Tag Archives: France

Seydoux, the founder of Parrot, about entrepreneurship and innovation

A recent publication by the excellent ParisTech Review draw my attention. It’s entitled Three lessons from Parrot’s saga et you can read the entire article here (www.paristechreview.com/2016/09/28/three-lessons-parrot-saga/)

I already posted about Parrot and its founder Henri Seydoux (see www.startup-book.com/2012/08/10/parrot-and-henri-seydoux-a-french-success-story/) and I was lucky to listen to him at EPFL in 2014. I encourage you to watch to his presentation below, where he gave five advice: follow your own ideas, people will help you, focus is essential, be cautious with money, and… good luck.

In this new series of advice, I did not only notice Seydoux’ three lessons (1- it’s perfectly possible to create an industrial company in France. In fact, it’s even easier than ever. 2- high technology works in cycles, and you can’t expect to sell the same product for decades. 3- the software industry is fundamentally oriented towards B2C) but also some striking points:
– Parrot was many times close to bankruptcy but thanks to the courage, vision and yes, luck of its founder, Parrot avoided the worst.
– To his regret, [he] never managed to convince French brands […]. No one is a prophet in his own country…
– To innovate, Seydoux created « internal start-ups », with small talented teams with “two main prohibitions: no specifications, no market research”. Some tinkering, trial and errors and “gradually, we accumulate knowledge and sometimes, it ends up working”.
In 2016, Parrot has a market cap. of €300M, sales of €300M and close to 1’000 employees. A beautiful European success story.

Global Entrepreneurship 2016 – Part 1: the Macroeconomics

I just read two great reports about entrepreneurship. The first one is the Global Entrepreneurship Index 2016 (GEI). The second one is the Startup Playbook by Sam Altman (Ycombinator). Whereas the second one is about the micro features of entrepreneurship, the GEI is a worldwide macro-economic analysis. I will cover the Startup Playbook in the part 2 of these series of posts, so let me focus here in the GEI.

Global-Entrepreneurship-Index

What I found really interesting is that compared to the Global Innovation Index (GII) about which I always have doubts – I think it measures more the inputs necessary for innovation than the outputs – I feel much more comfortable with the criteria and results of the GEI. For example, the USA is number one which makes a lot of sense and Switzerland is #8. Switzerland is #1 in the GII which is some kind of a mystery to me. France and Israel are #10 and #21 in the GEI but #20 and #21 in the GII.

Global-Entrepreneurship-Index-USA-Isr-CH-FR

The 3 As of Entrepreneurship

So how is this measured? The authors define 3 framework conditions entrepreneurship: attitudes, abilities and aspirations.[Pages 26-27 of the document or 49-50 of the pdf]. They also define 14 related pillars [Pages 19-22 of the document or 42-45 of the pdf]

Entrepreneurial attitudes are societies’ attitudes toward entrepreneurship, which we define as a population’s general feelings about recognizing opportunities, knowing entrepreneurs personally, endowing entrepreneurs with high status, accepting the risks associated with business startups, and having the skills to launch a business successfully. The benchmark individuals are those who can recognize valuable business opportunities and have the skills to exploit them; who attach high status to entrepreneurs; who can bear and handle startup risks; who know other entrepreneurs personally (i.e., have a network or role models); and who can generate future entrepreneurial activities.

Moreover, these people can provide the cultural support, financial resources, and networking potential to those who are already entrepreneurs or want to start a business. Entrepreneurial attitudes are important because they express the general feeling of the population toward entrepreneurs and entrepreneurship. Countries need people who can recognize valuable business opportunities, and who perceive that they have the required skills to exploit these opportunities. Moreover, if national attitudes toward entrepreneurship are positive, it will generate cultural support, financial support, and networking benefits for those who want to start businesses.

