What will happen in 2020: the year of sustainability in tech?

Following yesterday's post about what happened in the French tech / VC scene in 2019, here's a "prediction" post about I think will happen in 2020.

Prediction posts may seem arrogant. ‘Who’s that muppet who thinks he can predict what’s gonna happen this year?’ is a rightful thought.

The goal is mostly to (i) force myself to structure my own thoughts and stand by them, and improve mental models and (ii) to generate deep and fruitful discussions with people.

As I write these things, two big trends seem to underpin these 10 predictions: making tech beneficial to agents that used to be left behind and being more thoughtful in company building. Hence, there appears to be a sense of sustainability in more of these predictions… let’s hope so.

So here we go, let’s take the leap!

1. More and more startups will target non-tech SMBs as customers

2019 was the year when a lot of startups selling software and/or service to other tech startups started blossoming, helped by record VC money amounts invested which created new cash-rich customers, and a high level of tech-savviness. This created a lot of companies in the finance, HR and productivity spaces.

However, as concerns grow around the macroeconomic situations and as founders and investors alike start to realize that tech startups as a customer group might be too niche to create a large business, more and more startups will target the good ol’ traditional business as a customer.

  • I’m particularly excited by (i) B2B marketplaces in all sorts of sectors reshaping the supply chain process, à la Rekki and by (ii) software tools digitizing core business activities for these SMBs (as opposed to productivity, which they might be less sensitive to).

2. Extra attention will be paid to non-trivial distribution channels

As a result of this new customer segment, new strategies will be deployed to reach these SMBs, but also consumers. As the money poured into venture-backed businesses went massively to the online advertising duopoly formed by Google and Facebook, performance marketing will be increasingly tough for most businesses, which have been pretty effective for tech-savvy startups.

Successful direct outbound sales playbooks (à la Doctolib) will be replicated as a first step to reach non-tech SMBs, creating more heavily-staffed teams and additional managerial challenges for startup founders and C-levels.

As a second step, founders will get extra creative (and investors will get more demanding) around new distribution strategies, including non-trivial partnerships, product-led growth initiatives, and controversial PR initiatives aimed at strengthening word-of-mouth.

  • As a product lover, I’m particularly excited about product-led growth initiatives that make the product both a product and a distribution vector. Usual techniques like watermarking, referral programs or social media sharing are now pretty common, however, so new kind of organic growth triggers will appear.

3. A new social network platform will emerge

Facebook fatigue will be even stronger in 2020 among part of the population, and this time it will go beyond the Facebook -> Insta dumping. FB’s messaging apps failed to innovate, and Instagram and TikTok alike will increasingly become influencer-led Media x Shopping destination apps, failing to recreate a social graph around meaningful relations, while Snap’s editorial choices and core mechanic around ephemerality will prevent it to get non-millennials back.

As a result, a new mobile-only social network platform will emerge in 2020.

  • I’m particularly excited about platforms that would gather people (i) in a trustful environment and (ii) around activities that people can do together, which I think will go through some gaming or conversation-starting social content and (iii) be centered around meaningful interactions with a limited number of people as opposed to wide and shallow exposure to a lot of likes / followers / comments.

4. The average European consumer will pay >€50 p.m. of digital subscriptions

As this new social platform will not follow the rules of traditional volume-based, ad-financed social media, new ways to monetize will be increasingly important.

As mobile carriers in the 1990s, ISPs in the 2000s and Netflix/Spotify in the 2010s evangelized users to the very business-friendly subscription business model, this model will continue to rise and most startups selling a product that used to be transactional will try to shift to subscription based.

  • I expect gaming to come first (see Google’s, Apple’s and Snap’s initiatives in that field), but would be very curious to see founders applying this model to less obvious topics such as live entertainment, food or fitness.

5. More and more startups will target the 99%

Similarly to B2B startups tackling other tech-startups which are both early adopters and easier to reach through online channels, many B2C startups chose to tackle high-income, forward-thinking urban customers with products offering a mix of extreme convenience and sleek, pastel-colored design.

