social and economic performance of french digital … · french digital champions (+22% revenues...

S O C I A L A N D E C O N O M I C P E R F O R M A N C E

O F F R E N C H D I G I T A L B U S I N E S S S T A R T U P S

Barometer 2018September 2018

C O N T E N T S

E D I T O 3

1. M E T H O D O L O G Y 5

2. E X E C U T I V E S U M M A R Y 6

3. K E Y F I G U R E S 7

1 W O R L D W I D E L E A D E R S H I P O R N O T H I N G ? 8

2 P E O P L E - B A C K E D C O M P A N I E S ; - ) 1 2

3 N O T H I N G I S P O S S I B L E W I T H O U T A V I B R A N T E C O S Y S T E M 2 0

4 B R I G H T A N D A M B I T I O U S P E R S P E C T I V E S 2 4

C O N T A C T S 2 7

3

For the 7th edition of the barometer, 293 startups completed the survey.

Key messages of this new edition can be summarized as follows:

1/ WORLDWIDE LEADERSHIP OR NOTHING?

French Digital startup ecosystem is extremely dynamic. Participating startups keep growing sharply, as their revenues increased by 26% to reach 5.8B€ in 2017. Growth is driven both by the expansion of the French Digital champions (+22% revenues vs. 2016 for the +50 M€ revenue startups) and by the hypergrowth of newly emerging startups (+51% revenues vs. 2016 for the 0 to 5 M€ revenue startups).

French Digital startups think, more than ever, GLOBAL. Their outreach has no borders as more than half of their revenues are generated abroad in 2017 (56%) and 3 startups out of 4 have already set up at least one office outside France. French startups now target not only the European market but also the US market, establishing operations principally in New York or the Silicon Valley.

The rapidly developing performance of French Digital startups attracts foreign international investors: 39% of respondents have a foreign VC that already invested in the firm in 2017. As a reminder, less than 25% of respondents in the 2015 Edition of the barometer had a foreign VC investing in their share capital. The median amount of fund raised as of 2017 increased by 200% compared to 2016. Funds raised by VCs have never been higher and VCs are now perfectly positioned to accompany international expansion of startups.

2/ PEOPLE-BACKED COMPANIES ;-)

The number one assets for French Digital startups: their People. Their continued growth relies on qualified teams. Between 2016 and 2017, their staff grew by 18% (24% excluding TOP 3 respondents). On average, 13 jobs were created in each startup of which 68% were located in France. Almost all of their staff are permanent employees (94%) and more and more women are joining Digital startups (+5% vs. 2016). Startups focus also on hiring international profiles … But startups are nonetheless experiencing increasing difficulties with recruitement.

Recruiting talent is considered as one of the biggest barriers to development by 61% of respondents! 50% of them confirm that IT developers are the most difficult profiles to hire, but difficulties for Sales & Marketing staff is substantial too. Facing such difficulties, one of the alternatives found by startups is to work with freelancers: 2 startups out of 3 have worked with freelancers in 2017!

Digital startup ambition is inspired by highly qualified and experienced Entrepreneurs, 87% of them have a master degree or a PhD and 1 digital startups CEO over 2 is a serial entrepreneur. Most of respondents’ CEO are the historical founder (94%).

E D I T O

4

3/ NOTHING IS POSSIBLE WITHOUT A VIBRANT ECOSYSTEM

Data collected in this new Edition of the barometer confirm one thing: France is one of the most attractive European territories for Digital startups. The legal environment is favorable for startups right now, enabling the use of warrants such as BSPCE, without significant tax constraints. Entrepreneurs motivate their teams massively through such equity instruments as 63% of respondents distribute such instruments, not only to Managers, with 26% of total staff benefiting from these warrants. Emerging companies also benefit from several tax incentives: 55% of participants receive the research tax credit, 40% the innovation tax credit and 47% the label “Young Innovative Company”. The innovation tax credit becomes, year after year, one of the most used incentives, enabling the evolution of startups from a research stage to a scaling up stage.