Entrepreneurial abilities refer to the entrepreneurs’ characteristics and those of their businesses. Different types of entrepreneurial abilities can be distinguished within the realm of new business efforts. Creating businesses may vary by industry sector, the legal form of organization, and demographics—age, education, etc. We define entrepreneurial abilities as startups in the medium- or high-technology sectors that are initiated by educated entrepreneurs, and launched because of someone being motivated by an opportunity in an environment that is not overly competitive. In order to calculate the opportunity startup rate, we use the GEM TEA Opportunity Index. TEA captures new startups not only as the creation of new ventures but also as startups within existing businesses, such as a spinoff or other entrepreneurial effort. Differences in the quality of startups are quantified by the entrepreneur’s education level—that is, if they have a postsecondary education—and the uniqueness of the product or service as measured by the level of competition. Moreover, it is generally maintained that opportunity motivation is a sign of better planning, a more sophisticated strategy, and higher growth expectations than “necessity” motivation in startups.

Entrepreneurial aspiration reflects the quality aspects of startups and new businesses. Some people just hate their employer and want to be their own boss, while others want to create the next Microsoft. Entrepreneurial aspiration is defined as the early-stage entrepreneur’s effort to introduce new products and/or services, develop new production processes, penetrate foreign markets, substantially increase their company’s staff, and finance their business with formal and/or informal venture capital. Product and process innovation, internationalization, and high growth are considered the key characteristics of entrepreneurship. Here we added a finance variable to capture the informal and formal venture capital potential that is vital for innovative startups and high-growth firms.

Each of these three building blocks of entrepreneurship influences the other two. For example, entrepreneurial attitudes influence entrepreneurial abilities and entrepreneurial aspirations, while entrepreneurial aspirations and abilities also influence entrepreneurial attitudes.

GEI-Conditions

The 14 Pillars of Entrepreneurship

The pillars of entrepreneurship are many and complex. While a widely accepted definition of
entrepreneurship is lacking, there is general agreement that the concept has numerous dimensions. […] Considering all of these possibilities and limitations, we define entrepreneurship as “the dynamic, institutionally embedded interaction between entrepreneurial attitudes, entrepreneurial abilities, and entrepreneurial aspirations by individuals, which drives the allocation of resources through the creation and operation of new ventures.”

Entrepreneurial Attitudes Pillars

Pillar 1: Opportunity Perception. This pillar captures the potential “opportunity perception” of a population by considering the size of its country’s domestic market and level of urbanization. Within this pillar is the individual variable, Opportunity Recognition, which measures the percentage of the population that can identify good opportunities to start a business in the area where they live. However, the value of these opportunities also depends on the size of the market. The institutional variable Market Agglomeration consists of two smaller variables: the size of the domestic market (Domestic Market) and urbanization (Urbanization). The Urbanization variable is intended to capture which opportunities have better prospects in developed urban areas than they do in poorer rural areas.

Pillar 2: Startup Skills
. Launching a successful venture requires the potential entrepreneur to have the necessary startup skills. Skill Perception measures the percentage of the population who believe they have adequate startup skills. Most people in developing countries think they have the skills needed to start a business, but their skills usually were acquired through workplace trial and error in relatively simple business activities. In developed countries, business formation, operation, management, etc., requires skills that are acquired through formal education and training. Hence education, especially postsecondary education, plays a vital role in teaching and developing entrepreneurial skills.

Pillar 3: Risk Acceptance. Of the personal entrepreneurial traits, fear of failure is one of the most important obstacles to a startup.

Pillar 4: Networking. Networking combines an entrepreneur’s personal knowledge with their ability to use the Internet for business purposes. This combination serves as a proxy for networking, which is also an important ingredient of successful venture creation and entrepreneurship.

Pillar 5: Cultural Support. This pillar is a combined measure of how a country’s inhabitants view entrepreneurs in terms of status and career choice, and how the level of corruption in that country affects this view.

Entrepreneurial Abilities Pillars

Pillar 6: Opportunity Startup. This is a measure of startups by people who are motivated by opportunity but face regulatory constraints. An entrepreneur’s motivation for starting a business is an important signal of quality. Opportunity entrepreneurs are believed to be better prepared, to have superior skills, and to earn more than what we call necessity entrepreneurs.

Pillar 7: Technology Absorption. In the modern knowledge economy, information and communication technologies (ICT) play a crucial role in economic development. Not all sectors provide the same chances for businesses to survive and or their potential for growth. The Technology Level variable is a measure of the businesses that are in technology sectors.

Pillar 8: Human Capital. The prevalence of high-quality human capital is vitally important for ventures that are highly innovative and require an educated, experienced, and healthy workforce to continue to grow.

