The future is based on innovation.
Philippe Gluntz, President and Vice-President for Public Affairs at Business Angels Europe, is the founder and former President of Paris Business Angels, former President and current Executive Vice-President of France Angels, the French federation of business angels and early stage funds. Furthermore, Philippe founded Business Angels Europe and has been its first president from 2013 to 2017.
Keep reading for his take on what makes for a successful investment, what makes an ecosystem strong, how investments in innovation can be incentivized, the difference women investors make, and so much more!
Tell us about someone you admire. What strength made them successful?
I am fond of people who are successful in starting a business and they grow it into a big company afterwards. One such person is Jonathan Cherki, Head of Contentsquare, which is now a unicorn. When he started, he was still a student in business school, and he already had 12 people working for him, and half a million EUR revenue. Now, 7 years later, he is running a 2.7 billion EUR company of 5000 people. This is a big success! I would love for Growceanu to invest in a company like that.
What is interesting about Jonathan is that he was 20, or even younger, when he already wanted to have his own company. He was not coming from money, he had a good idea and he had good insight into what needed to be done. He wanted to make it happen for himself.
His drive made him successful. His drive is what’s powering his company and the people working for him. He was always driven to convince people to start something new with him. He convinced big telecom companies and luxury manufacturers in France to partner with his potential company, which he hadn’t even started, at the time. And he did convince them. His drive with people and customers is remarkable.
The team is fundamental.
How do you recognize a good investment?
First, what I don’t consider as important as other people do is the business plan. As far as I'm concerned, the business plan has to be completely changed 6 months later. You have to have it, of course, but it’s just a reference. The team is fundamental, though. The team is what we're betting on – and by ‘team’ I mean the leader and the 2-3 people who work with the leader, and who must be complementary, in terms of skills. Everything comes from the team. They might change their mind, 6 months later, and pivot to a different strategy – so they must be flexible enough to do that, and realize when they have to change and find another way to grow, work on another strategy. So the team is key, it’s probably 80% of the total.
Second, they have to be, or want to be, in a market that is growing. I see so many people who go for a niche market, but that will never make them a big company.
And then, of course, they need to bring something new to the market, against the competition, something that will capture people’s attention and interest.
The future is based on innovation.
When you think of the start-up ecosystem in Europe, what creates a sense of forward momentum?
In most of the countries I know, the Government declares that the future development of the country is based on innovation, and that an ecosystem of innovation must be built for that. And this ecosystem is being built in most European countries – not everywhere it is as effective as it should be, but at least the concept that the future is based on innovation is pervasive now.
Depending on the country, the ecosystem can be based totally on private initiatives, as is the case in Netherlands, for instance, or the public system can be very involved, which is the case in France - where we may have slightly too much investment from the public system in order for the innovation ecosystem to develop. Having support from the public system is a good thing, for sure, but I think innovation should be left more to the initiative of private individuals. What’s important is that the ecosystem of innovation is now developed in most countries, which is a positive for our future.
Young people should be trained very early to think in terms of innovation.
What makes an ecosystem strong?
First, I think young people should be trained very early to think in terms of innovation, instead of merely wanting to join an existing company. They should be trained to think about new things, think about starting a company, or at least consider joining a young company. Also, University researchers should be trained to think in terms of innovation. Many researchers, at least in France, are not able to think in terms of innovation. They love deep tech learning, but creating something new, starting a company is not on their mind. In France we have initiatives, called ‘Deep Tech’, focusing on motivating researchers to think in terms of starting a business, or at least participate in innovation.
Secondly, I think these people must be supported financially, from the very beginning, so they can start working on something, go through some trials and errors – so it’s a question of training and financing at a very early stage.
Then, obviously, they have to be able to find the money to start a real company and grow. But at the very beginning it’s a question of motivating young people and university researchers to think in terms of innovation.
It’s important for people to invest together, rather than individually.
When you think of the angel market in Europe, what is its most marked characteristic? What difference was ESIL set to make? Has it achieved its purpose?
I think the angel market is growing very much in most of the Western Europe countries. ESIL was not focused on Eastern Europe so much. Best practices were exchanged between some countries, but ESIL was mostly focused on Eastern Europe, the Balkans and other countries. Trading and research are quite advanced, so we saw a lot of potential here. What is lacking, though, is the understanding of what it takes to really transform ideas and research into innovation and companies. As a consequence, there was a lack of demand for the angels, not enough deal flow. Unless there is significant deal flow, the angel market cannot grow. Angels must have a choice, they need several opportunities to look at and select the one they feel is better for them.
The second important thing is getting angel investors motivated. The people who have enough money need to be motivated to put their money into innovation, into innovative companies, instead of going for the stock market or the real estate. And this is not easy to do, no matter where you are in Europe. Particularly in France, high net worth individuals prefer to invest in real estate, and maybe in the stock market if they are open to some risk taking, but they very rarely do in innovative companies. So we must change people’s minds, which is what ESIL seeks to do.
