French Oxygen Deficient Business Angels, Financing

The explosion of fundraising for five years changes nothing, the number of French business angels and the amounts they invest are struggling to get off the ground. In 2019, they injected a total of about 43 million euros, an increase of 16% compared to 2018, but lower than the 48 million invested in 2017, according to France Angels, the association that unites 5,500. †

“We want more business angels in France, and given the needs we need 10,000”, assures Guy Gourevitch, president of France Angels. At the same time, the representative of these private investors points to a phenomenon that rather seems to be going in the right direction. “70% of the investments are made by several people, in a network. It is a move that makes it possible to increase ticket bets on start-ups thanks to a ripple effect among public and private actors. † But this wish has not yet come true. The number of transactions between 200,000 and 500,000 euros fell in one year from 71 to 41, while only the share of tickets under 50,000 euros increased (from 148 to 164 bets between 2018 and 2019).

A political issue

“Excluding the activity of ‘superbusiness angels’, the proportion of these individual investors in French Tech remains lower than in the United Kingdom or the United States.notes Franck Sebag, partner of EY. In France they represent less than 10%, while on the other side of the Atlantic they are 22%, with an envelope of $22 billion. † Cultures and history largely explain this discrepancy, but are not enough to justify a gap that is difficult to narrow.

France Angels proposes fiscal measures to unblock this brake, in particular by increasing the tax exemption rate (from 18 to 50%) and the ceiling (from 10,000 to 50,000 euros). “We want to limit this measure to two years, to encourage vocations to divert savings to the real economy, and no longer to real estate or banking products”, says Guy Gourevitch. Other technical points are raised, such as the reduction of the net loss of the taxable income base or the possibility to reinvest the capital gains on disposal, resulting in a tax deferral.

For this, the political ground seems undermined by the wealth tax return debate, and its proponents are under no illusions in the short term. “It is a pity that the IFI cannot be invested in start-ups, especially at a time when especially those in the start-up phase will suffer”adds Franck Sebag.

Evolution of the approach

During the period of the coronavirus crisis, the number of new dossiers supported by business angels already appears to have run out, notes AngelSquare CEO Charles Degand: “During the period from April to June, we recorded a 30% drop in activity, but not a single operation was cancelled. However, the criteria have evolved and our business angels are focusing more on rational aspects such as profitability or the level of expenditure. †

Last lesson of the France Angels barometer, preserving the entrepreneurial fabric in the region. If the majority of investors are in Paris (54.5%), two-thirds of them inject money into companies in the rest of France. This is particularly the case of Arnaud Laurent, who runs operations from Montpellier. “I cover the axis from Bordeaux to Nice where 90% of VCs don’t have deal flow due to lack of proximity. † And the one who has particularly supported nuggets such as MWM, Getfluence or OnOff remains convinced that, if the number of his peers does not increase, the pole and desire will remain very strong: “Former BA entrepreneurs are drawn to the adrenaline that comes with the start of the adventure. They are motivated by this stage where everything has to be built and if not exceeded, it is dead. †

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