Pillar 9: Competition. Competition is a measure of a business’s product or market uniqueness, combined with the market power of existing businesses and business groups.

Entrepreneurial Aspirations Pillars

Pillar 10: Product Innovation. New products play a crucial role in the economy of all countries. New Product is a measure of a country’s potential to generate new products and to adopt or imitate existing products.

Pillar 11: Process Innovation. Applying and/or creating new technology is another important feature of businesses with high growth potential. New Tech is defined as the percentage of businesses whose principal underlying technology is less than five years old.

Pillar 12: High Growth. This is a combined measure of the percentage of high-growth businesses that intend to employ at least ten people and plan to grow more than 50 percent in five years (Gazelle variable) with business strategy sophistication (Business Strategy variable).

Pillar 13: Internationalization. Internationalization is believed to be a major determinant of growth. A widely applied proxy for internationalization is exporting.

Pillar 14: Risk Capital. The availability of risk finance, particularly equity rather than debt, is an essential precondition for fulfilling entrepreneurial aspirations that are beyond an individual entrepreneur’s personal financial resources.

The reason I really felt synchronized with the authors (congrats to Zoltán J. Ács, László Szerb, Erkko Autio for the great work!) is a final extract from pages 63-64 (86-87 of the pdf): they explain the challenges and related mistakes and describe better approaches.

Unfortunately, although high-growth entrepreneurship and entrepreneurial ecosystems are high on many policy agendas, there is fairly little understanding of how policy can foster them most effectively. Most entrepreneurship policy playbooks remain stuck with old world policy approaches, which focus on identifying and fixing “market failures” and “structural failures.” Such approaches, while effective in addressing well-specified market and structural failures, are hopelessly inadequate to deal with the complexities of entrepreneurial ecosystems.
A classic example of a market failure is the failure of businesses to invest in R&D. Because R&D is a risky and uncertain activity, many firms are tempted to wait, to let others to take the risk, and then quickly copy successful projects. But if everyone thought this way, no one would invest in R&D, and innovative activities would stagnate. Therefore, governments address this market failure by providing subsidies for R&D—in effect, participating in the downside risk while allowing firms to keep the upside returns.
In contrast to subsidizing specific activities, a structural failure policy would seek to build support services and structures that support new firm creation and growth. Examples of structural failure policies include, for example, the creation of science parks and business incubators to shelter and support startup ventures.
Both of these approaches fail to address the complexities of entrepreneurial ecosystems, which are too complex to allow easy identification of specific clean-cut market failures, such as insufficient investment in R&D. The “product” entrepreneurial ecosystems produce is innovative and high-growth new ventures. Creating high-growth new ventures is a far more complex undertaking than starting an R&D project. If we do not see a sufficient number of high-growth new ventures, where exactly is the market failure supposed to reside? The standard approach by governments, which is consistent with market failure thinking, is that there perhaps is not sufficient support funding available to start new, high-growth firms. However, as much as governments have provided subsidies to support new firm creation, the results have not been very encouraging.
Another major problem with both market failure and structural failure approaches is that they are top-down, where the policy maker analyzes, designs, and implements entrepreneurship policy. Top-down, however, is not a feasible approach in entrepreneurial ecosystems that consist of multiple independent stakeholders. In such situations, a policymaker cannot simply command and control, as you have no formal authority over ecosystem stakeholders. Instead, policymakers need to engage the various stakeholders and co-opt them as active participants and contributors to the policy intervention.
[…]
Entrepreneurial ecosystems are fundamentally interaction systems consisting of multiple, co-specialized, yet hierarchically independent stakeholders, many of which may not even know one another. Here, co-specialization means that different stakeholders play different roles—venture capitalists, research institutions, different supporting institutions, new ventures, established businesses, and so on. They offer complementary skills and services, and normally depend on others to accomplish their goals, which implies that team play is needed.
In the above, hierarchical independence means that there are no formal lines of command, unlike, say, within government agencies or industrial corporations. Everyone makes their own independent decisions and optimizes their own performance. Combined with co-specialization, this creates a mutual dependency dilemma: to accomplish your goals you must depend on others, yet you cannot tell others what to do. Cooperation is therefore required. This limits the usability of traditional top-down policies, which are usually implemented through formal chains of command (e.g., a government department designing a policy, which is then implemented by a government agency overseen by the department).
Also of relevance is the notion of interaction systems, which means that the stakeholders of entrepreneurial ecosystems “co-produce” their outputs, such as innovative high-growth new ventures. These outputs are coproduced through a myriad of usually uncoordinated interactions between hierarchically independent yet interdependent stakeholders. This combination of independence and interdependence makes coordination challenging.
In the GEI model, it is the entrepreneurs who drive the entrepreneurial trial-and-error dynamic. This means that entrepreneurs start new businesses to pursue opportunities that they themselves perceive. An entrepreneurial opportunity is simply a chance to make money through a new venture, such as producing and selling goods and services for profit. However, entrepreneurs can never tell in advance whether a given opportunity is real or not: the only way to validate an opportunity is to pursue it. In other words, entrepreneurs need to take risks: they need to access and mobilize resources (human, financial, physical, technological) before they can verify whether or not a profit can be made. This means, then, that not all entrepreneurial efforts will be successful, as some opportunities turn out to be mere mirages. In such cases, the budding entrepreneur will realize sooner or later that they are never going to make a profit, or that they could make more money doing something else. In such cases, the entrepreneur will abandon the current pursuit and do something else instead.
If, however, an entrepreneurial opportunity turns out to be real, the entrepreneurs will make more money pursuing that opportunity than doing something else, and they will continue to exploit it. The net outcome of this entrepreneurial trial-and-error dynamic, therefore, is the allocation of resources to productive uses. In other words, a healthy entrepreneurial dynamic within a given economy will drive total factor productivity, or the difference between inputs and outputs. The greater the total factor productivity, the greater the economy’s capacity to create new wealth.

