THE Corporate Venture Capital (CVC), investment funds of the largest French companies, are more and more numerous. Indeed, in recent years, several corporations have taken the step of investing directly in startups. While many of them had started to invest indirectly with a fund of funds activity, those who only practice this form of investment are today an exception.
To better understand this movement, and the way in which CVCs operate, Maddyness spoke with Lucas Rudolf and Muriel Atias. Respectively director of HVAC at SNCF, 574 Invest, and Chief Investment Officer of L’Oréal, BOLD. They also co-president of the France Invest HVAC club. Created in 2023, this club today brings together 35 CVCs, including a large number of CAC40 companies. Its mission is to lead the CVC network to enable better representation in the ecosystem, in particular by providing information on their role and sharing good practices in the sector among peers.
Corporates have gained maturity in investing
In recent years, VC has undergone a transformation and CVCs have followed suit, gaining in maturity. “There is no single recipe and there are as many stories as there are CVCs, but we still find a common trend among corporates, starting with indirect investment before moving on to direct”, analyzes Muriel Atias. This is particularly what happened for the SNCF group and for L’Oréal. “When we launched BOLD in 2018, we started by doing fund of funds. This allowed us to acquire an in-depth understanding of an ecosystem with which we were not yet well familiarized and to increase access to a deal flow of startups that we also had via our Open Innovation teams. With indirect investment, we were able to increase our skills and consider starting to invest directly”says Muriel Atias.
Among the advantages of direct investment, it is the proximity to startups that stands out first. “When we do a fund of funds, we do not choose all the startups in which we invest, and mechanically, if part of the portfolio is of strategic interest for the group, the rest may be out of scope”explains Lucas Rudolf.
Some corporations still choose to go through another intermediate stage, that of the management mandate. Recently, Orano launched a fund with Supernova of which it is the only Limited Partner, but managed by the Supernova teams. The FDJ has also adopted a similar strategy. “It seems to me that corporates who choose the management mandate do so mainly for reasons of team size. They are outsourcing, because they do not yet have the capacity to manage in-house, but at some point they will probably move to a direct investment model with their own teams”comments Muriel Atias.
Most CVCs are so-called strategic funds, that is to say, if, like a classic VC fund, they have financial objectives, they are also there to serve the interests of the group, in particular by establishing partnerships. with startups. “In our eyes, serving a strategic thesis requires investing directly. This does not mean that we are completely stopping indirect activity, we can continue to do it at the margins in specific geographies or sub-verticals”, shares Muriel Atias. Among the members of the CVC club, it identifies 7% exclusively financial funds, 50% exclusively strategic funds, and the rest which mixes the two aspects.
A unique value proposition for entrepreneurs
“Today, startups must generate more turnover and be closer to profitability. As a CVC, we are perfectly placed to help them in this mission, with precise and effective introduction capabilities, in our groups, but also in those of other CVCs”says Lucas Rudolf.
Investing directly allows CVCs and startups to maximize their operational relationship. “The level of contractual commitment may vary from one CVC to another, but overall all the CVCs are moving forward with a common objective: strengthened collaboration with the startups in their portfolio”, says Muriel Atias. CVCs are not only investors, but also ambassadors for startups within the groups. “We facilitate connections, with the right people, but ultimately, it is the different Business Units who decide if they want to buy the solution. There is no free pass, but the aid is clearly more targeted than when the investment is indirect”details Lucas Rudolf.
Today, CVCs are structured to make direct investments. But far from being opposed to traditional VC funds, on the contrary they represent an excellent complement. “We bring capital, business and business expertise, but we are not intended to put up tickets as large as some of the biggest VC funds. We need them and for several years, we have noticed that there are more and more alliances between VC and CVC on financing rounds”underlines Lucas Rudolf. “After indirect investment and the structuring of direct investment activity, it seems to me that we have entered a third phase. A phase where we seek to systematize co-investment, either with other CVCs, or with VCs who indeed provide strong technical and/or industrial support”confirms Muriel Atias.
