“We don’t want funds! », expressed a businessman in the process of raising tens of millions of euros. With technology, money is (almost) worthless. Star startuppers no longer want capital, however “smart money”: money that opens doors to networks and distribution channels which would increase their income tenfold and accelerate the collapse of their model. The new icon of high-end sound Devialet can thus raise 100 million euros, an amount voluntarily limited, from industrialists like Sharp or funds hyperconnected to the electronic universe like Gynko which supported by Taiwanese Foxconn.
Ditto for the Qwant search engine. Google’s European rival, already supported by Axel Springer with its capital and a rare ticket from the European Investment Bank (25 million euros), will raise about twenty million euros in the coming weeks by calling distribution groups or media. Wanted by search engines access to new contracts in markets it has not yet broken. The same equation still arises for delivery specialist Stuart. Already supported by La Poste, he wants to raise 20 million euros from transport or catering groups. “If start-ups have the means to raise capital, the difference between investors is relatively little over the role of “sparring-partner” they can put forward”said Greg Revenue, associate director of investment bank Bryan Garnier.
Industry competition
This excess liquidity especially punishes pure financiers, who face competition from manufacturers or their investment vehicles, with all their sectoral connections. But this is not the only marketing effect of financiers seeking to distinguish themselves. “As the next round of funding increases, entrepreneurs are also forced to find a way to diversify their investor base to justify the arrival of new entrants vis-à-vis their historical shareholders”continued the banker.
The rise of industrial investors, which account for 20% of the world average (see 45% in Asia) of technology investments, according to CB Insights, is however not so simple. “The real difficulty is that the industrial investor behaves like an … industrialist, and not like a real minority financial investor”said Morgann Lesné, partner at Cambon Partners.
The first fear of businessmen and financial owners is that the manufacturer, despite all its networks and distribution channels, thus provides its own preferred conditions to access to a new technology relative to the market price. The second doubt comes from the fact that through investment, the industrialist seeks to sanctuary for his own benefit the capacity to acquire the beginning of the long term. “The challenge for these new investors in the industry is that they cancompliance with a shareholders’ agreement with no right of first refusal or privileged access to products. This respect for the rules of the game prevails in the United States where the company’s business is most developed”, the latter continued. But much less in Europe, at the risk of falling back into the traps of the 2000s.