Last week TheFamily announced that they have pulled in $1 Million in fundraising, including the initial $150K that Index Ventures limped in last year. Index’s investment has been matched by a leading French VC , alongside a handful of Business Angels, all of whom have one thought on their mind: deal-flow.
For VCs & Business Angels alike, investing in TheFamily means getting access to deal-flow. Given that the Family manages over 100 seed-stage startups in France, it is not an overstatement to say that TheFamily has an ever-tightening grip over the seed investment round. For business angels, investment in TheFamily allows them to syndicate alongside TheFamily’s investment in select members.
It’s a complicated system when compared to Y-Combinator or TechStars, who invest equally across the board in all of their startups – talk about not sending signals. Speaking with Jean de la Rochebrochard, Partner at TheFamily responsable for much of the fundraising and financing of their startups, as well as identifying new startups, he said that the reason for TheFamily’s unique structure is that “The French/Parisian ecosystem is not mature… we’re building a framework to shape the ecosystem”
TheFamily presents itself as an ecosystem-builder: it provides free & paid events as well as educational content around entrepreneurship, growth hacking & more. This activity, in addition to providing knowledge to the ecosystem, serves as great recruitment for TheFamily or, in the case of the growth hacking meetup, its member startups.
Startups accepted into TheFamily pay 1% of their equity, and in exchange, have access to pretty amazing tools: lawyers, fundraisers, accountants, education, a network of France’s most successful entrepreneurs in all stages of development, and even press. That’s all wonderful for startups. I’ve said it before and I’ll say it again: if you’re a pre-fundraising French startup and you’re not in TheFamily, you’re doing yourself a disservice.
Yet, TheFamily asks that all angels who want to invest in TheFamily startups first invest in TheFamily – this is according to French syndication laws, says co-founder Oussama Ammar in an interview on TechCrunch. The logical progression of such an arrangement is that all seed startup deal-flow passes through TheFamily, meaning that all business angels must pay a hat-tip ‘investment’ to TheFamily in order to play by their rules. Suddenly, TheFamily sounds much more like this family.
All the red alerts going off in my head around this model for investment, which I worry are creating more barriers than eliminating, may be in vain. After all, PeopleDoc received $17.5M without entering TheFamily, as did Dashlane with their $22M. In fact, MobyPark raised $600K, and WhereToGet raised €1 Million – all without paying tribute to TheFamily.
To date, TheFamily counts a handful of startups who have gone on to raise $1Million+ fundraising rounds – Bunkr, Algolia, TokTokTok, … – RudeList‘s latest fundraisings all come from startups outside of TheFamily’s network.
Putting aside events (TheFamily is not an events company), TheFamily’s chief source of revenue will be its investments, and its ability to get in early on many of the next big exits in France; however, if the ecosystem can function well without TheFamily, does it need TheFamily?
Many, including TheFamily, will tell me that TheFamily is building an ecosystem, that they’re educating the next generation of entrepreneurs – this is all great, and I will continue to encourage this – however, TheFamily is, before everything else, a company. A company with investors who want to make money. It has employees & co-founders who, I imagine, would like to see TheFamily grow beyond events organization and into a full-fledged investment vehicle. After all, what better way to give back to the ecosystem than to invest in it, and leverage previous investments to continue investing more?
For now, I still fully support the efforts of TheFamily. What it is exactly that they are trying to build remains foggy to me – at best, they are building 3 companies at the same time (media, events, VC), and at worst they are building a mafia that makes both sides pay to play. Until I can see exactly what it is that TheFamily wants to be in 5 years, I will treat it the same way I treat any startup who doesn’t know what it will look like in 5 years – with skepticism.