As this target group appears to be both niche and saturated, I expect (and hope) more and more startups will tackle “the 99%”. I believe several social movements in Europe, including the “gilets jaunes” in France, as well as the recent success of companies like Wish, Vinted or the Facebook marketplace shed light on how successful ‘mainstream’ businesses can be.

  • I am very excited about this trend because I believe it will also favor entrepreneurs with less privileged socioeconomic background, who can have a more original insight

6. Values-driven consumption will continue to rise

With the division between a Greta Thunberg’s and a Donald Trump’s view of the world being a key topic in 2019, I believe consumers will use their spending as a way to express their values even more in 2020.

I expect consumers to be even more concerned and inquisitive with businesses around selling and promoting green, sustainable and healthy products.

  • As a result, I expect new ideas and companies to emerge in the area of travel (with the increasing number of people who refuse to get on a plane), food (more fun and diverse plant-based food, less meat and processed foods) but also fashion and entertainment

7. More DNVBs will emerge, less will get VC funding

Speaking of values, many direct-to-consumer brands choose to position themselves around strong values to capture a group of customers.

As direct-to-consumer playbooks started to get widely known in 2019 spread by role models like Hims or Care/of, and as getting a direct-to-consumer brand off the ground became easier and easier (set up a Shopify website, buy and repackage an often off-the-shelf product), more direct-to-consumer products will emerge and tackle small niches with a more nuanced brand universe.

However, as investors start to notice the lack of defensibility that most of these businesses show and the subsequent proliferation of companies bidding against each other in marketing (see mattresses-in-a-box, menstrual panties or erectile dysfunction pills) and given that growth often plateaus after the initial niche has been saturated, I expect the VC appetite for D2C brands to be lower in 2020. These businesses can be great bootstrapped businesses with amazing outcomes for the founders, employees and customers.

  • Nevertheless, I’m very bullish on brands that (i) have a true product edge (ii) have distribution edge, possibly through an existing engaged community and (iii) target non-saturated groups of customers.

8. The Blitzscaling model will run out of fashion…

2019 was the year the scaling model behind Uber or worse, WeWork, and the kingmaking strategy of their backer Softbank Vision Fund started to show their limits.

Subsidizing exponential growth at the expense of healthy unit economics with equity has been the path chosen by many low-tech, execution-driven businesses believing all markets were ‘winner-takes-all’ markets. Uber’s so-so IPO performance and WeWork drama have shown that this model can not only be terrible for employees (whose options become worthless), society (it’s a machine that’s by design not optimized for efficiency of resources) but also the investors themselves (with Softbank’s performance).

Hence, I believe a more human, resource-conscious approach to growing a business will prevail in 2020, and Blitzscaling will no longer be considered as the only way to go for more businesses. VC money, which is the main fuel of this engine, will as a result no longer be the only way to finance startups and I suspect debt and revenue-based investment models to develop.

9. … but will still be widely used for some businesses, creating new breeds of ‘Unicorns’

However, I think this model is still very effective for some businesses when it is executed with more foresight and less hubris.

As even more money will seek to be invested in few opportunities, I suspect the time between funding rounds to decrease even further than it did in 2019 in the ‘very best’ (read: hottest) companies, vastly driven by the fact US tier 1 VCs will want to quickly build local presence in Europe by buying their way into identified success stories.

10. More startups will tackle heavily regulated topics

Finally, as many low-tech businesses have become more and more competitive due to lower setup costs and greater availability of capital, and as the time to market for deeper tech companies (think blockchain, quantum, AR/VR, some ML applications), I expect more founders to turn to more heavily-regulated businesses as a way to build a differentiated and defensible business.

In France for example, a second startup became regulated as an insurance company (Seyna, after Alan in 2016), while there was no new insurance company since 1986.

I believe entrepreneurs will take on more regulated businesses in the fields of healthcare, finance, insurance, but maybe also some professional services, special transportation, etc. But also maybe stuff that is beyond regulation for now, think illicit drugs, for example.

