Of the hundreds of French startups to have raised funds between 2013 and 2021, almost 80% benefitted, at some point, from support from public bank Bpifrance, according to the group’s own figures.
France has long sought to position itself as Europe’s leading technology hub, culminating this week in a Dealroom report which suggested Paris had overtaken London as the best startup ecosystem on the continent, based on valuations, growth and unicorn numbers, among other measures.
According to data published Thursday by Bpifrance, 80% of French startups that secured funding between 2013-21 at some point received direct backing — in the form of an investment, a grant or a loan — from the bank, or indirect funding when, for example, they raised from a VC that counts Bpifrance as an LP.
The bank’s report outlines Bpifrance’s impact on the country’s startup and VC ecosystem in the period, revealing the organisation invested €4.6bn into 500 French startups and nearly €6bn into 180 VC funds. It also pumped €13bn in grants and loans into early-stage startups.
This significantly contributed to the growth of the tech ecosystem, according to the bank. In 2013, French startups raised €1bn, multiplying nearly ninefold to reach €8.3bn in 2023.
“The strength of the ecosystem for the past 15 years has been largely accelerated by Bpifrance,” Stéphanie Hospital, founder and CEO of early-stage VC OneRagTime, which does not have backing from the bank, tells Sifted. “It’s been a formidable catalyst for the tech sector.”
Boosting French tech
Bpifrance was created at the end of 2012 with the mission to fund and develop French enterprises with a focus on innovation — and as such its remit spans a wide range of activities for companies of all sizes and across all sectors of the economy. Last year, Bpifrance injected €60bn overall into the French economy.
The bank supports startups and VCs in several ways, including direct investments, fund-of-fund operations, grants and loans, as well as a number of support services like events, networking opportunities and bootcamps.
The report notes that two-thirds of VC funds in France that have raised from institutional LPs also have backing from Bpifrance — and the same proportion of funds consider they wouldn’t have been able to raise without the bank.
For VCs Bpifrance is now seen as critical to attract other institutional and private LPs. “It can bring huge and quick success when fundraising,” says Hospital.
Alexis Houssou, the founder of early-stage VC firm HCVC, whose first fund was backed by Bpifrance, says the bank has significantly contributed to growing a strong network of VC funds in France.
“Around 10-15 years ago there were no or few LPs who could invest in funds, especially as anchor investors,” Houssou tells Sifted. “They’ve had an evident role in helping to kickstart the ecosystem.”
This has been particularly critical at early-stage: the study found that between 2013-2017, Bpifrance represented on average 43% of the capital raised by seed funds.
“There was a major gap at seed stage 10 years ago and it’s not the case anymore,” says Houssou. “Early-stage French startups today are pretty well-off at the European scale.”
VCs are also getting bigger: the report found that over the decade, funds backed by Bpifrance have tripled in size on average. Overall, while in 2013 there were only five funds over €200m, in 2021 this had jumped to 30.
Deteriorating the sector?
According to the report, a recurrent criticism against Bpifrance is that heightened public support for VCs and startups leads to a lower-quality ecosystem where players who perform badly can still find funding.
But a comparison between startups backed (directly and indirectly) by Bpifrance and those who have only received support from private actors shows no notable difference when it comes to revenue growth and employee growth over five years.
“Bpifrance has invested without deteriorating the market,” Alexandre Gazaniol, a senior economist at Bpifrance in charge of the report, said during a press conference.
Bruno Raillard, the cofounder of seed VC Frst, which is backed by Bpifrance, says these criticisms miss a key part of the picture.
France has no pension funds comparable to the US and the UK that can invest in VC, leaving a huge gap in funding that Bpifrance has been filling, says Raillard.
“There is a lot of public money-bashing against France, which I think is inopportune,” says Raillard. “VC is a long-term game with little liquidity. By definition you need players with long-term money… And Bpifrance is one of the biggest investors there.”
A maturing ecosystem
Bpifrance says it is taking on a less prominent role as the ecosystem matures.
While startup funding between 2013-2023 multiplied by nine, Bpifrance’s direct and indirect investments in startups multiplied by seven, suggesting the sector is increasingly capable of securing private funding.
“It’s what we were trying to do: to grow the private ecosystem,” said Pascal Lagarde, executive director at Bpifrance, at a press conference.
VC funds are also securing more funding from other sources. The average proportion of capital owned by Bpifrance in seed-stage VC funds dropped from 43% before 2018 to 34% between 2018-2021, as funds raised more money from other institutional investors, corporates and family offices.
But one investor, who asked to remain anonymous, tells Sifted enabling this shift is more challenging than it seems. Securing funding from Bpifrance comes with constraints, including committing to making a number of investments in France — which in turn is likely to put off foreign LPs.
“France is too small a market… It makes it much harder to create iconic VC franchises and to attract foreign LPs,” they tell Sifted.
Nearly half (48%) of the funds surveyed for the report disagreed that securing backing from Bpifrance had enabled them to attract foreign investors.
Fund performance
Despite the encouraging numbers reported, Bpifrance says there is still a long way to go.
Fund performance has improved over the past decade: between 2009-2012, the funds backed by the bank generated a multiple of 1.9x, which increased to 2.5x between 2013-2016. But this is not enough, says the bank.
“The performance has improved,” said Gazaniol, “but we know it’s not enough… We’re still missing, in France, very high-performance funds like you can find in the US.”
Read the orginal article: https://sifted.eu/articles/bpifrance-vc-results-2013-2023/
