A short note about Venture Capital in France
|Jun 6, 2018|
Ventured-Backed companies worth $2B+
Here you are buddies :)
Venture Capital is about taking a lot of risk under a fair dose of uncertainty with high conviction. It’s driven by the ambition of supporting talented entrepreneurs willing to create beautifully large companies and therefore generating great (if not tremendous) returns on the long term.
Everything around this notion can’t be categorised as Venture Capital per se, it’s just early stage investment, which is more correlated with capital efficiency and risk aversion.
Built on wrong grounds
This being said, let’s face the truth about Venture Capital in France. It has taken root 20 years ago, primarily driven by tax cuts which created two deviant behaviours. First, opportunistic people took advantage of this initiative to build huge management fees models and Second, those same people preferred to mitigate the risk to limit the standard deviation of their returns where the tax discounts were already covering the losses in the worst case.
With the wrong incentive
This tax-cuts model also exists in the United-Kingdom except that the discount is way higher, allowing people to take real risks (including as direct investors) instead of just mitigating it.
Misplaced purpose compound with lack of meritocracy
There is no meritocracy in Venture Capital, whether it’s in France, in Europe, or even in the US. However, Americans are risk takers and more competitive by default, which are two incredible attributes to strive in Venture Capital. Those two attributes are also true in the UK. As for Germany, it just took two brothers (The Samwer’s) to create an empire of companies and talents. Regarding the nordics, geography and demography push them to go beyond their borders as soon as possible in order to make it, which foster their international mindset and ambition.
France benefits from such an insanely great position, whether we talk about geography, demography and education that it seems we took this comfort for granted and became lazy, risk-averse and opportunistic instead of hard-working, ambitious and driven.
A US delegation once studied a factory they were competing with in France and concluded: “We’re lucky they are so lazy, because with their level of creativity and efficiency they would kick our ass otherwise”.
French investors lack talent and professionalism
It’s not true for everyone of course but for a majority of so called early stage investors who have been around for the past 15 years, they have hasically showed a path of mediocrity that we’ve all taken for granted as a standard, the poor performance of European Venture Capital serving as their great excuse.
Fortunately, great entrepreneurs rise up !
Fortunately, the growing quality of french entrepreneurs is attracting international investors and pushing local ones to step-up their game or disappear.
At least I wish…