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Chair "Finance for Innovation" #3 - Interview

01 août 2019
Interview of Jérôme Faul, Managing Partner at Innovacom

Could you briefly explain us your professional background, and especially what led you to turn to Venture Capital?

Before joining a big French R&D lab, I worked for a startup in California. Following this experience, I decided to launch my own startup as a mean to develop strong operational work before joining again a large company. Finally, I joined the venture capital sector after these round trips, convinced that innovative projects could only be developed in small well-funded structures.

Can you tell me more about Innovacom, its position and its differentiation levers?

Innovacom, is the oldest French venture capital company. It was launched in 1988 and we have invested in 300 startups for around 1 billion euros since. Our specialty encompasses all themes related to the digital world and to disruptive technologies that allow us to develop innovative products and services in the digital field. These disruptive technologies can also emerge in software, hardware, components, materials.

The beauty of technologies is that they are transversal, and cover different sectors of the economy, in the telecoms, transport, energy, health and buildings sectors. Wherever digital comes into play.

Three things characterize us:

  • We invest in disruptive technologies that emerge from public or private laboratories in France or in countries close to France. We invest in projects led by researchers or engineers who have spent 5, 6 or 10 years developing a new technology. Let’s take for example the company (ITEN) which develops extra flat micro batteries in order to replace all the button cells we have in watches. Researchers have developed this technology to create anthodes and cathodes that are able to generate an electric current. This is a typical example of our investments: a breakthrough technology that can be applied in the digital world. What can one do with this kind of battery? It can be used as a device to connect objects and sensors. This contributes to the digital transition in different sectors (watchmaking, secure payment, medical sector). This illustrates quite well what we like to do. We don't base our investments on ideas. We only invest in Startups with a working prototype. We want to go beyond the concept and we do not finance R&D; we finance the transition from R&D to the product. We are funding the industrialization of prototypes and their commercialization. What interest us is moving from prototype to product and sell it.
  • We are very operationally close to the entrepreneurs we finance: we provide them with funding, but above all, with operational assistance. We help them with the marketing of their product, the industrialization, and, on the financial side, with raising more funds: on all subjects in which the entrepreneur feels less comfortable than on technical subjects. They are engineers and researchers, so they are only experts in their technical field, but less on everything that related to business. We help them by finding other people who have left a former funded startup in the past and who are available to join a new adventure. We will help recruit a sales manager and a financial manager to make the team grow.
  • Our funds are multi-corporate funds. The money we invest is money that belongs to public or private financiers, particularly the BPI, but also to industrials and corporates. The idea relies on accelerating the development of the startup, through the relationships that we create between the startups and the corporates which have invested in our funds. Often, they will provide them with contracts. This allows the startup to quickly create value. Beyond the financial returns, corporates will have much faster business returns and get to know products before anyone else on the market.

Hence, these are our three main characteristics: disrurptive technologies emerging from the laboratory, operational support and corporate investments.

As somebody who has turned from entrepreneur to investor, you have gotten to know the investor-entrepreneurs relationship from both sides. What can you tell me about this relationship? During your professional career, you may have been confronted with delicate relationships. How do you get out of your situations? Is this one of the criteria for a good deal to work?

This is the main criterion: we are very attentive. On average, we spend 5 to 6 years in a company. Our second characteristic relates to the role of operational support. If we cannot implement this strategy, part of our model does not work. It is very important to get along well with the contractor. Most of the failures we know are related to the deterioration of the relationship. It is very difficult to be an entrepreneur: They are generally people with strong personalities. An entrepreneur must generally be tenacious in preserving in the company, lest the temptation to give up arise. We need people who are preserving. Being persevering means having a strong head. When we have to advise them to change their mind about something, do not always acquiesce as we would hope. It is necessary to demonstrate both diplomacy and empathy. The fact that I was an entrepreneur myself helps me understand their state of mind and grants me legitimacy regarding them. "He was in my place at one point". They are therefore more prepared to listen than if the advice were to come from a pure financier. We like working with people who are aware of the importance of the quality of the relationship. Those who are there to have a high valuation with products that do not necessarily hold up well, are not very interesting to me.

On the other hand, you have the serial entrepreneurs, who have had good or bad experiences before, and who know the importance of the relationship with the shareholders.

What do you think of the future of the tech ecosystem in France?

It needs to attract more capital, but this will not happen until mechanisms are put in place to encourage households to save over the long term (for retirement) and to return to citizens control over the destinations of their savings.

What do you think of the new forms of financing that are emerging on the market (Crowdfunding, ICOs)?

This job keeps focusing on human relations. New forms of funding such as crowdfunding will not replace funds and will not change the way we work today. Financing through a platform dehumanizes investment subjects. The value we get from it comes from the relationship we create with each other more than from finding as much money as possible, as quickly as possible. Crowdfunding must exist, but should be complementary.

Interview Realized by Géraud Jousseaume De La Bretesche, student at Audencia Business School, involved in the Chair

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