the revenge of silent start-ups, Funding

Fundraising is a controlled indicator in French technology. Start-ups are obviously the first to communicate the amounts collected by private and public investors. The government, through the tweets and LinkedIn posts of some of its ministers, when it is not Emmanuel Macron himself, participates in this celebration of almost free money.

This funding, which hit record highs in 2021, is essential for industries like deeptech and biotech, which need to invest heavily in research and development and will only have a return on investment (ROI) in several years’ time. “We are more careful on deeptechs because the ecosystem is not yet mature”, Paul-François Fournier, executive director of the innovation department of Bpifrance, recently pointed out to “Echos”.

For another part of the Italian ecosystem, fundraising is not considered an end, nor a means. Some have chosen not to use investors, or very little. “Our focus is turnover. Earn money from our customers, “says Wilfried Granier, founder of Superprof, a home-based training platform that has never raised funds.

A “freedom” that does not necessarily allow you to multiply your income by three every year but that forces you to monetize your customer base from the start. “With the funds we could have developed much faster in the United States, that’s for sure, especially as the cost of acquiring customers is higher than in Europe,” admits the manager.

BtoC most affected by failures

But when the fundraising runs out, as has been happening for a few months, the young company with a turnover of 21 million remains calm. It predicts 50% growth this year and the opening of new countries (Israel, Thailand, China, etc.). And best of all, there’s no need to cut budgets, stop hiring or, even worse, lay off.

Difficult situations in which many start-ups find themselves today that have collected a lot and quickly, recruit a lot and quickly. Failures multiply, especially for those who offer products aimed at the general public, activities that require significant marketing expenses.

This the generation of entrepreneurs, more often than not, has never experienced a technological crisis. “I notice that people in their forties, fifties or who have created several start-ups choose more self-financed models and a peaceful growth”, observes Dany Rammal, European director of PSG, an American investment fund that takes stakes in start-ups that are profitable or are going to be.

The new profitability trend

Profitability! This is a term that has been swept away for a long time by French technology, which swore only by hypergrowth. But since the turnaround of the cycle, investors have been asking young shoots in their portfolios to find their way to profitability as quickly as possible.

Self-financed start-ups have always had only this word in their mouth. “Being a profitable start-up means proving that we can survive, that we are resilient,” said Alexandre Berriche, founder of Fleet, an IT rental platform, and investor in several start-ups.

Resilience pays off. And it also allows you to grow, expand internationally or make acquisitions… Since its creation in 2011, Superprof has acquired sixteen companies thanks to the money it earns but also to bank loans. This financing tool is not common among unprofitable start-ups as a banker requests several balance sheets and examines more “traditional” indicators such as Ebidta (while an investor looks rather at recurring annual income, ARR).

Superprof recently borrowed at 1.90% and no deposit. A luxury that young people who have not yet found a viable economic model and are counting on the next fundraiser cannot claim.

Switching from one model to another?

If one day self-financed start-ups decide to give in to the sirens of investors in the face of an over-funded competitor, they will be able to be more aggressive commercially, expand more rapidly internationally or even accelerate their technological development. But is the opposite approach possible? ” Not all start-ups that have relaunched will be able to switch to a self-financing model “Says Danny Rammal. “It’s not easy because you chose to build a rocket,” adds Alexandre Berriche. And with a rocket, landing is never safe.

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