michaël Benabou, etc. – have stepped up their support for start-ups. The business angel community is also benefiting from an influx of new blood and capital. Among the newcomers, investors just in their thirties, who finance start-ups even before signing their first real estate purchase. A tremor is also observed on the side of the women, more numerous in the classification.

“Enter the capital as soon as possible”

How do business angels see the influx of money pouring into French Tech? “It’s very ambivalent, retorts Thierry Petit, the founder of Private Showroom. I take advantage of it and it serves me.” He explains: “When the funds want to come in, the business angels are the first to come out.” But, at the same time, the rise in valuations increases the entry price for shareholders. “Hence the interest for private investors to pre-empt rounds and to enter the capital as soon as possible”, underlines Alexandre Korenfeld. “It’s more difficult than before, it requires greater discipline”, continues Thierry Petit, who has ruled out “projects that can be summed up in a few slides, valued several million” and favors start-ups founded by seasoned entrepreneurs, like Memobank, produced by Jean-Daniel Guyot, the ex-founder of Captain Train.

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Another effective parade is to structure yourself. The trend is towards grouping together in clubs and pooling transaction flow. Two members of the Women Business Angel (FBA) network have even just created the Win Equity fund, which supplements the action of the BAs. Composed of 80 shareholders, men and women, it gives priority to young investors aged 18 to 30. Their investment thesis: promote gender balance and diversity in entrepreneurship. Currently endowed with 2 million euros, the fund invests in partnership with FBA. “This allows us to increase in power in the deals, believes Catherine Abonnenc, vice-president of FBA, to be a recognized partner while keeping the value specific to the business angel: support.” Thomas Rival, partner of Evolem, Bruno Rousset’s investment holding company, goes so far as to help his foals write the “terms sheets” signed with the funds, looking very closely at the entry conditions. In these crazy times, the advice of these seasoned entrepreneurs can help keep a cool head.

Michaël Benabou, President of Financière Saint-James: “The beginning of a technological tsunami”

We lived well through this period which made a forward link to digital and therefore to e-commerce which represents the third parties of our portfolio. The explosion of valuations is not a problem because as professional business angels, we position ourselves very upstream, on the pre-seed segments and up to the series A. The crazy inflation of valuations takes place above all on the rounds following. And we benefit from it in the companies where we are already shareholders. Two years, since we are closer to our ecosystem, including venture capital funds: we work with them more than against them. There is a lot of activity and enthusiasm. The BAs always smoke so many risks and the funds smoke more and more.

I remain agnostic in terms of sectors but I am moving more and more towards technological investments with innovative products, capable of developing and being internationalized very quickly. The most booming right now: everything related to blockchain and cryptocurrencies is monstrous. We are at the beginning of a technological tsunami, which is what justifies these crazy valuations.

Thomas Rival, partner of Evolem, Bruno Rousset’s investment holding company (Luko, Monisnap, Voltaire Project…): “Beware of too high valuations”

Ten years ago, the balance of power was favorable to investors. It got reversed. So much the better for start-ups, but this creates side effects. If an entrepreneur raises too much money, they run a significant execution risk. By setting goals that are too high to justify a very high valuation, he risks going off the road. We advise entrepreneurs to only raise money that they could pay in the next eighteen months. We also underline the interest of having two, three or four investors, so as not to depend on a single fund.

When we launched Evolem Start in 2017, we had to bring a new proposal. We decided to take tickets from 100,000 euros to 3 million, to meet a need for poorly covered financing. We deploy 10 million per year, with no exit horizon. Before, we were usually the leaders of a Series A funding round. With soaring valuations, that is no longer possible. We have therefore returned to seed rounds of 1 to 4 million, where we rub shoulders with other business angels.”

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