Following the announcement made by Nicolas Sarkozy the former French finance minister on 29 November, AFIC, the French venture capital association is eagerly anticipating the launch of a SBIC (Small Business Investment Companies) initiative, which is hoped will boost entrepreneurship in France.
The SBIC system was introduced to the US in 1958 to support small and medium sized enterprises and has financed over 90,000 companies to date.
There have been various discussions to see how this initiative could be applied in Europe and France is now well on the way to launching a similar investment model following encouragement from Nicolas Sarkozy who intends to encourage public sector support for funds investing in small and medium sized companies.
Funds will be raised from institutional investors with a partial guaranty by the French State. It is hoped a sum of between €200m and €500m will be raised each year to be invested in a good balance of venture capital and expansion capital investments.
But exactly how much the fund will raise is not yet finalized, nor how big the guaranty provided by the French State will be or what the role of the Caisse de Depots and the Banque de Financement des Petites et Moyennes Entreprises (bdpme) will be in the structure of the fund.
Grégoire Senthiles, head of the capital development commission of AFIC and managing partner of Aurel Leven Next Stage, said: “The French market is the second most developed private equity market in Europe after the UK. But the markets for expansion capital and venture capital have significant room for growth. The aim would not be a fund-of-funds purely in venture which would be too risky. There are not that many fund-of-funds in France focusing on development capital and development capital is less risky than venture with an average gross IRR of between 20 and 22%. And so the larger part of the fund would be allocated to development/expansion and the smaller part to venture capital. What it will do is reinforce the value chain of private equity in France.”