Afic launches scheme to promote entrepreneur funds

Greg Gille
27 April 2015

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French private equity association Afic recently announced the launch of its Entrepreneur Funds Club, which aims to promote private equity vehicles drawing significant commitments from business leaders and entrepreneurs. Greg Gille reports

Who says France lacks a strong entrepreneurial spirit? Certainly not the country's private equity industry, which is increasingly keen to leverage the financial clout and industrial know-how successful business managers can bring to the fundraising table.

Local private equity association Afic recently announced the launch of its Entrepreneur Funds Club, which aims to federate and promote private equity vehicles drawing a significant proportion of their commitments from private investors and entrepreneurs.

The club so far comprises 17 members, managing a total of €615m. Of these commitments, €450m were contributed by 920 private investors, with the remainder coming from around 50 institutional investors.

"Often, these entrepreneurs have come to know about our industry because they created start-ups or developed companies that benefited from growth capital and private equity. They know the model and want to support it, reinvesting their money in the French economy because they believe in its potential," says Isabelle de Baillenx, CEO of venture firm Fa Diese and president of the club.

Indeed, more and more teams are reaching out to entrepreneurs to back their vehicles. Although the more visible of these tend to focus on early-stage deals, harnessing the capital and experience of successful tech entrepreneurs that made it big in the 2000s, entrepreneur funds are present across the spectrum. In fact, according to de Baillenx, the majority of such funds launched these days are more focused on the growth/LBO side of private equity.

"There is a discrepancy between the reality of what entrepreneur-backed funds are, and their perception in the market," she says. "Most of the attention has been focused on venture funds launched by successful web entrepreneurs on their own, whereas a significant number of funds backed by several entrepreneurs – coming from more traditional backgrounds, mutualising their financial resources and their know-how – are less visible."

One of the club's main goals is to go beyond the tip of the iceberg, and entice entrepreneurs to back these funds by highlighting their diversity and the opportunities on offer. There is, for instance, a clear distinction between seed-style funds and growth and LBO funds. Entrepreneurs will be very involved in the former, when it comes to sourcing deals and later supporting portfolio companies in their expansion. Growth and LBO funds, meanwhile, usually adopt a less hands-on approach, where the fund manager undertakes the majority of the work itself. The club seeks to signpost this environment so entrepreneurs can better find the opportunity that suits their ambitions.

More than a club
The club is obviously in its infancy, so the full extent of its initiatives is still to be defined. According to de Baillenx, other projects include the organisation of an event mixing club members and wealth managers to boost visibility and promote networking. The creation of a standardised ‘Afic Entrepreneurs Fund' label for members, to increase visibility and transparency is also being considered.

But one thing is for sure: tapping into the potential pool of capital coming from successful entrepreneurs, and high-net-worth individuals in general, is becoming increasingly important for French private equity players. According to Afic statistics, the contribution of individual investors and family offices to local fundraising efforts has increased for two years running while, in the meantime, more traditional LP types have been looking to rationalise their allocations.

Private investors and family offices were the third most important LP group in 2014 fundraising figures behind funds-of-funds and insurance companies, contributing a total of €1.58bn – up 22% on 2013 figures. The 2014 total is more impressive when put against the €1.07bn raised in 2012, with a 47% differential.

Two members, Isai and Alter Equity, incidentally reached fundraising milestones following the announcement of the club's creation. The former, launched back in 2010 by influential web entrepreneur Pierre Kosciusko-Morizet, held a first close on €55m for its latest fund, Isai Venture II – already ahead of its €35m target. Alter Equity, meanwhile, closed its latest impact investment fund on €33m, drawing nearly a quarter of its commitments from high-net-worth individuals and entrepreneurs.