In 2017, 3 out of 4 French Digital startups appreciate the dynamism of the local ecosystem (French Tech, BPI, professional organizations…) and consider it as productive. More than half of Digital startups use business incubator or accelerator, proving the efficiency of such organizations in helping companies to grow their business.

4/ BRIGHT AND AMBITIOUS PERSPECTIVES

French Digital startups are not only focusing on growing but also on developing a viable business model. If 25% of respondents declare having a positive EBIT, more than half of +50 M€ revenue startups are profitable! Entrepreneurs are confident in their near future as 23% of 0 to 5 M€ revenue startups are profitable and 67% of them expect, within the next two years, to be break even.

The ecosystem is favorable and half of entrepreneurs expect to increase their revenues by more than 50% in 2018. Growing and better funded, startups want to pursue their expansion not only through organic growth, but also through external acquisitions.

To reach this double objective, 79% of startups will hire in 2018, mostly in France (72% of jobs will be in France) and 32% of respondents plan to finalize an external acquisition. Top10 fundraising in France during the first semester 2018 will offer to the French Digital champions the needed financing to execute their expansion strategies!

Franck SEBAG Partner, EY

Xavier LORPHELINManaging Partner, Serena Capital

5

1 M E T H O D O L O G Y

E Barometer based on data from digital business startups financed by venture capitalists, business angels, corporate ventures…

E Survey sent by venture capitalists to companies they invested in

• 293 participants

• Average age: 7,5 years

• 6,3 M€ invested by VC (median)

• Key figures from financial data 2016 & 2017

E EY, as a third-party, consolidate the data and ensure that the figures are kept confidential

2 E X E C U T I V E S U M M A R Y WORLDWIDE LEADERSHIP OR NOTHING

E +26% of revenues vs 2016

E 56% of revenues are generated abroad in 2017

E 75% of startups above 5M€ of revenue have already set up offices abroad

E 39% of respondents have a foreign VC that already invested in the firm

E 200% of growth of median fund raised vs 2016

NOTHING IS POSSIBLE WITHOUT A VIBRANT ECOSYSTEM

E 55% of startups use research tax credit

E 40% of startups use innovation tax credit

E 47% of startups use the label « Young Innovative Company »

E 57% of share capital held by management and employees

E 63% of startups use equity instruments

E 51% of digital startups are using incubator or accelerator

PEOPLE-BACKED COMPANIES

E +18% employees vs 2016 (+24% excluding TOP 3)

E 32% of jobs created abroad in 2017

E 67% of startups contractualized with Freelancers

E +5% of women working in startups

E 94% of CEO are the historical founder

E 87% of CEO have a master degree or a PhD

E Sales & Marketing are the most wanted profiles to recruit

BRIGHT AND AMBITIOUS PERSPECTIVES

E 50% of startups have positive « EBIT » when reaching 50 M€ of revenues

E 38% of companies expect a revenue growth above 100% in 2018

E 79% of startups will hire in 2018

E 32% plan external growth to pursue their development

E 38% of startups (0-5 M€ of revenue) expect to be break-even within 2 years

6

+26%2018 Edition

3

K E Y F I G U R E S

8

4,598

2016

5,771

2017

51%

0 to 5 M€

37%

5 to 20 M€

31%

20 to 50 M€

22%

+ 50 M€

+31%2018 Edition

without top 3

+19%top 3

W O R L D W I D E L E A D E R S H I P O R N O T H I N G ?

E Total revenues (in M€)

+26%2018 Edition +33%

2017 Edition

E Growth of total revenues (in %) Analysis by revenue segment

+26%

9

E Growth of revenues per geographic area (in M€)

E Revenue growth rate per segment per geographic area (in %)

0 to 5 M€

50%

64%

59%

5 to 50 M€

33%

45%

26%

+ 50 M€

29%

18%

19%

+20%

+22%

+32%1,919

42%

1,14125%

1,53833%

2,52744%

1,39224%

1,85132%

2016 2017

France Europe International


1 0

+ 50 M€5 to 50 M€0 to 5 M€


E Did startups set up an office abroad to pursue their international expansion?