Thinking about these topics was really enjoyable for me, I hope reading it was too. I’ll surely be wrong about most of these, but I think setting out thoughts clearly and sharing them for comments is both fun and useful!

9 things that happened in 2019 in French startups

As 2019 ends, here's a brief and very factual summary of what happened in 'La French Tech' in 2019

As you may wonder if you’re familiar with VC blogging, yes I unashamedly stole this blog post format from USV founder Fred Wilson. I think it’s a great format to wrap up a year that passed and start off the one that’s starting with a clear mind and concrete, falsifiable assumptions to be tested.

Below is a non-exhaustive list of interesting things that happened in the VC ecosystem, with a (strong) focus on France. Let me know if you see things differently!

  1. As a sign of a maturing startup ecosystem, the number and visibility of repeat entrepreneurs with an exit under their belt skyrocketed:

    • Ex-Withings founder Eric Carreel’s Zoov raised this year

    • Made.com’s Ning Li launched Typology

    • Alittlemarket founders Nicolas Cohen and Nicolas d’Audiffret launched AnkorStore

    • the team from MonDocteur launched PixPay this year, while its competitor Kard is also co-founded mostly by ex-entrepreneurs

    • Criteo’s Romain Niccoli co-founded Strana

    • Wit.ai’s Alexandre Lebrun launched Nabla

    • the PriceMatch founders launched and/or raised for several new ventures

    • I know of at least 3 others that haven’t changed their LinkedIn profile so I won’t name them here, tackling the consumer fintech or direct-to-consumer space with new projects

    • Interestingly, fintech and direct-to-consumer seem to be topics that particularly attract repeat founders this year :)

  2. These repeat founders can count on the fact that seed investing is becoming more and more structured in order to get initial funding based on their track-record and kickstart the business:

    • Frst.vc spun out of Otium and raised a seed fund (congrats Pierre, Bruno & Gabriel!)

    • Top-notch former entrepreneurs and long time business angels teamed up to create a more structured syndicate

    • Several foreign seed funds chose 2019 to hire or staff a dedicated for France (Samaipata, Stride and Cherry)

    • While obviously most existing seed investment players remained active

  3. When these companies are growing, 2019 showed that there’s a striking consistency in the ability of French startups to raise mega-rounds since 2017:

    • 12 of them raised >€25m in 2019 (vs. 13 in 2018 and 8 in 2017): TalentSoft, Lunchr, Malt, Alan, 360Learning, FretLink, Heetch, VestiaireCollective, Ornikar, Spendesk, Akeneo and Blade

    • 7 raised >€50m (vs. 4 and 10): Wynd, ContentSquare, Mirakl, Payfit, Ivalua, Jobteaser and Algolia

    • 4 raised >€100m (vs. 3 and 1): Ynsect, Doctolib, ManoMano and Meero

    • in total, that’s c.20 companies a year raising more than €25m for the third consecutive year (vs. 11 in 2016 and 8 in 2015)

  4. Thanks to these mega-rounds, France anecdotically adopted three new ‘unicorns’ to the club in 2019: Dataiku (which my employer Alven backed since the seed round), Doctolib and Ivalua.

  5. This slight increase in mega-rounds has been enabled by the fast-growing interest of foreign VC funds in French startups:

    • According to a report released mid-year by PitchBook, US VCs participated in financing rounds equalling half of the money invested into French startups in the first half of 2019 (!), to be compared to c. 1/3 in 2018

    • As you’ve probably read if you’re exposed to the infamous ‘VC Twitter’, the most prestigious US VC firms are said to open shops in Europe, and I wouldn’t be suprised if people in France were lobbying for Paris instead of London

    • European funds are not giving up just yet, with Balderton and Atomico and some more to come relocating some of their teams to Paris

  6. These bigger rounds are more often then not in startups that have raised very recently, which shortens the traditional 12-18 months cycle between two funding rounds:

    • Lunchr’s Series B was 9 month after its A

    • Alan’s Series B was 10 month after its A

    • Meero’s Series C was 11 month after its big B round

    • many other companies raised two rounds in 2019, with the second oftentimes led by a non-French investor, sometimes with just a few months gap