What makes an entrepreneurial ecosystem by Nicolas Colin

Great analysis by Nicolas Colin (The Family) in his article What makes an entrepreneurial ecosystem? If the topic interests you, it is a must-read.

Colin-Ecosystems

in a nutshell, the entrepreneurial ecosystems need 3 ingredients – I quote:
– capital: by definition, no new business can be launched without money and relevant infrastructures (which consist of capital tied up in tangible assets);
– know-how: you need engineers, developers, designers, salespeople: all those whose skills are necessary for launching and growing innovative businesses;
– rebellion: an entrepreneur always challenges the status quo. If they wanted to play by the book, they would innovate within big, established companies, where they would be better paid and would have access to more resources.

This reminds me of two “recipes” I often mention. First the “5 needed ingredients of tech. clusters”
1. Universities and research centers of a very high caliber;
2. An industry of venture capital (i.e. financial institutions and private investors);
3. Experienced professionals in high tech;
4. Service providers such as lawyers, head hunters, public relations and marketing specialists, auditors, etc.
5. Last but not least, an intangible yet critical component: a pioneering spirit which encourages an entrepreneurial culture.
in “Understanding Silicon Valley, the Anatomy of an Entrepreneurial Region”, by M. Kenney, more precisely in chapter: “A Flexible Recycling” by S. Evans and H. Bahrami

Second, Paul Graham in How to be Silicon Valley? “Few startups happen in Miami, for example, because although it’s full of rich people, it has few nerds. It’s not the kind of place nerds like. Whereas Pittsburgh has the opposite problem: plenty of nerds, but no rich people.” He also added about failed ecosystems: “I read occasionally about attempts to set up “technology parks” in other places, as if the active ingredient of Silicon Valley were the office space. An article about Sophia Antipolis bragged that companies there included Cisco, Compaq, IBM, NCR, and Nortel. Don’t the French realize these aren’t startups?”

Many toxic friends of entrepreneurial ecosystems have not understood this. But for those who have understood, building lively ecosystems remains a real challenge: bringing the rebellion, the culture, diminishing the fear of risk taking without stigmatizing (not rewarding– here I disagree with Colin) failure remains highly challenging whereas finding know-how and capital is not easy but feasible with some hard work…

Finally, I copy his diagrams which show ideal and less ideal combinations of capital, know-how and rebellion, adding my exercise for Switzerland.

