Business Angels networks in France are showing rather muted confidence in the growth of their activities in 2014, due to persistent uncertainties over both the economic and regulatory environment.
Now that the French government is close to getting its bill easing the process of crowdfunding through parliament, the next issue on the agenda of the regulatory authorities should be to encourage ‘business angels’. The support structure these investors provide has become an integral factor for the creation of startups, but evidence shows that they are generally rather pessimistic about the outlook for 2014. While competition among young companies to attract early-stage funding is becoming fiercer, the fifth in a series of 6-monthly surveys among business angels networks that are members of the French Federation of Business Angels (‘France Angels’), carried out in partnership with business TV station BFM Business, highlights the doubts and concerns that are currently holding back business angel investment in the country. In spite of an increase in the number of business projects looking for funding, coupled with an increasingly comprehensive support network of incubators and accelerators in France, business angel network activity looks likely to stagnate during 2014, awaiting more positive signals from the financial markets.
General uncertainty dampening optimism
The ‘Business Angels Barometer’, a survey carried out among around 4,200 individual investors operating through some 80 networks, paints a rather poor picture for 2013. While 20% of the networks saw an increase in the number of business plans submitted for funding, there was only a proportional 7% increase in actual funding. Over half the respondents to the France Angels survey reported stagnation in project financing which, given the higher number of projects submitted, means that funding was granted more rarely. In the same vein, only 10% of the business angels stated that they had increased total funds available for investment, compared with 42% who said there had been a net reduction in available funds. Moreover, rather than taking on more risk by supporting new startups, many business angels appear to have ‘played safe’ by focusing on driving forward businesses that have already proved themselves. Some 18% of those polled said that they had re-financed a larger number of young companies during the year. This retreat to solid ground is a reflection of the general retrenching highlighted in the report. As for the causes of the slowdown, 15% of respondents cited the economic climate or taxation, while far more – close to 50% – pointed the finger at fiscal and regulatory uncertainty as the main reason for the current brake on expansion.
Demand growth set to continue
However, while the figures indicate a degree of pessimism, or at least a wait-and-see policy on the part of business angels, the outlook for early stage company financing is not necessarily all that bad. Regarding the current obstacles and uncertainties, over half those surveyed agreed that once the situation is clarified – one way or the other – there could quickly be a 30% to 50% growth in their funding activities. Likewise, despite current stagnation in actual financing deals, both the number of business angels and the number of business plans seeking this type of finance are apparently growing, confirming the importance, if that were still necessary, of the role these financiers play in the entrepreneurial ecosystem. In 2013, 44% of the networks reported a sharp increase in the number of individual business angels, and 35% expect this trend to continue in 2014. In the same vein, although only 20% of the respondents recorded an increase in business plans submitted in 2013, close to 50% predict growth in the number of projects seeking finance in 2014.