This post was most recently updated on September 21st, 2018
Priming, the word is launched, but what does it exactly mean? A brief overview of the financing techniques available to an entrepreneur to develop his very young start-up.
To understand the problem of priming, we must first clarify the corresponding notion of equity gap. The equity gap, an expression that can do little and rightly! The equity gap corresponds to the air gap in the financing of the innovative company. This gap in the innovation finance chain makes it difficult to move from concept to customer service delivery.
Entrepreneurs, you have an idea, brilliant, moreover, you will naturally draw on your savings in order to give a little shape to your project. You will also appeal to your family, friends, and others to raise some money for this project. Then you try to appeal to your bank that unfortunately does not want to take the risk of financing the supplement. Why? No visibility, too few guarantees, the product or the technology is not yet developed. His job is to lend money with the maximum chance of recovering it and, of course, you are very optimistic about your project, but the related risk remains high.
And after? What are your other solutions?
It is then necessary to consider opening the capital of the company, which is often problematic! The investment ticket is not high enough, the maturity of the project is not advanced enough. Private equity funds want to reduce risk by closely following the companies they fund. To this end, they invest amounts that allow them to amortize the costs associated with the management team, and secondly, they prefer companies that have already made a minimum of proof by a certain level of revenue. 'business.
But then how to find these tens or hundreds of thousands of euros essential to offer your product/service to the market?
Apart from OSEO's public aid and financing such as the PCE (business start-up loan) or the participator seed loan, and some emerging financial innovations in this direction, only two financing actors correspond to this. niche and are likely to help you give birth to your product/service.
These two actors are Business Angels and Seed Funds.
In order to give you every opportunity to seduce these investors so rare, it is essential to look after the presentation of your project (Business Plan and others), but also your presentation (elevator pitch, storytelling, etc.). For this, do not hesitate to get advice and support. To market in a market, you first need to learn how to sell your project.
Individuals who invest part of their wealth in the capital of companies with high potential and who, in addition to that, provide skills, time and privileged access to their network.
These are mostly current or former entrepreneurs who have built a certain wealth and want to relive an entrepreneurial adventure through investment in start-up capital. They fully accept the notion of risk and therefore provide additional funding for advice and access to their network to reduce this risk.
The financing process can be quite fast compared to traditional fundraising processes since these people invest their own money and therefore have no account to make. If the obvious prerequisite remains the quality of the project, the difference will be on the "good feeling" that the angel investor, who will finance you and accompany you in your adventure, will have for you.
For the moment, these Business Angels are only 7 000 in France and they rarely invest more than 100 K euros alone. This activity is structured and a large number of Business Angels networks now exist. You can discover these networks in particular via the association France Angels which will be able to put you in relation with these financers.
They are venture capital funds specializing in seed capital and therefore invest in projects that are not very mature with relatively low fees. Unfortunately, there is very little seed money. The fundamental difference with Business Angels lies in the source of funds and therefore the requirement of profitability that results.
Seed funds will have higher profitability requirements and the investment process will be longer. They are also very focused on the biotechnology sectors and will not fund patent-free innovations.
The National Seed Fund (FNA) and bpifrance
The National Seed Fund (FNA) is a share of the Investment Program of the Future launched by the State in December 2009.
Endowed with 650 million euros, the National Seed Fund makes investments in investment funds. are managed by professional management teams and themselves invest in innovative start-up and startup companies.
Warning! The National Seed Fund does not directly finance companies.
The seed funds underwritten by the National Seed Fund are primarily intended for companies in the technological sectors defined by the National Strategy for Research and Innovation (SRI): health, food and biotechnology, technologies information and communication, nanotechnologies, environmental technologies.
After consulting a committee made up of representatives of the State, investment decisions will be taken by Bpifrance Investissement (formerly CDC Entreprises) which ensures the implementation and monitoring of investments in the beneficiary funds.
The aim of the FNA is to ensure the emergence of the most innovative small and medium-sized enterprises (SMEs) and to support their growth, by strengthening the investment funds intervening at the beginning, to improve the equity financing of these companies.
Also published on Medium.