As the startup sector becomes more mature, some of the more traditional investment funds are now starting to get involved right from the seed-capital stage. Partech International is an example.
Interview with Jean-Marc Patouillaud, Managing Partner at Partech International, which is celebrating its 30th birthday and has this year launched two new investment funds.
L’Atelier: One of the new funds you’ve launched is a seed capital fund, the other is a standard business development fund. Why exactly did you decide launch these new funds?
Jean-Marc Patouillaud: For Partech’s 30thventure capital fund, called Partech VI. We have now raised €135 million for Partech VI from institutional investors and strategic corporate players. Then to complete our range of funds and boost our capacity to support entrepreneurs with ambitious business ideas right from the earliest stage, we have now established Partech Entrepreneur, which is a €30 million seed fund, which we have set up together with French State financing group Bpifrance and a number of corporate players such as BNP Paribas and Econocom. Additionally, the seed fund has also received commitments from 40 web entrepreneurs who have all been successful with their past ventures and are keen to help us pass on lots of good advice to our young entrepreneur friends, as Eric Carreel of Withings has done.
Is the ecosystem mature enough for investors to start taking risks with young fledgling companies?
I think that the BPI initiative has been salutary as it has sought to get public funds involved to fill a gap in the financing spectrum. And I have to say that most of the thirty or forty seed funds that have been set up couldn’t have been established without BPI support. But when I say that they’re filling a gap, it’s not simply because there were previously too few players and too little money available. It’s also because I believe that this approach is a valuable complement to the venture capital model, whereby funds make only three, four or perhaps five investments a year. As all the energy is channelled into these few investments, there isn’t much time left for seed capital investments. When you’re usually making investments of five million, it doesn’t really make much sense to invest say €200,000 unless you can devote all the necessary energy. So if you have a seed fund that complements your venture capital funds, you can in fact increase the number of incubation experiments you undertake. Speaking for Partech, this fund will enable us to make seven or eight times the investment there that we made before. And we’ll be able to support these companies for several years going forward. Some of them will then move over to take advantage of Partech’s venture capital funds.Still, one gets the impression something has changed – or maybe rather something is changing – in France.
Is the situation the same in the other markets where Partech works – Germany and the UK for example?
Well, that’s right. In France, people are able to take on greater amounts of risk once they realise that seed capital funding isn’t managed in the same way as venture capital. With seed funding, you take a rather more statistical approach – i.e. if you make ten investments, you know right away that six of them are likely to flop. But if you’re rigorous and disciplined in the way you run the portfolio, you can manage birthday we decided to continue our tradition by starting a new your seed capital properly and so put much more energy and money into the three or four companies that you think will stay the course. Unfortunately entrepreneurs in Germany don’t receive this kind of encouragement. There are very few seed funds and also far less venture capital. This is why a large number of deals in Germany are done with France-based funds.Partech specialises mainly in e-commerce and everything to do with logistics, servers etc.
Are you really going to continue in the same vein? Do you believe that these will remain the strong sectors in the future?
If you look at the full range of Partech investments, you’ll see that they break down into two main areas –one the one hand information and communication technologies, and on the other the digital economy. We can then subdivide the digital economy businesses into two areas: the e-commerce transaction-oriented side and the collaborative working side, with companies such as Airbnb and Blablacar. But we can also add there media channels, which have a more ‘local’ feel and are slightly less technology oriented However, in the digital economy, you also have another sub-area consisting of all the web tools which enable these companies to boost their growth and improve their margins. And at the end of the day this field brings us back full circle to the world of technology. So we’re still basically a technology player even if it’s via our interest in the digital economy. And strangely enough, they have pretty much the same characteristics, in the sense that as soon as you start to deal with state-of-the-art technology, most of what’s going on is very often in the United States. And that’s why we decided from the beginning to be in San Francisco. Because in this field, it will be two or three years at most before you’re taking the entrepreneur or one of the company’s management representatives off to Silicon Valley so that they can drive the company’s business development forward.