Sample of 142 startups

67%

32%

22%

78%

25%

75%

Yes No

E Preferred location when settling in the US


New York City

San Francisco

Boston

Los Angeles

Miami

Austin

Other

44%

27%

11%

7%

7%

2%

6%

E Part of revenue outside of France out of the total revenue

(within the last three editions of the barometer)

54%2017 Edition

43%2015 Edition

50%2016 Edition

56%2018 Edition

1 1

E Median of fund raised since the creation including IPOs (in M€)

Analysis by revenue segment Sample of 223 startups

E Percentage of startups that are International VC-backed*

Analysis by revenue segment Sample of 173 startups

*Percentage of foreign venture capitalists investing in French digital business startups

E Percentage of digital startups that raised funds in 2017


39%

of startups are international VC backed

Barometer 2018

2016 2017

5 to 50 M€

11 15

+ 50 M€

46

75

0 to 5 M€

1 20 to 5 M€

35%

5 to 50 M€

42%

+ 50 M€

100%

0 to 5 M€

43%

5 to 50 M€

33%

+ 50 M€

29%


1 2

P E O P L E - B A C K E D C O M PA N I E S ; - )

E Growth of employees Sample of 213 startups

E Segmentation of employees by geographical areas Sample of 213 startups

3,799jobs

created

1,206hired abroad

(32%)

2,593hired in France

(68%)

+18%

2016

17,401

2017

21,200

Top 10 recruiters created

1,785jobs

Without top 3

+24% growth

3,200 jobs created

1 3

30

70 In %

Women Men

French employees Foreign employees


E Women/Men split in startups in 2017 Sample of 102 startups

E Part of foreign employees working in the French entity Sample of 92 startups

+5%of women

in 2017 vs. 2016

85,3%

14,7%

2016

84,9%

15,1%

2017

1 4

4951 In % 4654 In %

Yes No Yes No


E Did you hire foreign employees in France in 2017? Sample of 97 startups

E Is it difficult for you to recruit foreign employees in France?


1 5

67

33

In %

Yes No

94In %

1 2

3 6

In %21

70

2

E Type of work contracts (2017) Sample of 78 startups

E People qualification (2017) Sample of 60 startups

E Do startups contractualize with freelancers? Sample of 107 startups

Permanent contract (“CDI”) Temporary contract (“CDD” & “Interim”) Professional training contract Internship

No diploma Bachelor degree (BAC+3) Master degree (BAC +5) PhD degree (BAC+8)


1 6

45

12

43In %

0 to 5 M€ 5 to 50 M€ +50 M€


E Segmentation of employees by revenue segment of the digital

business startups Sample of 216 startups

E Average age Sample of 100 startups

E Ratio Management/Staff wages Sample of 74 startups

40.25 41.25

30.99 32.03

CEO Employees Min. Average

0.60

2.22 1.84

Max

7.17

4.41

2016 2017 2016 2017

0.19

1 7

E Chief Executive Officer is a Serial entrepreneur? Sample of 112 startups

E Profile of the CEO Sample of 113 startups

2017

51%

49%

Yes No

87%have a

Master Degree or a PhD

94%are the historical

founder


2016

48%

52%

1 8

22

78 In %11

35

6

48In %

One woman No woman

50% consider that

IT developers are the most difficult

staff to recruit


E Is there a woman in the founding team?


E Chiefs Executive Officers are women?


