Three reasons why Bpifrance has decided to increase its investments in FinTech

Bpifrance is increasing its investments in FinTech, with assets of €100 million managed by its two teams specialized in tech — Digital Venture and Large Venture — with a focus on early-stage companies.

The three reasons for this decision are as follows.

1. A good time to market — as demonstrated by the rapid growth of FinTech investments

Recent technological and regulatory developments have had a substantial impact on the financial services industry, with the emergence of financial technology, or FinTech — which targets various links in the value chain, transforms customer relations, automates management infrastructure, and enhances banks’, insurers’ and asset managers’ predictive models.

The growth in investments in FinTech companies in France — 10-fold increase in five years, with around €700m of capital raised in 2019[1] — illustrates the attraction of this sector for investors, specialists or generalists, who see the potential created by the major changes in financial services.

The interest of venture capitalists in this sector also explains the constant rise in the amounts raised and invested in FinTech companies as a proportion of the total amount invested in early stage companies since 2014, reaching around 20% in the first half of 2020[2].

The huge fundraising rounds seen recently, especially in the most mature FinTech markets, show that FinTech start-ups have succeeded in convincing their customers, companies or individuals, of the usefulness of their services, as well as winning their trust, essential in financial services. These start-ups have succeeded in finding a product-market fit. It is the case for example of Younited Credit, which specialises in consumer credit; Qonto, a neobank for VSEs/SMEs; Alan, which offers health insurance products; Swile, which offers a radical new luncheon vouchers model; and Lydia, the mobile payment app.

Another indicator shows the sector’s growing maturity and potential: the number of acquisitions of French FinTech companies backed by venture capitalists has increased, with eight start-ups acquired in 2019 compared with five in 2018. These investments are being made by traditional banks seeking to digitize or supplement their offerings, as shown by Société Générale’s acquisition of Shine; Crédit Mutuel Arkéa’s acquisition of Budget Insight; and Checkout.com’s acquisition of Processout.

2. Many early stage opportunities — thanks to growth in new vertical markets

Investment activity is very strong in early stage FinTech companies[3]: they account for 75% of transactions (28 out of 36 transactions[4]) in the FinTech sector, with €133 million of capital raised in the first half of 2020, which prefigures the arrival of potential new champions.[5]

While some sub-sectors are already covered by many well-funded start-ups, others are still hardly explored and represent great opportunities for both start-ups and investors.

Since 2010, more than 60% of investments in France have been made in the most mature verticals, namely payment, financing and banking 2.0 services.[6] New initiatives are still emerging in these areas, but at a slower pace than in the more emerging sub-sectors: InsureTech, RegTech, financial services, solutions for wealth managers, investors, middle- and back-office teams, and blockchain — which represent at this stage 40% of the total amount invested.

3. Bpifrance & Fintech companies — a partnership with strong synergies

Bpifrance has real expertise in investing in tech. Its investment capabilities cover all stages thanks to its two teams: the Digital Venture team, which focuses on early stage deals (seed, series A and B with tickets ranging from €0.2m to €10m); and the Large Venture team, which focuses on late stage investments (tickets above €10m). These two teams can therefore fund start-ups over the long term and potentially in relays. This ability to provide substantial long-term investor funding is all the more crucial for FinTech companies, whose financial strength is essential for customers and who may also be subject to strong regulatory constraints, making their growth even more capital-intensive.

In addition, the investment teams have privileged access to a network of business-line experts within the group that have specific knowledge of the finance and banking industries (business, legal, regulatory, risk, ALM, etc.), thus generating synergies between Bpifrance and start-ups, thereby finding business opportunities, while helping to accelerate the group’s digital transformation.

Start-ups backed by Bpifrance not only benefit from increased visibility thanks to the Bpifrance brand, but they also gain additional trust, which is key for start-ups in the financial services sector.

All these reasons have led Bpifrance to increase its investment in FinTech — especially in early-stage through Bpifrance Digital Venture.

With €700m+ under management, Bpifrance Digital Venture invests in early-stage startups (seed to series B) with high growth potential. Since 2011, the team has backed over 90 digital companies, including Manomano, Openclassrooms, Shippeo, etc. and has carried out several exits, such as Teads (Altice), Netatmo (Legrand), Meilleurs Agents (Axel Springer), etc.

Within the team, two investors are now dedicated to investing in early-stage FinTech companies (covering all sectors, banking and insurance services, risk and compliance management, etc.). Over the years, Bpifrance Digital Venture has invested in Famoco, Garantme, Captain Contrat and Acinq. In the last year alone, the team has backed four new Fintech companies Pixpay, Swan, Memobank and SIS-ID.

Bpifrance’s FinTech portfolio

If you are a Fintech startup looking to raise funds, please contact :

Clarisse Blandin — clarisse.blandin@bpifrance.fr / Quentin Mayolle — quentin.mayolle@bpifrance.fr

[1] KPMG “Pulse of fintech France S1 2019” & Bpifrance analysis

[2] Eldorado & Bpifrance analysis

[3] We have taken capital raises of less than €20m here

[4] L’Observatoire de la Fintech, Le semestre de la fintech, 1er semestre 2020 & Bpifrance analysis

[5] Bpifrance analysis

[6] L’observatoire de la fintech, Le semestre de la fintech, 1er semestre 2020