  7. Interestingly, businesses which were historically outside of this regular VC cash-injection game joined the party in 2019. Hot markets are always a good time to take some money off the table

    • Long-time bootstrapped Legalstart finally raised in 2019

    • Just like data visualisation startup ToucanToco

    • This is not dissimilar to 1Password in the US, which raised it’s first round of $200m

  8. Indeed, financially substantial VC-backed exits remained a rare thing in 2019

    • MeilleursAgents (€200m) and Drivy ($300m), two Alven portfolio companies, were the only two companies exiting for >$200m

    • Mailjet, Snips, Sculpteo and Streamroot are filling the ranks of VC-backed exits which still seem pretty desertic

  9. Politically, startups became even more of a trendy topic to get positive vibes, on the back of the political line that Emmanuel Macron is having since his election in May 2017

    • Much has been said about the Next40, a curated and contested list of 40 up-and-coming startups that are potential candidates to ‘replace’ the 40 biggest market caps listed on the French market

    • And about the €2bn that the French public investment bank BPI is looking to deploy as an LP into later stage funds

Hope you enjoyed reading! I kept it very factual and analysis-free on purpose, tomorrow’s post about what I think will happen in 2020 will be a bit more personal :)

Thoughts of a Parisian VC

Welcome to Bartosz’s Newsletter by me, Bartosz Jakubowski. VC @alvencap. Consumer apps, SMB SaaS & Decentralization fan. ex- @eqtventures @XAngeVC @goldmansachs. Football player, LEGO builder, crypto hodler.

Sign up now so you don’t miss the first issue.

In the meantime, tell your friends!

An (actual) map of Parisian VCs 🇫🇷

<Spoiler (yet another one)> This article is typed from an iPhone from Folégandros in the Cyclades islands, where by the way Google Maps is funnily doing a shitty job, don’t expect mind blowing insights </Spoiler>

Following one of these Twitter exchanges which reminds me why this company is great despite its product (ie ability to connect with busy and brilliant people without any intro just because you are interested in the same stuff) with Pawel Chudzinski from Point Nine Capital, I started to collect VC firms in Paris on a map.

The following map well, maps, the active VC firms in France, including Seed funds.

Given that the first thing I do when I have to go somewhere is to type it in Google Maps (when I’m on desktop, otherwise it’s Citymapper 🙂), I thought it may be of interest for entrepreneurs to have their potential funders mapped.

Some insights also popped up along the way 🤓

If it’s not on Google Maps, it doesn’t exist :)

First, I was really surprised by the number of VC firms whose Google Maps pinpoint either doesn’t exist (hello Kima Ventures, FaDièse, Hi-Inov, French office of Global Founders Capital) or is inaccurate or not specific enough (hi there Kerala Ventures, Side Capital, and probably some others that never invited me for a coffee 🙃).

If founders share my habit and googlemap an address before going there, it might be a good idea to help them find their way to your office!

Typical French concentration

The first thing to notice is how geographically concentrated these firms are.

There are only 4.1km from the westernmost VC point (ISAI) to the most easterly VC (Korelya / Daphni).

And except from the left bank outlier Seventure Partners, you’ll only have to walk 1.8 km from the southern edge Alven to the northern wall defended by Omnes. That’s a fairly small area.

Paris VCs are fairly concentrated

From Étoile to Opéra, the French Sand Hill Road

Zooming in a bit, you’ll notice that most of the VC firms are located in the traditional central business areas of Paris:

  • 8th arrondissement, around the Champs-Elysées: ISAI, Blackfin Capital Partners, Idinvest, Cathay, Iris Capital, XAnge, Elaia Partners and Breega Capital

  • the Saint-Lazare / Madeleine / Haussmann area (north 8th / south of the 9th district): Truffle Capital, Partech Ventures, Capagro, Aurinvest, Omnes Capital, Newfund, Aster Capital and Serena Capital
    + Hi-Inov

  • Opéra / Drouot: Banexi, CapHorn Invest, BPI France, Ventech, CM-CIC, 360 Capital Partners and Alven.
    + Kerala Ventures

All of these VCs are traditional, institutional VCs. Funnily enough, two “entrepreneur money” seed funds are located in this fancy area, ISAI and Kerala.

