Apr. 08th, 2022
With almost €5bn in total funding Q1-22 sets the pace for a new record in 2022 for the French Tech, which had already reached a record in 2021 at €11bn – already a 2x growth from 2020.Yet, some external factors could throw a spanner in the works.
Obviously, the uncertainty around the war in Ukraine, rate hikes and global inflation hitting its highest level in decades, will influence the French Tech funding in the next months.
In addition, the recent public market correction on Tech stocks has been steep (i.e. -33.3% for the BVP Nasdaq Emerging Cloud Index in the last 6 months compared to +1.3% for the S&P 500 on the same period) and might impact private companies’ valuation when they seek for new capital.
The Presidential elections in France on April 10th and April 24th could also change the game if President Macron, who clearly displayed his support to the French Tech during this last 5 years, was not to be re-elected, as potential alternatives seem less enthusiastic, to say the least, about the technology industry.
On the other hand, VC’s dry-powder has never been so high with $430bn in cumulative overhang globally in 2021, growing 3x since 2014 (according to Pitchbook). The new $20bn growth equity fund raised by US-based Insight Partners represents perfectly this abundance of capital for startups.
Besides, VC returns continue to display the benefits of the robust VC exit market over the last few years. The rolling one year IRR for VC rose to a staggering 65.5% as of Q2 2021 (according to Pitchbook).
In the end, VC money will keep on flowing only for a handful of over-funded startups, making early rounds ever more challenging for most entrepreneurs that don’t fit exactly all the VCs’ criteria.
Arthur Porré, Founding Partner, Apr. 8th, 2022