NicolasColin-NationalEcoCompar

Switzerland is probably 80% Germany and 20% France…

SwissNationalEcoCompar

(A short addition on Oct 29, 2015) – The best description of Switzerland was given by Orson Welles. It explains a lot of things…

“In Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace – and what did that produce? The cuckoo clock.” in The Third Man, said by Holly Martins to Harry Lime.

The (sad) state of high-tech IPOs on the Paris Stock Exchange

I just read an excellent article in the newspaper Le Monde: Investors get tired of IPOs.
LeMonde-July14

The first reading could suggest positive news, as shown in the following charts:
LeMonde-FrenchIPOs-2
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LeMonde-FrenchIPOs-3
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LeMonde-FrenchIPOs-1
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I looked in more detail at the IPO prospectus of 11 of these strat-ups. For reference, the 11 companies studied are:
Ask http://www.ask-rfid.com
Awox http://www.awox.com
Crossject http://www.crossject.com
Fermentalg http://www.fermentalg.com
Genomic Vision http://www.genomicvision.com
Genticel http://www.genticel.com
Mcphy energy http://www.mcphy.com
Supersonic Imagine http://www.supersonicimagine.fr
Txcell http://www.txcell.com
Viadeo http://fr.viadeo.com/fr/
Visiativ http://www.visiativ.com
and here I let you discover the 11 capitalization tables.

I show you here the two most successful and Supersonic Viadeo:

Supersonic-captable
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Viadeo-captable
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Why did I feel the need to use the term “sad” situation? Because:
– Valuations do not exceed €200M
– Amounts raised do not exceed €50M
With such numbers, neither entrepreneurs nor investors can not be compared with their U.S. counterparts. (I refer you to my summary of U.S. IPOs, if you are not convinced).

And if you’re still not convinced, I refer you to an excellent debate on France Culture including Osamma Ammar, founder of The Family: Is France heaven or hell for start-ups? Osamma Ammar describes the historical weaknesses of the French system, too much government intervention, IPOs (like those Viadeo rightly) that are so low that they would not take place in the USA (whereas a French start-up such as Criteo could be quoted on the Nasdaq). There is much to say from the 11 IPOS, but I leave you to think about what they mean …

France: a New Deal for Innovation?

It can be said: France is trying hard to change its innovation culture. After many months of thinking (I was part of an expert group, the Beylat-Tambourin mission), French Minister for Innovation and the Digital Economy, Fleur Pellerin announced a New Deal for Innovation. Some will smile, another state decision! But if you read my posts about Mariana Mazzucato’s The Entrepreneurial State, you will understand my interest.

Fleur Pellerin, à Paris le 30 octobre 2011

In a nutshell, Fleur Pellerin and her team are focusing on:
additional resouces: money is the fuel of innovation, far from sufficient, but critical. A new €500M fund, Large Ventures as well as €30k grants for new entrepreurs (about €10M per year). It’s important to cover seed funding as well as later stage.
attracting talent with a “New Argonaut” policy. there are 50’000 French people in Silicon Valley, they have experience to bring.

Exactly what Paul Graham says in How to be Silicon Valley: you need nerds and rich people. And it is not just the state. Xavier Niel, the most succesful French entrepreneur in recent years is launching 1000start-ups, a huge and ambitious initiative in the heart of Paris with a lot of money…

Yes, France is trying hard!

1000start-ups

You can have a look at the following references, but you need to read French!

L’innovation, c’est un projet de société” in La Tribune
Nous avons une vision trop idéologique de l’entreprise” in Le Monde
Une nouvelle donne pour l’innovation (A New Deal for Innovation) with a 25-page pdf (in French)

Nouvelle-donne-innovation-dossier-presse-France-2013

Criteo files to go public

The latest French success story, Criteo, just filed to go public on Nasdaq. You can find all the details in the SEC F-1 document. I had tried to build Criteo’s cap. table, one of my favorite exercises, in What’s Criteo worth?

