Before going into politics in 2012, French President Emmanuel Macron was an investment banker. During his years at Rothschild, he advised Atos Origin - the forerunner of Atos [EPA: ATO] - on the acquisition of Venture Infotek, an Indian payments company, according to Mergermarket's profiles function.
Cutting his teeth on a tech deal or two seemed to have proved very influential on Macron's presidency: He has made state and EU support for startups one of the main themes of his political career, championing the cause with other European politicians who have spent far less time in the trenches with tech entrepreneurs.
The European Tech Champions Initiative (ETCI), a funds of fund supported by France, Germany, Spain, Italy and Belgium, is one of the results of Macron's ambitious European tech agenda. Its launch in February was accompanied by drumrolls and trumpets.
However, although the fund's initial firepower of EUR 3.75bn to strengthen European late-stage investors is certainly a step forward, it is important not to get too carried away by the hype. Startups raised EUR 13.5bn in France alone in 2022, according to one study widely used by the country's government.
It is true that other EU member states might add funds to the ETCI, but states still look very much like junior players, with foreign investors playing a particularly important role in the scene.
In 2022, the share of non-European investors in late-stage start-ups financing rounds - or capital hikes of more than EUR 100m – in the five European countries enrolled in the ETCI initiative represented around 56% vs 55% in FY21, 50% in FY20 and 62% before the pandemic in FY19, according to Dealogic data.
France’s new tech gem, quantum processor developer Pasqal, is a case in point. It raised EUR 100m earlier this year in a round led by Singapore-based Temasek. Meanwhile, Innovafeed, a French biotech firm producing insect meals for the feed industry, raised USD 250m (EUR 229m) in a Series D funding round led by Qatar Investment Authority last September.
Over here
North America, home of giant US venture capital (VC) firms like Sequoia Capital and General Atlantic, leads the ranking of foreign investment by region, with 31% in FY22 (vs. 33.7% in FY21, 26.6% in FY20 and 27.5% in FY19), according to Dealogic. It is followed by North Asia, with 8.6% (vs. 4.5%, 6.6% and 13.7%) and the Middle East with 5.1% (vs. 5.1%, 6.6% and 10.3%).
Many dealmakers, particularly in the US, find rhetoric about European industrial sovereignty unattractive. There are risks (or at least perceived risks) that Macron's peers in other countries could take his tech-friendly rhetoric a little further until it becomes outright protectionism.
At the same time, sentiment in the European startup scene was already worsening before VC-focused US lender SVB Financial Group [NASDAQ:SIVB] suffered a bank run and regulators told Credit Suisse [SWX:CSGN] to agree a shotgun wedding with UBS [SWX:UBSG], as reported by Mergermarket. The mood in the market has become more pessimistic recently, even if companies like Enpal were able to raise hundreds of millions of euros in the early part of the year before SVP fell.
Impeccable timing
The ETCI's focus on high-tech companies in their late-stage growth phase is designed to help the most successful European companies avoid relocating their official headquarters to the US or other markets.
Examples of unicorns or potential unicorns in this phase identified by Mergermarket in recent weeks include Jobandtalent, the Spanish jobs platform, which is getting ready to operate as if it were a public company; Hydrogenious LOHC Technologies (Hydrogenious), a German hydrogen storage systems manufacturer, which hired BNP Paribas to help it raise EUR 100m-EUR 120m; and Billie, a German invoicing and payments software firm, which could add shareholders into its capital.
While the Macron-led initiative will never replace foreign investment, the timing of the announcement is impeccable. It could be just enough to provide a boost of confidence to executives at European VC firms, who are understandably inclined to sit on their hands as they watch banks collapse and interest rates rise.
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