The 3 hubs of French traditional VCs

New kids on the Sentier’s blocks

You might have noticed that some stars on the map are not located within the red-circled areas. The one near the Tour Eiffel is the outlier from the left bank, Seventure Partners.

But the most interesting fact concerns the one to the right hand side, in the blue circle. They are located in the Sentier, where most of Paris’ startups are located today.

That move away from the bankers’ 8th district to the Entrepreneurs’ Sentier has been performed either by investment firms which are either newly set up (Korelya and Daphni, who share the same building rue Réaumur) or with renewed interest for startups (Otium Venture).

Interestingly, the center of gravity for the Parisian startup scene is moving east. The center of attention followed suit with the emergence of The Family which is even further east (Bastille) and will maybe go SE with the grand opening of StationF.

Viens chez moi, j’habite chez une copine

Speaking of the coworking space (let’s call it this way), it is worth noticing that many VCs are hosted by other startup-related institutions.

  • Kima Ventures performed exactly the East-aimed path I mention (from Iliad offices in the 8th district to TheFamily premises near Bastille to StationF)

  • Global Founders Capital’s Paris team moved from Rocket Internet’s Africa Internet Group premises near St Lazare to TheFamily

  • FaDièse team works, as far as I know, from Le Cargo, a State-financed incubator in the north of Paris

  • Side Capital, the only star you see on the right bank which is not within a circle, shares offices with the accelerator 50 Partners

  • StationF is now (at least to some extent) home to some French VCs including Ventech, Daphni, Kima and will most probably be a visiting office for some investors working for foreign VC firms. That would be a tremendous opportunity for the visibility of the French startup scene abroad.

As I said, this is a light and easy summer article for founders preparing a fundraising roadshow in September. If this is a case, drop me an email! :)

Map of the French VCs in Paris :)

Leveraging AI to make CRM Marketing great again: EQT Ventures’ investment in Tinyclues’ Series B

Tinyclues’ Founder and CEO David Bessis — and some nice formulas!

Today, Paris-based Tinyclues, the most advanced AI-based CRM marketing software, has announced its $18m Series B, led by EQT Ventures.

The investment was made alongside existing investors Alven, Elaia Partners and ISAI, which are considered some of the best French VC firms.

Proof of EQT Ventures’ increased presence in France, Tinyclues leverages the most prominent French assets (namely, mathematical knowledge, AI talent and big B2C companies) to revolutionise CRM marketing with an AI-first, heuristic-free approach.

  • Tinyclues is not a typical ex-industry insider startup, which is often the case in marketing tech. A mathematician by background, David Bessis studied relational databases and graph theory to extract insights from a big data set as early as 2010

  • David decided to apply this framework and set of algorithms to CRM marketing. This is an industry where the world’s biggest B2C companies spend billions per year, but is still largely led by marketers’ biases and heuristics, with insights often limited to “we need to advertise more on umbrellas in the winter than in the summer”

  • By running its machine learning algorithms on large datasets of transactions on the one hand and catalogue on the other hand, Tinyclues’ software finds those “tiny clues” to predict the probability of any customer buying any SKU at any point in time. By doing so, Tinyclues creates customer segments with much better ROI (up to +250% revenue uplifts on certain campaigns) for its clients’ customer reactivation campaigns

Credits: https://quotesurf.com/john-wanamaker-quotes

  • We, at EQT Ventures, are convinced that the recent surge of interest in AI — even though David and his team have been working on this technology for the past seven years — is a great way to add an intelligence layer on top of existing systems of records (in this case, a CRM and a PIM) and workflow apps (here, campaign managers like emailing software or social media ads managers). We believe that this is where the real value is. Tinyclues enables big B2C companies to understand their customers even better, and waste less money on marketing, while preserving their customers’ time and attention

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