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Europe's unicorns: France in pole position

One announcement after another, French start-ups are (finally) achieving unicorn status. Better still, the growth in venture capital investment has put France in second place in Europe, ahead of Germany. All the signs are green, despite persistent obstacles...

With a fundraising of $355 million announced in June, French DIY specialist ManoMano has reached a valuation of $2.6 billion. The round of financing led by a new American investor, Dragoneer Investment Group, should enable the company to accelerate its European growth, in particular by continuing its development in Germany and the United Kingdom, and by strengthening its B-to-B offer in Spain and Italy.

ManoMano plans to recruit 1,000 new talents by the end of 2022: the scale-up joins the very select club of "unicorns" (companies valued at more than one billion dollars). And it's not the only one: in the last few months, several French start-ups have also raised significant funds. And the number of unicorns is increasing (Contentsquare, Backmarket, to name but a few). "The pandemic has accelerated the digitalization of all sectors and certain activities have been particularly highlighted," says Marc Menasé, serial entrepreneur, business angel and founder of the impact fund Founders Future.

The UK in the lead

Overall, "Europe has seen an acceleration in the development of start-ups and scale-ups over the past five years, bringing the number of unicorns to around 80, compared to 50 two years ago," notes Jean-Pierre Valensi, partner in charge of the Capital Markets Advisory team at KPMG France. The planets are aligning. "Public authorities in Europe have realized the need to stop losing ground to Asia and the United States. Financial support policies are being put in place, and pre-existing technological know-how is now valued," he adds.

The United Kingdom, which has around 30 unicorns, is ahead of the game. "Its ecosystem has been in place for longer and the Anglo-Saxon culture is familiar with investment funds. In addition, London benefits from the spin-offs of American funds," explains Franck Sebag, an EY partner. In France, we had to wait for the creation of Bpifrance and French Tech to see a solid ecosystem emerge. "In England, investment funds are powerful and Bpifrance is not able to make up the difference. French entrepreneurs do not help the next generation enough, mechanically, the French start-ups arrive later at the same level as their British counterparts. Especially since the language barrier penalizes France, whereas all British companies are ready to launch on the U.S. market," says Denis Fayolle, serial entrepreneur and investor - he founded La Fourchette and accelerated ManoMano - CEO of Seed & Seeds (an endowment fund for the environment). On the other hand, "German start-ups benefit from a larger local market (with more than 80 million inhabitants) and an export-oriented culture," he says. In addition, Germany has a fertile breeding ground with a fine panel of industrial ETIs.

France, on the other hand, has opted for a watering strategy. As a result, "the pool of start-ups is very dense today, but there are still very few towers worth more than 100 million euros. Success stories are all too rare," laments Franck Sebag. However, France has the capacity to create innovative companies of intermediate size. Nevertheless, to date, there are no "decacorns" (start-ups valued at more than 10 billion dollars) in France. The biggest companies are elsewhere: Klarna, the electronic payment specialist, which is undoubtedly the most valued start-up in Europe, is... Swedish.

Start-up nation

"France is becoming a start-up nation," says Paul-François Fournier, executive director of innovation at Bpifrance. A dynamic has been set in motion thanks to the synergy between the number of start-ups, the talent and the money available. "We are now financing about 1,200 startups per year, compared to only 300 in 2013-2014, and a powerful venture capital industry is being created," he argues. Another metric illustrates the trend: "The number of companies that find an investor has more than doubled between 2013 and 2020," says Paul-François Fournier.

Do you need a large number of startups to create unicorns? Grégoire Martinez, Station F's Director of Community and Communications, believes so: "The Station F campus is home to more than a thousand start-ups. The first stage is very important, because project holders make their first strategic choices, their first investments. In France, the skills exist, and we have excellent engineering and business schools. "Some of the 120 scale-ups selected as part of the French Tech 40/120 support program are destined to become world-class technology leaders. "We need funds to support the growth of start-ups and we have been making a major effort for several years now. Bpifrance invests in around 100 venture capital funds in France," says the executive director of innovation.

Moreover, their size is increasing, from €80 million in 2013-2014 to nearly €300 million today, according to Bpifrance. As a result, "the ecosystem is in place to invest several tens or even hundreds of millions of euros and thus allow unicorns to emerge," promises Paul-François Fournier. A giant step forward. In 2019, the Tibi report - named after its author, Philippe Tibi, president of Pergamon campus and professor of economics at the École Polytechnique - entitled "Financing the Fourth Industrial Revolution: Lifting the Lock on Financing Technology Companies" pointed to the insufficient financing capacity of technology companies in France at the time of their industrial and commercial acceleration. To close this gap, French institutional investors have pledged more than €6 billion to finance technology companies by December 31, 2022.

11 IPOs in France

"The financial markets are not yet mature, the public authorities must go further, especially to direct savings towards investment in Tech through structured and reassuring vehicles. France lacks the capacity to support companies on the financial markets," laments Jean-Pierre Valensi. But that's where the rest of the adventure takes place. "And yet, entrepreneurs must take the risk. "You have to be brave and go to the stock market, and to succeed, you have to invest upstream in the company's structure, in particular by recruiting a quality CFO, capable of setting up and managing the necessary processes, and giving visibility and credibility," assures Jean-Pierre Valensi. This is one of the weaknesses of the French ecosystem. "In the first quarter of 2021, 99 IPOs were recorded in the United States for a total of more than $41 billion, compared to 17 in the United Kingdom ($7.5 billion) and 11 in France ($1 billion), which is out of all proportion," says Franck Sebag. Alexandre Prot, CEO and co-founder of Qonto, a neo-bank dedicated to SMEs and the self-employed, asks, "Are French companies taking the path that allows them to go public? Few are tackling it, it involves many constraints and the Paris market remains little sought after. "

Believe, the music nugget specializing in digital support for artists, launched its IPO on the Paris Stock Exchange in June to raise €300 million. A first that shows the way? Also in June, DEE Tech, a Spac (Special Purpose Acquisition Company, or listed investment vehicle) dedicated to tech, was listed on Euronext and raised 165 million euros. Led by Marc Menasé and former Veepee employees, its goal is to create a European giant. "We want to facilitate access to the listing, our objective being to make one or more acquisitions of players operating in Europe and to accompany them in a new stage by an operating mode that is more akin to merger and acquisition," says Marc Menasé. This type of initiative should become more common.

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