Criteo-Founders

I was not too far from the truth. The numbers are different because there was a 2-for-5 stock split and probably other little things, I consider minor. You will see my cap. table again at the end (figure 3), but first here are Criteo’s impressive numbers (profit & loss – figure 1) as well as the current shareholder structure (figure2):

Criteo-P&L
Figure 1 – Criteo’s P&L – click on picture to enlarge

Criteo-Owners
Figure 2 – Criteo’s main shareholders – click on picture to enlarge

Criteo-CapTable
Figure 3- Criteo’s “old” cap. table – click on picture to enlarge

Neolane, the latest French success story

France is often criticized for its apparent weakness in entrepreneurship and of its start-ups, but it is clear that the reality is not as negative as the perception; Kelkoo in the past, Criteo probably in a few months as well Deezer. And last week Neolane. I hear the critics say: “Yes, but this is the web.” It would mean you forget Parrot, Soitec, Envivio, Sequans Ymagis, Qualys, Inside… France is quite impressive (at the European level) for its start-up scene.

Neolane is the story of three friends who met at Centrale (one of the top French engineering schools). They co-founded a first start-up just out of school, which they sold before the Internet was really born. They launched a new one, Neolane, in 2001, with the support of Auriga Partners in 2002. Neolane raised more than €15M before being acquired last week by Adobe for €460M. It should not be very far from the largest M&A value of a French start-up. Again the acquirer is from the USA, as it is mostly the case with start-up acquisitions. Let us hope the jobs will not disappear, but it is certainly good news for France and Europe to enjoy such success. And sincere congratulations to my friends at Auriga Partners (I am not sure if they will appreciate or not this article…) Comments welcome!

neolane-founders
The founders of Neolane. From left to right, Benoît Gourdon, (Director of Operations for Europe), Stephen Dietrich (President of North America), Stephane Dehoche (CEO) and Thomas Boudalier (CTO).

As you can imagine if you know my blog, I had to build the capitalization table. I decided to focus here on the VC returns, i.e. both multiples on the investments and IRR. This is an interesting exercise as they were many rounds including partial sales. I have always been confused by the difference between multiples and IRRs. Multiples are what matters but IRRs also count as a relative measure of return (if compares with other assets).

neolane-vc-returns

NB: all data come from French register of commerce. Some numbers were missing so it is a best effort exercise and it was not the easiest I had to do…

neolane-captable2

French start-ups (again)

I am attached to France for obvious reasons. And recently, I have read a lot about French innovation. It’s not as bad as the general public may think but it is not as good as I would like. Still there are reasons for hope. Let me comment two recent works:
– an article from Le Monde newspaper, entitled Heureux comme un patron de start-up en France
– a report from OSEO (the French Innovation Agency) which I had mentioned before in You have to go global, and right from the start, but which I had read too quickly!

The article from Le Monde is about French Accelerator Le Camping. The article is optimistic (maybe a little too much), but you should read it if you understand French. What I noticed was:

– “The Hexagon can also count on experienced funds such as Partech (but also Idinvest, Apax) who continued to irrigate the area after the bursting of the Internet bubble in 2000. About fifteen venture capital funds finance about a thousand start-ups and inject 200-300 million euros per year in the digital field, said Philippe Collombel. The French industry is one of the best in the world, judges Christopher Bavaria, president of Idinvest. And there are many areas where a little “Frenchy” managed to make a name alongside the leading Anglo-Saxon player: Dailymotion vs. YouTube, Viadeo behind LinkedIn , Deezer on the heels of Spotify …” I think this is dangerously optimistic but nice! We should not be just a copy-paste version of the USA though.

– “Another asset of the Hexagon: its serial entrepreneurs. The first generation began with the Minitel, has launched the digital era in the late 1990s, and overcame the bubble. They include Marc Simoncini (iFrance, Meetic), Jacques-Antoine Granjon (ventre-privée), Patrick Robin (Imaginet, 24h00), Xavier Niel … Twenty years later, they play the “business angels” for the younger: PriceMinister, Dailymotion, Criteo, or Deezer.” Quite true.

– However, “the Business Angels do not support enough entrepreneurs” […] “There are not enough funds enbling jumping from start-up to that of medium-sized companies.”

