subject: France Swings Both Ways In Social Media Investment Financing [print this page] Many look to why the Paris property market is so resilient. Today, we are going to look at how France is approaching the world of venture capital or sovereign wealth fund investing which is always a good indicator of a countries long term fiscal health. Here we find something very interesting but let's start off with a basic fact which is commonly known.
The French are known around the world for their attitude; for their aloofness. Many foreigners won't mince words and will come right out and say that the French, especially Parisians are plain, down right rude. Well the French are showing signs they are sensitive to this perception and are investing millions to prove the are not in fact, anti-social. Viadeo, the French version of LinkedIn, the world's second largest professional social network has just announced that it has secured financing from the Fonds Stratgique dInvestissement, to the tune of 24million euros. This has been described by anaylsts as the largest funding ever of a European, let alone French, social network. What is the Fonds Stratgique dInvestissement? Well, it has been referred to as a Sovereign Wealth Fund but this SWF is French and the French never do anything like everyone else!
Usually, your average, garden variety Sovereign Wealth Fund invests in assets that are tedious and soul sucking like government bonds and precious metals. Financial instruments so lifeless only a central bank could love. The Fonds Stratgique dInvestissement firm is different. It's young, adventurous, goes both ways and it's from Paris; 56 rue de Lille to be exact! It's 50/50 lifestyle is accredited to the fact that it is half public and half privately owned. That means it has an orientation that swings both towards the American style of venture capital investing while also swinging back to work for the interests of the sovereign nation it represents.
Must be interesting siting in that boardroom.
The FSI is the new kid on the block. It was founded in 2008 under the Sarkozy administration to help "enhance equity and to help stabilize French firms". And while exhibiting capitalist tendencies it still stays true to it's alternative life style courting an exotic array of partners and relationships. Although it was created by the French government to invest in private business, 51 percent will be managed and controlled by Caisse des Depots et Consignations which was created under King Louis XVIII. What's such a young firm doing with an old institution like that? Caisse des Dpts et Consignations was created after the fall of the Napoleon to help rebuild a nation gone empire wild. The new king would have to rebuild the economy, work to eliminate the trade deficit and debt incurred by the Napoleonic Wars. The CDC was created to specifically help safeguard public funds including the country's civil servant pension funds and retirement accounts. In short, the CDC is use to handling all the boring stuff which gives the young FSI the freedom to go out on the prowl, cruising the French business landscape for alluring partners to infuse funds into.
Yes, the FSI/CDC partnership can be as traditional and mundane as any mezzanine or late stage Venture Capital fund. They partnered with Nissan to make electric-car batteries (yawn...). They rose their stake to above 10 percent in Carbone Loranine a maker of electrical components (stretch...) They even like swash around the primordial ooze of the Industry raising their stake in Technip, a builder of refineries and pipelines, to 5 percent from 2.6 (ZZZZzzz...)
But where it gets exciting is when FSI acts like a Silicon Valley venture capital firm and starts investing into tech startups like Viadeo. But that is just the latest revelation in a string of daring moves. You can put on notch on the Tech Beltway Francais when it comes to Dailymotion, the French video sharing service ala YouTube and Skyrock, a French based Blogging platform. Include tech giant Groupe Bull and FSI has invested a whopping 2.5 billion in French Technology groups.
Talk about 'link luv'!
Europeans governments are beginning to recognize that they must be active in nurturing start-up tech companies. It is one of the bests hopes on the horizon for producing economic growth. But usually these steps by government manifest in the form of tax breaks or other financial incentives. International competition is also a concern. Companies like SeLoger, a French real estate site have been bought up by foreigners. So it makes it unusual and extra sexy for a public fund such as the FSI to take a direct stake in and effectively protecting ownership of valuable French start ups.
What are these start ups going to do with all this extra liquidity? Viadeo says it will use the money to expand into international markets. It's less than a third the size of it's American counter part LinkedIn. But with 45 million users it's number one in France and what's interesting to note is it's also number one in China with 10 million members. These markets are now exploding for us, says Dan Serfaty, CEO of Viadeo, The market is there, but you need this kind of cash when you want to expand". As for Dailymotion? Just like Google swallowed up YouTube, 49 percent of Dailymotion was acquired by France Telecom in a deal that gave the right to take full ownership eventually.
And there you have it, the aloof often rude French culture dispensing their brand of venture capitalism which is meant to nurture and support established industry as well as start up companies born of the nation. Contrast that with the American style whose fund managers are sometimes referred to as vulture capitalists where a business is acquired and then 1000's are fired to raise profits. The company is later divided up, sold for it's parts and becomes a shell of it's former self if it survives at all, for the benefit of the few.
When it comes to venture capital funding of start up and medium stage businesses one can argue it's not necessarily the French that need a lesson on how to eliminate graceless social interaction.
