Vivatech: European start-ups enter the big leagues

The world of start-ups is populated by fantastic animals. The most common is the unicorn, a status denoting a company worth more than a billion dollars. There are now 283 in Europe, ten times more than in 2014, according to GP Bullhound’s annual report “Titans of Tech” published on the occasion of VivaTech, the European tech fair organized by Publicis and “Les Echos” from June 15 to 18 , 2022.

The decacorn refers to start-ups worth more than $10 billion. They are 37 in the Old Continent, including Swedish fintech Klarna (45 billion) and British neobank Revolut (33 billion). In comparison, Societe Generale’s capitalization is 18 billion euros.

Towards profitability

Recently, an even rarer species has appeared: the centaur. This time no appreciation but turnover. To join this club, a startup must generate a minimum of $100 million in annual recurring revenue (ARR), the key indicator for subscription-requiring startups (“SaaS”).

Difficult to know the exact number of centaurs, as young shoots rarely communicate about their financial results. In France, marketplace operator Mirakl was the first to announce that it crossed the ARR 100 million. Operating in the CSR assessment segment, the latest EcoVadis tricolor unicorn will pass this milestone for fiscal year 2022.

While fundraising amounts often make headlines, it’s not always the best criterion for assessing a company’s vitality.

Latest Roland Berger report on the structuring of start-ups in Europe

Behind this new core indicator lies the question of profitability. “The more the company matures, the more investors focus on growth and the more monetization issues become central,” explains William Kunter, CFO of employee benefits specialist Swile, in Roland Berger’s latest report on the structuring of start-ups in Europe.

The urgency of impact

This document lists other markers that show that European start-ups have changed in size. “While fundraising amounts often make headlines, it’s not always the best benchmark for assessing a company’s vitality. Hypergrowth is no longer a sufficient condition for investors, who need companies to prove their profitability in order to agree to support them,” the study authors underline. This analysis takes on even more significance as fundraising around the world is declining, both in number and value.

Like big companies, tech nuggets are taking impact issues into their own hands. Impact-focused jobs, such as chief impact officer positions, have increased by 50% in tech companies between 2020 and 2021, the report finds. Impact directors are not only found in climate tech, agricultural or second-hand start-ups.

For example, Kat Borlogan, former boss of French Tech, joined the unicorn Contentsquare, specialist in user experience on the internet, in December 2021. More and more start-ups are communicating about their CSR obligations. In 2021, 106 French start-ups have committed to carrying out a full carbon assessment before the end of the year and taking concrete action to limit the emissions identified. A year later, there are 300 and they aim for 3,000 signatories by 2023.

More parity and M&A

Parity has also become an essential topic in start-ups, which is still a very male ecosystem. The French Tech Mission unveiled a “parity pact” last May that would notably set a 20% quota of women on the boards of directors (CA) of start-ups within three years and then 40% by 2028. This measure is reminiscent of the 2011 Copé-Zimmermann law that set a 40% quota of women on the boards of directors of companies with more than 500 employees in 2017. “We know it has worked. We even reached 45%, which is a world record,” says Clara Chappaz, director of the French Tech mission, enthusiastically. Nearly 140 start-ups have now signed the charter.

Another sign that the ecosystem is expanding: the proliferation of mergers and acquisitions. Faced with the decline in IPOs in Europe (18 in 2021, currently one in 2022), M&A is an exit route increasingly favored by young shoots.

“Well-funded companies can take advantage of the current recession to take over struggling companies, take over competitors to consolidate the market, or double down to emerge stronger from the crisis,” the authors of “Titans of Tech” say. Among the last important operations we can mention Vestiaire Collective, which acquired its American competitor Tradesy. The shopping has only just begun.

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