Something’s not sitting right with me about TheFamily

Something’s not sitting right with me about TheFamily
French-Startup

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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.

5 Responses

  1. Oussama Ammar

    Thanks for this great article Liam 🙂 – the signal problems are easy to solve.

    1) if you want to invest in TheFamily AND don’t manage your participation (aka having a single line in your cap table) = TheFamily Syndicate (if you want to access our deal flow without us, please feel free)

    2) we have legal agreement w/ our VCs about dealflow and that’s fine (we give early access to them and yeah it is a pay to play) – if a VC cannot pay to get this access, I don’t care 🙂

    3) to avoid signal problems, TheFamily invest ONLY after having offer the deal on the market to everyone!

    4) our Entrepreneurs ask all time long that we reinforce our commitment inside their captable and we will be happy of that

    What is TheFamily? An investor (aka taking shares) that created a FREE management fees (AKA no LPs thanks to event) who want to build billions dollars company (AKA having the ecosystem working in their favor BECAUSE in some way we are a family).

    You don’t get if we are an event company is like asking what kind of company amazon is. We will do whatever it costs, to achieve our goal: building the next generation of homerun with big links between the founders 🙂 helping like the paypal mafia to move to even bigger ambition.

    At TheFamily – if you are unhappy u can take your shareback at ANYMOMENT at market price (AKA if you don’t fundraise, you are allow to buy them the price we paied meaning nominal value).

    • Liam Boogar

      Thanks Oussama.

      I get the investment plan, and why it has to be ‘unique’ given the unique circumstances.

      I wonder how many of your companies use Amazon as a justification for their unproven business model? I think you hit the nail on the head as to where my skepticism comes from. It is born out of having nothing to compare TheFamily to. TheFamily has bits and pieces of a lot of things, and sometimes uses the same lingo (like “accelerator”) as those other things, but it is distinctly not those things. Hence the red alerts.

    • Tyler Willis

      Liam, I think your missing the most critical piece with regard to signaling issues: TheFamily only invests as a follower once a startup has found a lead. This means that any signaling would happen after the startup has already found a lead investor.

  2. Nicolas Colin

    Let me quote Miles Davis (one of my idols and a great innovator): “I’ll play it and tell you what it is later”. In other words, if what’s already known delivered results, we wouldn’t have to build something different.

    By “results”, I mean “Multinational companies dominating their digital market, employing thousands of people, acquiring dozens of startups every year, still growing strong, and still headquartered in France (and paying their taxes there)”.

    I don’t see any of those in your article, which suggests that something isn’t working. Hence TheFamily.

  3. Anonymous

    I find this article fair and it does a good job into highlighting both positive aspects and question marks around TheFamily’s operations and interactions with the community. I also think TheFamily is a business in itself so the ‘ecosystem accelerator’ label can be misleading as there are other start-up actors that are not for profit.

    I like Rude Baguette’s independent thinking. I also think that TheFamily could be clearer in its community communications and be receptive of criticism regarding its profile and positioning. A lot of for profit business also make a social contribution but they are still a business doing CSR.

    Thank you for creating this debate.

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