Business Angels: The Jackpot Year – Challenges

Madness, overheating, runaway… While two years earlier the global pandemic had put chills on the funding of start-ups, these words resurface today to describe the unabashed health of French technology. Record fundraisings followed, and no fewer than 25 companies achieved the coveted unicorn status by reaching a valuation of over €1 billion. Most recently, the champion of refurbished electronics BackMarket announced a capital increase of 450 million euros, crossing the crossbar of 5 billion euros in value. A first for a French Tech start-up.

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In this ultra-dynamic context, business angels remain an essential link. First, because they are essential to finance the first steps of a business creation, before the funds come into play. So because they have increased their financial obligations. “The amounts invested by business angels have increased significantly,” 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 blood and new capital. Among newly arrived investors in their thirties, who finance start-ups even before they sign their first real estate purchase. A tremor is also observed on the women’s side, several in the ranking.

“Enter the capital as soon as possible”

How do business angels see the influx of money flowing into French Tech? “It is very ambivalent, answers 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, business angels are the first to come out.” But at the same time, the increase in valuation increases the entry price for shareholders. “Hence the interest of private investors to anticipate rounds and enter the capital as soon as possible”, emphasizes Alexandre Korenfeld. “It is more difficult than before, it requires greater discipline”, continues Thierry Petit, who has ruled out “projects that can be summarized in a few slides, valued in several millions” and favors start-ups founded by experienced entrepreneurs, such as Memobank, launched by Jean-Daniel Guyot, former founder of Captain Train.

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Another effective parade is to structure yourself. The tendency is towards grouping into clubs and pools trading flows. Two members of the Women Business Angel (FBA) network have even just created the Win Equity fund, which complements the action of the BAs. Composed of 80 shareholders, men and women, it primarily attracts young investors aged 18 to 30. Their investment thesis: promoting gender balance and diversity in entrepreneurship. The fund currently has 2 million euros and invests in partnership with FBA. “This allows us to increase the power of the agreements, considers Catherine Abonnenc, vice president of FBA, to be a recognized partner while maintaining the value specific to the business angel: the accompaniment.” Thomas Rival, partner at Evolem, Bruno Rousset’s investment holding company, goes so far as to help his foals write the “term sheets” signed with the funds, looking very closely at the terms of entry. In these crazy times, advice from these seasoned entrepreneurs can help keep a cool head.

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

We survived this period well, which made a leap forward in digital and thus e-commerce, which represents a third 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 series A. The crazy inflation of valuations takes place primarily in the subsequent rounds. And we benefit from that in the companies where we are already shareholders. For two years, we have come closer to our ecosystem, including venture capital funds: we work more with them than against them. There is great activity and enthusiasm. BAs still take just as much risk, and funds are taking on more and more.

I remain agnostic about sectors, but I am moving more and more towards technological investments with innovative products that are able to develop and be internationalized very quickly. The most booming thing at the moment: everything related to blockchain and cryptocurrencies is monstrous. We are at the beginning of a technological tsunami, which is what justifies these crazy ratings.

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

Ten years ago, the balance of power was favorable to investors. It was reversed. All 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 astray. We advise entrepreneurs to raise only the money they can use in the next eighteen months. We also emphasize the interest in having two, three or four investors, so as not to be dependent on a single fund.

When we launched Evolem Start in 2017, we had to come up with a new proposal. We decided to take tickets from 100,000 euros to 3 million to meet a need for poorly covered financing. We implement 10 million per year with no exit horizon. Before, we were usually the lead in a Series A funding round. With sky-high valuations, that is no longer possible. So we went back to seed rounds of 1 to 4 million where we rub shoulders with other business angels.”

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