10%2017 Edition

8%2016 Edition

9%2018 Edition

E Focus on recruitments

Most wanted profiles to recruit for 2018


Sales/Marketing/Customer services Programmer/Developer Data science/Business intelligence Other

1 9

E Top 5 of barriers for development? Sample of 104 startups

Complexity of administrative process

Narrowness of French market/ Lack of unified European market

Cost of work

Financing difficulties

Contracting with large companies

Recruiting talent 29% 15% 17%

14% 20% 15%

24% 15% 9%

9% 20% 9%

15% 7% 12%

2% 12% 16%

1st choice 2nd choice 3rd choice


2 0

6337 In % 4357 In %

Yes No Average of capital held by investors Average of capital held by founders or employees

143

83In %

Warrants (BSPCE & BSA) Free shares Stock options

26% of employees own warrants

N O T H I N G I S P O S S I B L E W I T H O U T A V I B R A N T E C O S Y S T E M

E Are you using equity instruments to motivate your team?


E Percentage of share capital held by owners and employees


E Types of Equity instruments Sample of 76 startups

2 1

5545 In %

+50 M€

100%

5 to 50 M€

88%

12%

0 to 5 M€

50%

50%

E Did you use the Research tax credit? Sample of 113 startups

E Did you use the Competitive employee tax credit? Sample of 111 startups

E Did you use the label « Young Innovative Company »? Sample of 94 startups

E Did you use the Innovation tax credit? Sample of 108 startups

Yes No

Yes No Yes No

In % 4060

Yes No

In %47

53 In %58

42


2 2

51%

of digital startups are using incubator

or accelerator


E Did you use business incubator or accelerator? Sample of 110 startups

Analysis by revenue segment Analysis by startups age

2016 2017

5 to 50 M€ + 50 M€0 to 5 M€ 3 to 5 years 6 to 10 years + 10 years0 to 2 years

24% 30% 33%

58%

46% 52%

36% 33%

13%

33%

52% 53% 59% 64%

2 3

2

15

37

6

40In %


E Dynamism of ecosystem in the area you are based in France


E Which is the first European market on which you have developed or on which you wish to develop your business?


Very productive Productive Correct Low Very low

Other

Spain/Portugal

Benelux

United Kingdom

Germany 24% 33% 20%

28% 30% 13%

21% 18% 22%

19% 11% 29%

7% 7% 16%

1st choice 2nd choice 3rd choice

2 4

Profit Loss

25

75 In %

0 to 5 M€ 5 to 50 M€

23% 25%

50%

+ 50 M€

E “Earnings before interests and taxes” or EBIT Sample of 231 startups

E Percentage of positive “EBIT” by revenue segment Sample of 231 startups

B R I G H T A N D A M B I T I O U S P E R S P E C T I V E S

2 5

E Do you plan external growth to pursue your development? Sample of 105 startups


E When do you expect to be break even? Sample of 129 startups

+ 50 M€

5 to 50 M

0 to 5 M€

50% 33% 17%

37% 28% 26% 9%

22% 29% 38% 11%

Profitable <1 year 1 to 2 years >2 years

5 to 50 M€

60%

40%

0 to 5 M€

27%

73%32

68 In %

Yes No

2 6

79% of startups

will hire in 2018

E Revenue growth expectation for 2018 according to companies participating to the survey


E Focus on recruitments for the year 2018 Sample of 93 startups


72% of jobs created will be in France

1 to 25% 26 to 50% 51 to 100% >100%

22

38

17

23In %

C O N T A C T S

Xavier LORPHELINManaging Partner

Serena Capital

[email protected]

@xlorphelin

Franck SEBAGPartner, in charge of fast growing companies

department & IPO Western Europe & Maghreb, EY

[email protected]

@frsebag

EY | Assurance | Tax | Transactions | Advisory

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About France Digitale

France Digitale brings together the champions of digital entrepreneurship: startups with strong growth plans and potential investors (venture capitalists and business angels). To build an alliance between digital entrepreneurs and investors, so that France becomes fertile ground for the creation of digital champions of International stature. For more information, please visit www.francedigitale.org.

social and economic performance of french digital … · french digital champions (+22% revenues...

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