The amazing depth and breadth of the French VC market

Chausson Finance just released their indicator for the VC market for 1H 2006.  You can read it at your leisure here.

What is most striking is the sheer number of funds involved in the venture capital world.  Unlike say Germany or Holland, which have seen dramatic decreases in the number of active venture firms, France has a deep and thriving market.

Whilst there are probably too many funds, the top ten garner around 55% of investments, indicating the existence of a two-tier market.  You can see the dominant position achieved by Sofinnova since raising their recent €400M fund.

Like any survey it has its shortcomings, since the data is not split by sector (Iris for example has media, Sofinnova has LS), but nevertheless I recommend having a look at the staggering graph on page 2, of which an excerpt is found below:

Whilst overall it is of course good to see an active market, the report also highlights some of the very clear weaknesses of the French environment. In H1, 259 companies received on average 1.4 million Euros.  We see a large proportion of the French dealflow, and I doubt whether 259 companies really deserved funding.  And 1.4M as an average indicates that most fund are effectively acting as angel investors.  So the report points towards what most active market participants know: fiscal incentives are somewhat distorting the markets, many companies remain undercapitalised, and France is still looking for a critical mass of angels to help get over the first hump.

You might wonder where Atlas Venture is on the graph.  We do about 2-3 deals a year in France, very selectively, and closed nothing between January and June.  Market share is definitely not our forcing function.

I would suggest to Chausson that they should map syndication relationships historically across all deals in the last 5 years, as this would give us a very granular visual representation of the market.

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