Is fundraising still an indicator of a start-up’s success?

What if the era of the fundraising race drew to a close? The question deserves to be asked at a time when the coronavirus crisis forced many start-ups to review their copy last year to overcome the difficulties related to the slowdown in economic activity on a global scale. Even before 2020, voices were already starting to rise to denounce more and more exorbitant roundtables and sometimes delusional valuations. Symbol of this madness of grandeur, the abortive IPO of WeWork in 2019, due to a wobbly economic model and catastrophic governance, highlighted the excesses of the digital ecosystem.

In this context, the economic crisis caused by the Covid-19 pandemic, beyond calling into question certain start-ups whose proposed innovation remains to be demonstrated, could make it possible to lay the foundations for a more mature ecosystem and reasonable. It is also an opportunity to question the economic model of start-ups undermined by the current situation. This reflection, the French start-up Side, which is developing an online interim platform, led it after raising 15 million euros in the space of four years and especially a slump at the end of 2019.

Listen to our exchange with Gaspard Schmitt, co-founder of Side:

Profitability was a bad word or a sign of a lack of ambition ”

Because if fundraising is a way to accelerate its development, it can also lead a business to its loss if this funding is not used wisely. Between premises of disproportionate size and poorly controlled recruitment, the possible errors are numerous and the consequences, potentially disastrous. In the eyes of Gaspard Schmitt, co-founder of Side, the essential is elsewhere, and mainly in financial indicators such asevolution of turnover, net margins or even working capital requirement. And this in a perspective: to achieve profitability. “Two or three years ago, profitability was limited, a swear word or a sign of a lack of ambition. Yet it is an essential indicator. A start-up is neither more nor less than an SME which tries to go faster with a little more Tech. We are a company like any other“, valued Gaspard Schmitt.

With the coronavirus crisis, could this thought spread within the digital ecosystem? “It is a crisis which reconnects with the reality on the ground, the reality of the busines, with the need to be very close to its customers, its teams and its financial indicators … There is a reframing that is taking place for many companies», Indicates Gaspard Schmitt. And to add: “There is a new era that is opening, healthier and more in line with reality. We don’t necessarily have to try to reproduce a CAC40 with 40 stars, 25 unicorns …As a reminder, Emmanuel Macron had set the goal of reaching the bar of 25 French unicorns by 2025.

Despite the economic effects of the Covid-19 pandemic, $ 5.2 billion was invested in French technology companies in 2020, compared to $ 4.8 billion in 2019, according to the annual “State of European Tech” report unveiled by the London fund Atomico. Always positioned on the last step of the podium of European technological investments, behind the United Kingdom and Germany, France has been able to count in particular on large-scale fundraising, such as Mirakl ($ 300 million in September 2020, the largest fundraising campaign for French Tech), Contentsquare ($ 190 million in May 2020), Sendinblue (140 million euros in October 2020), ManoMano (125 million euros in January 2020), Back Market (110 million euros in May 2020), Qonto (104 million euros in January 2020), Dataiku (100 million dollars in August 2020), Swile (70 million euros in June 2020) or Alan (50 million euros in April 2020).

Janelle B. Smith

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