VC Politics<\/a>.\u201d I have kept all sources anonymous, in order to preserve relationship, however in each case, I have talked to several actors deeply involved with the VC in\u00a0question\u00a0in order to get a well-rounded perspective.<\/em><\/p>\nThe question around the role of a government in the startup ecosystem is a difficult one, with no easy answer. If you listen to TechStars co-founder David Cohen, their role is to \u2018get out of the way;\u2019 however, in Europe, for better or for worse, that\u2019s just not how government operates. On a European level, on a member state (national) level, and on a local level, government encourages innovation through grants, advantageous loans for startups, and even investment.<\/p>\n
In France, the government was hailed last year when it announced that all of these activities, previously separated into many different organizations, would be rolled together into one organization, BPIFrance, so that startups would have one face, one person, one door to open, in order to get access to all of the government\u2019s innovation-oriented resources.<\/p>\n
BPIFrance\u2019s president, Nicolas Dufourcq, is a level-headed guy, having come from being #2 at CapGemini, and seems to have a good sense of the government\u2019s role in innovation; I have sat down with various members of BPIFrance on several occasions, and the message between them seems to be shared, a common vision around supporting growth, with a focus on support.<\/p>\n
BPIFrance doesn\u2019t invest in Seed Rounds, so you won\u2019t be raising 500K\u20ac from the government. Instead, they invest in Seed Funds, like Partech Entrepreneurs, Elaia Alpha, and a total of over 100 other local, national & international funds in France. In addition, for startups who raise capital from the private sector, BPIFrance offers low-interest loans & grants that match the company\u2019s capital, meaning raising 300K\u20ac from Angels can get you up to 300K\u20ac from BPIFrance \u2013 not bad.<\/p>\n
BPIFrance invests directly in higher round \u2013 20 Million euros and up, to be exact \u2013 via its Large Ventures, which means that, for Series C rounds & later it can find itself competing against private investors. One would imagine that, given BPIFrance\u2019s \u201csupport\u201d role, that, if enough private investors are involved in the round, that BPIFrance would led the private market take the reins, especially since it has its hands in most funds to begin with.<\/p>\n
One might also imagine that, if the fund who wanted to invest \u20ac20 Million into a French company was foreign, and thus came from a fund that BPIFrance was not involved in, that this would be a sign of BPIFrance\u2019s success \u2013 that is, if BPIFrance\u2019s goal is to encourage investment in France, than what better demonstration of success than a non-French fund investing in French companies?<\/p>\n
The Dark Side of Public Funds<\/b><\/p>\n
The downside to government-run funds is, of course, that their definition of ROI is not the same as a private fund, nor is it necessarily aligned with the interests of founders. BPIFrance isn\u2019t expected to return a fixed ROI to its sole LP (the Elys\u00e9e), which means that things like \u201cvaluation\u201d and \u201cterms\u201d are secondary to getting in rounds that will make headlines.<\/p>\n
I have recently heard from VCs that BPIFrance has taken to pushing out private investors by inflating the valuation \u2013 after all, founders want higher valuations, right? \u2013 in order to get in rounds, and push out funds that aren\u2019t in the BPIFrance family. VCs of French funds are unable to speak out against such practices \u2013 after all, BPIFrance is both an LP to their early stage funds and a potential co-investor in follow-up rounds to their investments; however, for funds that have no need to placate BPIFrance, the practice is becoming too much to handle, and late-stage investment in France is suffering.<\/p>\n
We often speak about the lack of late-stage funding in France; it may be that late stage funds are being kept at the gates to Paris by the government, in which case, BPIFrance is impeding itself from completing its very mission.<\/p>\n
Ireland: A great Example of Public Funds<\/b><\/p>\n
I don\u2019t want to leave on the thought that \u201cpublic funds don\u2019t work,\u201d and I don\u2019t necessarily think it\u2019s true; however, there are not many examples of success to follow on, so many funds are marching in the dark.<\/p>\n
Ireland however, through Enterprise Ireland (EI) and the Irish Development Agency (IDA) have won over my confidence in terms of their investment strategy by telling me just one point: their ability to get more money for follow-up funds from the government is based on their returns on investment.<\/p>\n
I would love to see BPIFrance and other government funds (even the European Commission\u2019s fund) adopt such a practice; to be both public about their ROI, as well as to use it as a metric for receiving funding in future years.<\/p>\n
For now, I think BPIFrance needs to also take a hard look at a role in the French startup ecosystem. In an ideal world, BPIFrance wouldn\u2019t exist \u2013 that is, it\u2019s success comes by rendering itself unnecessary. In order to do that, it needs to enable foreign investors to get good ROI on their investments in France. Private European funds like Index Ventures & Mangrove Partners, who have local investments and American LPs, are giving good returns to American LPs, showing them (with cash) that investment in European startups is a good one.<\/p>\n
In order to keep out of naughty practices, I hope to see BPIFrance adopt a bit of transparency about their investment terms, their ROI, and their KPIs for success \u2013 otherwise, France will be in the same position 7 years from now, dependent on public money in order to get Seed capital all the way up to Series C,D,E,\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"
The relationship between founders & VCs is a delicate one, to say the least. Because of the nature of their relationship, it is often in their mutual benefit for both to brush any tension other the rug. As such, the dark side of working with Venture Capitalist is often neglected or ignored, and so the<\/p>\n","protected":false},"author":77,"featured_media":21344,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"subtitle":"","footnotes":""},"categories":[113],"tags":[],"class_list":["post-21339","post","type-post","status-publish","format-standard","has-post-thumbnail","category-finance"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/posts\/21339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/users\/77"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/comments?post=21339"}],"version-history":[{"count":0,"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/posts\/21339\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/media\/21344"}],"wp:attachment":[{"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/media?parent=21339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/categories?post=21339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rudebaguette.com\/en\/wp-json\/wp\/v2\/tags?post=21339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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