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Benoist Grossmann (France Digitale): "Entrepreneurs and investors: it's a mutual seduction"
This article was originally published by Céline Tridon.
As the 9th edition of France Digitale Day takes place on Wednesday 22 September 2021, the co-president of the organisation Benoist Grossmann looks back at the relationship between entrepreneurs and investors. How should it be built? What makes the difference? Explanations.
If we talk about investment, what is the current context?
Investment in France is very dynamic, thanks to the entrepreneurial ecosystem, which is doing well. There are some great entrepreneurial profiles and we are even starting to see more and more serial entrepreneurs. After all, serial entrepreneurs are the heart of Silicon Valley: they are people who start a business for the second or third time and who get better and better each time.
Thanks to this ecosystem, which is gaining in quality, there are more investors than before (seed funds, business angels, series A, series B or series C investors and even journalists who are interested in the sector).
Is this a dynamic that is boosted by digital?
Today, everything revolves around digital technology. In this sense, Covid has been a formidable accelerator of the digitalization of the economy. Experts agree that we have gained two years in the digital efforts of companies.
98% of the start-ups created come from the digital sector, which is not very capital intensive.
So is it easier to get started and create a business?
In this context, you need very little money to create a Poc (proof of concept). Starting up in the semiconductor or health industry, for example, requires several million euros. A digital company, on the other hand, can start with 500,000 or 1 million euros. You just have to see how the business performs and if it does well, then you can raise more money.
The other advantage of digital is that you can easily pivot and reorient the company to a new sector of activity. Often, the market test is a quick step that allows to realize after a few days if the idea finds its customers, or not. However, raising money is never easy.
What is it that will enable an entrepreneur to convince investors?
The quality of the management team: its drive, its vision, its ability to surround itself.
Finding the right teams is a bit like being a recruiter: it's not an exact science. Sometimes the recruiter chooses the right candidate, sometimes he makes casting errors. For an investor, it's the same.
Does this mean that you operate by feel?
The feeling is based solely on the assessment of the entrepreneurial qualities. That is why it is also necessary to look at the markets in which the company wants to develop, to study the competition. When it comes to supporting young companies in the process of creation, there is little history to rely on. It is therefore necessary to think about its possible future and to do this, it is necessary to analyse its market over the next three years.
Is a company that focuses on positive impact more likely to attract investors?
In my opinion, impact is like ESG (environmental, social and governance criteria): it is everywhere. I like to invest in companies whose founders I like, their background, their diversity. And of course, I'd rather invest in a company that has a positive impact on the environment than one that has none, but that's not the only criterion I'll take into account.
I also make sure that the business is good for the community.
What advice would you give to a start-up that wants to solicit investors?
It should be kept in mind that it is a reciprocal seduction: when they meet, the investor must be seduced by the entrepreneur and the entrepreneur seduced by the investor. Because it should not be forgotten that a project leader can also choose between two investors. He will retain the one with whom he has the most affinity. The reputation of a VC also plays a role.
Finally, both parties must be honest with each other and establish a natural bond. It is a human adventure above all.
The role of the VC is not limited to simple financing?
He has in fact a role of accompaniment. He is present with the company for a period which goes generally from five to eight years. During this period, the investor and the entrepreneur meet for three hours every two months or so. That's a lot of time spent together!
With the manager, we will work on the structuring of the company, i.e. help him to recruit the right profiles, help him to meet customers or other investors for the next financing rounds. We share our network and our experience.
But there is no magic recipe for this?
I have funded a number of companies and I still don't know what it takes to make a company work! On the other hand, I do know what not to do, which statistically will help the start-up to grow.
What do you mean by that?
More often than not, people are mistaken. Another pitfall is minimizing the competition. Many entrepreneurs come to me and tell me that Google or Apple are finished! But you should never underestimate what other companies are doing! You have to keep a realistic vision of your project. Creating a company is above all a matter of pragmatism.
Do you think that this dynamic that you are talking about above will continue?
I think it will be around for a while! It meets real needs so it's not going to stop overnight. All the indicators are green: there are more and more entrepreneurs, companies are growing, there is money on the market...
Is this unique to France?
France has been able to develop a real ecosystem, which is not necessarily found elsewhere in Europe. It is the country that invests the most, just behind the United Kingdom, which will always benefit from the spin-offs of its relationship with the Americans.
But we are lucky to have real support for innovation like the BPI and political actions that support business, especially start-ups. Let's hope this continues beyond the 2022 presidential elections!