[You may also be interested about an analysis of the Acceletor trend from the Financial Times, which is also quite good: Start-ups put their foot on the accelerator. “In the past they could have been labelled an incubator, which is apparently different from an accelerator.” […] “Probably the first accelerator was Paul Graham’s Y Combinator in Silicon Valley. Since 2005 it has fostered almost 500 start-ups, including big successes such as AirBnB and Dropbox.” […] “This method of building new companies at warp speed is fascinating. The philosophy is to try lots of different ideas, fail fast, and pivot if something does not work. I like the sense of urgency, the work ethic, the high-pressure environment that helps drive rapid progress, and the incredible opportunities to network and cross-fertilise.” […] “However, in general, I think start-ups take a long time to become viable – years not months – so trying to achieve so much in such a concentrated period of time feels unrealistic.” […] “There are now an estimated 123 accelerator programmes around the world.” […] “Some veterans think many will close, just as many of the projects they incubate will fail. But all this frantic activity will surely boost entrepreneurship, stimulate jobs, and – in the long run – create wealth, so it deserves applause”]

You can find (in French) the OSEO report by clicking on the picture. I was wrong in my previous post, I learnt a few things! And it has more depth than the good Le Monde article. The first one is about the fears and difficulties of entrepreneurs.


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Fear of failing with its attached stigma remains high. Finding customers is the biggest challenge, higher then finding investors. Interesting. Then there is an interesting lesson about the age of founders, which you can compare to an analysis I have made on 165 public companies.


Click on picture to enlarge. Source: personal data

This is a popular topic, and you might read again Wadhwa’s study, his Washington Post article or Is There A Peak Age for Entrepreneurship? I am not sure how to read all this, but I have the feeling there is a tendency to higher age recently… The average age of French founders is 41 whereas the public companies I have have founders with an average of 36.5 (and 34 for the companies founded before 1995).

Finally there is an analysis of “models of development of start-ups”.

The authors compare 2 main classes of start-ups (out of 5), the ones being the most common (classes 3 and 5 in the figure). [Class 4 is more an intermediate status en route to either 3 or 5; class 1 is M&A and class 5 have not developed at all.]

“In class 3, 41% of the total population, companies have a lower level of development because the company is “self-centered”. 50% have no partner, no subsidiary. The project leader is still a dominant position in the capital: 68% have a stake greater than 75% in this class; 1 out of 2 still 50% to 75% of capital.”

“In contrast, firms in class 5, have a proven open behavior. They have opened their capital to have the resources to advance an innovation project. 60% of project owners have less than 25% of the start-up in this class, as well as half of them with between 25% and 50% of the capital. Moreover, almost all listed companies are in this class. 80% of these companies are internationalized (export or implantation).”

“These are companies that have had time to grow: almost half who them are more than 8 years old and almost 40% are between 5 and 8 years old today. The maturity only does not explain, however, their momentum. Indeed, they were faced, too, with problems of redefining their business plans as well as those of class 3, even a little more frequently. However, they saw this less as a constraint.”

“In addition, Class 3 focuses more on public funding which is considered a main lever for growth. The youth of this population and the lower opening of their capital can hypothesize that the public support at the pre-seed and seed stages is an essential substitute to private capital.”

“The statistical comparison classes 3-5 on these variables reveals that:
• The median Class 5 has a higher workforce than class 4, which employs, more people than class 3 (respectively 10, 6 and 4 employees);
• Classes 4 and 5 achieve an identical median turnover (about 580k€) higher than the median Iclass 3 (390k€);
• On the median level of equity, it is still significantly higher for class 5 (409k€) than for class 4 (284k€) and Class 3 (149k€), and more than €1million for the upper quartile of the class 5 only 389k€ for the class 3)”

Of course the conclusion of the report is to encourage the filtering and then development towards class 5. but myless optimistic conclusion is that even class 5 companies are not big success stories…

Deezer, a new French success story?

I do not often talk about french start-ups, but after my recent blog on Parrot, it would be a mistake not to mention Deezer’s latest financing round. If you do not know Deezer’s music service, just try it!

Deezer has been founded by two young French entrepreneurs (28 and 32 at the time of foundation), its seed investor was Xavier Niel, the famous founder of Free, and was backed by AGF Private Equity, DotCorp (the holding of the Pixmania founders) as well as Orange. It made a lot of buzz yesterday when it announced its new huge round with Access Industries, the owner of Warner Music. The beauty of private companies in France is that, though they are not public, you can find information of their shareholders thanks to Infogreffe, the French register of commerce. It will only cost you a few Euros. So… here is the cap. table I could build from the info I grabbed. Not fully accurate probably. I do not have the CEO or COO shares. And Access may buy more shares from existing shareholders (which may explain why the news mentions a $130M round and not €70M I have in the table).