Then it’s important for people to invest together, rather than individually. When in a group, there is more power, motivation and skills to employ, all of which put you in a much better position to make successful investments.
Women investors and men investors complement one another well.
What do women bring to angel investing, entrepreneurship, business, leadership? Have WEGate, WA4E surprised you in any way, have you had any interesting realizations?
When we first started in France, 20 years ago, 95% of our investors were men, and only 5% women. We were very happy to have women investors, because they had a different view on different businesses. Women were much more interested in evaluating people and team building – which was very important, especially because men were more financially and technically oriented. We complemented one another well. Back then, this complementary approach applied to the same investment. Today, more and more women start businesses, and the type of businesses they are interested in is less interesting for male investors. So the solution we have found is to have mixed networks. In Europe, we have 15-20% women investors, and in France we have approximately 200 women in 2 networks, which are growing very well. WEGate has showed us that things are evolving pretty much the same way in each country, where you have more investors in mixed networks, but we have also female dedicated networks, and the type of businesses that are evaluate is different.
The capacity to co-opt people and grow a network is a very important skill.
You were chosen angel investor of the year in 2012. What is one value you can always count on in your work?
I was a very early investor in telecom, back in 2004. I was coming from the telecom field and I brought people from the telecom industry into the network, at a time when investments in telecom were not prevailing. I invested early, so, naturally, I made a lot of bad investments. Therefore, I learned, progressively, and I think I refined my methods and I contributed to the process employed by Paris Business Angels, which I created in 2004. So I think I was chosen angel investor of the year because of the sector, the process and because I motivated people to join the network. Paris Business Angels had 5 people when is started, and reached 100, 4-5 years later. The capacity to co-opt people and grow a network is a very important skill, one that I have to put forward.
If an investment is to be successful, the founding team must not just be looking for money. They must also be looking for advice and be willing to listen to it.
How do you deal with failure when it happens?
Exiting a company before it becomes a unicorn is a failure, and I did that. I cashed out from Contentsquare when it was a 200 mil EUR company, and it is now evaluated at 2.7 billion. My portfolio is OK, because I did make 4-5 good exits, but probably 40% of my investments got out of business.
Let’s look at some reasons why and lessons learned.
One thing that leads to failure is when the start-up team is not interested in listening to us, not only as investors, but also as mentors. If an investment is to be successful, the founding team must not just be looking for money, they must also be looking for advice and be willing to listen to it. Many times, if things went wrong, it was because the founders did not listen to us, their investors, when we advised them they should change the way they were doing business, that they should change the strategy etc. And when the team does not listen, there is nothing you can do about it. You cannot sell the shares, because you have to have a buyer for that, and when things go sour nobody wants to buy your shares. So, cooperation with the team is key: they must be ready to listen to you, see you as a partner, as someone contributing ideas.
Another reason why an investment fails is when the founder is only looking for limited growth – for instance they are mostly looking to get a salary out of the business, instead of growing the company. This ‘salary’ approach does not bring good business. So the second thing we must be clear about is that the founding team also aims for significant growth and wants to sell – because sometimes they want to create a company forever, and that doesn’t happen anymore.
Founders should not have a national approach, they should have a European, if not worldwide, approach.
The third thing the success of an investments depends on is competitive advantage. Very often, founders are looking for a ‘me, too’ approach – especially when most of their competitors are in another country. 4 years later, though, they will be sharing the same market with those competitors, and our founders’ business will be in bad shape. So founders should not have a national approach, they should have a European, if not worldwide, approach.
The Government needs to incentivize investments in innovation.
What do you say to angel investors to convince/inspire them to invest more in innovation, as opposed to choosing real estate/other safer alternatives?
This is difficult, and we are not very successful in a lot of countries, particularly not in France. For instance, French people saved a lot of money during the pandemic – about 100 million EUR -, and we thought some of this money should be invested in innovation and innovative companies, instead of real estate. We have not been very successful so far. One thing the Government did not want to do is offer tax incentives – like they do in the UK, where you get 50% tax relief if you invest in innovation and innovative companies, which you don’t get if you invest in real estate or the stock market. But the French Government was very cautious about budgetary issues during the pandemic, and they used the money to help people keep their businesses, during the pandemic. So, governmental support would be helpful in this respect.
The second thing to do would be to motivate people to work in innovative companies, in order for the demand to be there. This demand needs to exist, and there needs to be a general feeling that innovation is the future of the country. La French Tech is very innovative, and there are similar such initiatives, where the government is insisting that the future is built on innovation, which leads to starting new companies, rather than just enlarge international companies. What angel investors can do, in this respect, is incentivize the government, so we do a lot of lobbying. There needs to be demand, there is need for young companies looking for money. So, you, too, must have your Government create the feeling that this is the future of the country and develop incentives to make this future happen.