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Venture Capital Investment in France: a Unique Opportunity!
Angel investors, high-net worth individuals, family offices, venture capital/private equity firms, funds
of funds, sovereign wealth funds, investment banks or any other institutional investors, this article is
for you!
In this post, I would like to explain to investors located out of France the great opportunity to found
and fund Venture Capital investment firms in France.
Every day a new startup is created in France. These
startups are based on innovative projects, holded by
Academic science researchers, engineers or business-
marketing professionals from all fields (marketing &
business concept, internet and web-tech, electronics,
telecomunication and high-tech, clean/green-tech,
mechanics, optics, chemicals, biotech-pharma,
healthcare or medical device .... ).
But our Angel investors networks and clubs are not
enough developed, and Private Equity firms, even if some note on their website "VC", prefer to focus
on Expansion/Growth Capital investments(1) and Transmission operations such as Leveraged Buy-
Out/Mezzanine, Merge&Acquisition and Initial Public Offering, instead of Seed and Venture
Capital(2) investments.
Due to the lack of investors, the French market of equities of privately-held companies, from startups
to SMEs, is at present cheap (pre-money valuations of French startups/SMEs are lower than US-ones),
but the quality of our basic and applied science, engineering, inventions and technologies is excellent.
Indeed, French Government and European Union have a strong Science to Business policy (important
grants are available for Research, Development and Innovation) to promote the technology-transfer
from Universities into spin-off/spin-out startup companies. But this is insufficient, indeed there is a
gap of financing between R&D and technology-transfer stages to early-later startup stage and
commercial expansion stages. The financing process of innovation is extremely efficient in countries
such as the USA or Israel, because as soon as an innovative startup emerges, Venture Capital firms
invest in these companies.
(1) Expansion/Growth Capital is also called Serie-B, Serie-C and Serie-D investment rounds.
Ari Massoudi / Consultant Strategy of Innovation / www.strategy-of-innovation.com / www.linkedin.com/in/arimassoudi

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(2) Seed Capital from idea to prototype: €50,000 to €600,000, Serie-A Venture Capital for market
introduction: €300,000 to €2,500,000 (except for biotech-pharmaceutical startups developing new
drugs, Serie-A can rich-up to €20M).
Some features of Venture Capital industry
- USA continues to be the largest venture capital industry in the world. US VC invested €15 billion vs
European VC only €3.7 billion (in 2010)!
- Early-stage VC investments in the US were on average €2.2 million per company, against an
average €400,000 per company in the EU!
- A Venture Capital fund in the European Union contains approximately €60 million, a US
counterpart has a fund size of €130 million!
- Every week in USA, a dozen of biotech/medical device companies raise $1M to $80M from Venture
Capital firms! Europe lags far far behind!
Three major targets for Venture Capital firms seeking to invest in French privately-held
companies
A) Startups founded by experienced managers of global or mature companies
In France, there is a more and more startups founded by experienced managers of big and/or mature
companies (spin-out or independent) offering fantastic products and services. French entrepreneurs
have a strong know-how to design innovative business-models, particularly combining "clients facing
online platform" and "offline logistics to manufacture and deliver products".
Unlike publicly-listed companies, for foreign investors (based out of France) it is very difficult to
identify these breakthrough privately-held startups (gold nuggets)!
B) From Science to Business
In France, we have 80 Universities, and each one has a startup incubator dedicated to support the
transfer of academic research and cutting-edge technology into spin-off startups. Each incubator holds
around 100 technology-based startups (around 8000 startups are currently in our incubators!). We
have startups having innovations coming from every academic and scientific fields (Formal Sciences,
Physical Sciences, Chemical and Pharmaceutical Sciences, Life and Medical Sciences ...).
Our tech-starups are undercapitalized compared to US-ones, there is a great opportunity for venture
capital investors!
Ari Massoudi / Consultant Strategy of Innovation / www.strategy-of-innovation.com / www.linkedin.com/in/arimassoudi

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C) From Classroom to Business
Startup incubators dedicated to students in higher-education (Universities, Business Schools,
Engineering Schools, .....) are very promising and such incubators are emerging everywhere in France,
linked to each higher-education organisation. Indeed, among the 3 million students in French higher-
education, we could have several potential Mark Zuckerberg (Facebook's founder-CEO) that have
crazy dreams and wishing to change the world. Of course, startups launched by students are less
technology-based compared to University spin-out startups backed by several years of scientific
research. Nevertheless, the success and profitability of such new ventures based on “good ideas” could
very high (Facebook, Goolge, eBay ...).
The incubators provide to student-entrepreneurs a strong support from the university’s academic
resources (business training, expertise and mentoring from Professors, and also from local expert such
as Lawyers, Corporate Finance Experts & Accountants, Strategy & Marketing Consultants, CEOs &
Managers of growing or mature companies) and facilities (laboratories, prototype engineering,
business offices ...).
The incubators increase dramatically the percentage of success compared to startups without having
had the support of an incubator. The incubation clearly diminishes the risk of failure:
- Without incubator: Over 50% of small businesses fail in the first year and 95% fail within the first
five years (according to the US Small Business Administration)
- With incubator: 90% of new ventures are still alive and are operating 5 year after leaving the
incubator.
Other studies has shown that the survival percentage of new ventures is intimately linked to the
capitalisation at the launching (incorporation). More the capital stock (or equity) is higher, more the
company has chance to survive during the 5 following years.
Therefore, the idea of combining in one structure “incubator and seed-capital investment fund” has
emerged.
Some well-known combo incubators [Startup incubator + Seed stage investment fund], all are located
in USA :
- Y Combinator http://en.wikipedia.org/wiki/Y_Combinator_(company)
- 500Startups http://en.wikipedia.org/wiki/Dave_McClure
- TechStars http://en.wikipedia.org/wiki/Techstars
Currently, in France we do not have such combo incubators mixing both business
mentoring/education and seed investments. There is a real opportunity for investors to take part of
such incubators.
Ari Massoudi / Consultant Strategy of Innovation / www.strategy-of-innovation.com / www.linkedin.com/in/arimassoudi

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In conclusion
The ecosystem of innovation by science & technology is very dense and active in France. We are very
good at supporting academic research in applied science and the transfer of technology into startups or
big companies. But we still lake venture capital investments (compared to other western countries),
and more precisely we lake seed-investors (angel investors) and serie-A venture capital investments
up to a couple of millions. Our private equity investment firms focus on middle-sized to big
companies and they invest in growth stage or transmission operations (LBO, IPO ...) instead of
Venture Capital investments. Therefore, our innovative startups remain undercapitalized, inducing
lower pre-money valuations.
The French market of startups and SMEs private equity is at present cheap:
Buy the highest quality at the lowest prices!
That's what I propose to you!
If a such project could interest you
........................................... Do not wait anymore, contact me
........................................................ and Let's Invest in the French Genius !
Ari Massoudi / Consultant Strategy of Innovation / www.strategy-of-innovation.com / www.linkedin.com/in/arimassoudi