Not a success story yet, but promising for sure!


Click on table to enlarge

Going public when you are not a US start-up – part 2/4: Envivio

Envivio follows my recent post on another start-up with European roots, Transmode. Envivio has similarities and differences. Both have roots in the Telecom industry, Transmode with Ericsson and Envivio with France Telecom. Both were founded in 2000, 11 years before the IPO or filing.

Both had complex financing rounds, including “down rounds”. You can see that in the Transmode case, the price per share went from $5.5 in the B round to $1 in the C round. These down rounds are usually terrible for founding teams. And indeed, there is not much info about Transmode founders.

Envivio had raised $41M until 2008 and the price per share increased steadily to $2 per share. Difficult to give precise dates for the rounds, but the investors were a combination of corporate investors (France Telecom, Intel, Bertelsman, Philips), and financial (Global Accelerator, Crédit Lyonnais – now Crédit Agricole). Then the G round in 2008 was a down round at $1.25 and the H round, less than 2 years later, even lower at $0.34. With such events, it is not surprising to discover that the investors own 87% of the company before the IPO. Obviously, this would have been very dilutive to the founder, Julien Signes, without the possibility of granting new (stock option) shares that you discover in the right column.

There is another interesting difference with Transmode: Envivio is filing to go public in the USA, it is indeed an American start-up, and not much shows its French roots (the R&D is based in Rennes, Britanny though). Even if Julien Signes studied and worked in France initially, he worked also for France Telecom in San Francisco and I would be curious to know if this had an impact in his entrepreneurial path. I asked him and am waiting for an answer, but it is possible that Envivio is not allowed to communicate in the pre-IPO period.

It is one my thesis that Europeans who had a US experience have digested better the start-up dynamics (whether they moved to the USA and became entrepreneurs there – De Geus, Bechtolsheim, Brin – or they became entrepreneurs in Europe but had lived in the USA – Liautaud, Borel, Haren). This does not prevent European high-tech start-ups to exist and succeed, but I have to admit, the numbers are not exactly the same.

Again, because the company is not public yet, I had to guess what the price per share might be at IPO. I have put a small price, using multiples of market cap. to revenues of 7x. I will make an update when I know more…

Next: Alibaba

NB: an explanation from the filing on the issuance of incentive shares: “In September 2008, we sold 1,532,372 shares of Series G1 convertible preferred stock and 13,359,323 shares of Series G2 convertible preferred stock for $1.25 per share and received total consideration of an aggregate of $15.9 million. Also in September 2008, we converted the outstanding principal balance of our outstanding convertible promissory notes in the amount of approximately $8.9 million plus accrued interest in the amount of approximately $0.2 million into 467,628 shares of Series G1 convertible preferred stock and 6,829,154 shares of Series G2 convertible preferred stock simultaneously with our Series G financing. In June 2010, we sold 895,502 shares of Series H1 convertible preferred stock, 18,487,298 shares of Series H2 convertible preferred stock, 7,775,801 shares of incentive Series 1 common stock and 87,170,915 shares of incentive Series 2 common stock for $0.3351 per unit and received total consideration of approximately $6.5 million. In connection with this Series H financing, all outstanding shares of Series B, C, D, E and F convertible preferred stock converted into shares of common stock. Also in June 2010, we converted the outstanding principal balance of our outstanding convertible promissory notes in the amount of $1.0 million plus accrued interest in the amount of approximately $4,800 into 2,998,571 shares of Series H2 convertible preferred stock simultaneously with our Series H financing. The number of Incentive Shares to be issued was based on the series of the outstanding convertible preferred stock held by each Series H participant as follows: at a rate of 107.430618 shares of common for each share of the Series B, 77.588779 shares of common for each share of Series C, 1.492092 shares of common for each share of Series D, 1.865115 shares of common for each share of Series E, and 3.073709 shares of common for each share of Series F. As a result, the Company issued 94,946,716 Incentive Shares with the shares of Series H convertible preferred stock issued during the Series H financing.”