Romain Serman is director of Bpifrance and former advisor of the French president Nicolas Sarkozy. In this interview, Serman discusses the evolving European venture capital environment and the main challenges French entrepreneurs face in the European ecosystem. Moreover, he highlights the main differences between the current investment behavior in Europe and the U.S., the roots to these differences and what the consequences are in respective markets.
Bpifrance is a financial institution providing assistance and financial support to small and medium-sized enterprises, as well as facilitating access to banks and equity capital investors. The firm particularly focus on French enterprises in high-risk phases. Acting in the French Regions, Bpifrance supports SMEs through a decentralized network of 37 regional offices, being in direct contact with the entrepreneurs and their partners. Even though the firm is private, the corporate model is a mix of many different structures with diverse sources of financing. The banking branch of Bpifrance is similar to a private bank in a legal sense, but with a high level of involvement from the government that acts as the firm’s main LP.
Bpifrance’s mission to support and develop French entrepreneurs is close to Serman’s heart. Having an office in the Bay Area enables him to observe and learn from U.S. entrepreneurs, and pass on best practices, culture, and mindset to French entrepreneurs based in Europe and the United States. Prior to Bpifrance, Romain Serman was the Consul General at the French Consulate in San Francisco. Between 2009-2010, he served as the Secretary General of France - Africa Summit 2010, to boost economic development in Africa. Serman also held the title of Advisor of the French President (2007-2009), First Secretary of French Mission to the United Nations (2003-2007), as well as Ministry of Foreign Affairs (2000-2003). According to Serman, his political career has helped him in terms of negotiating and navigating the life cycles of startups and the success of entrepreneurs better in his current role.
Serman holds a master’s degree in law, economics and public science from Institut d’Etudes Politiques de Paris.
Trusted Insight: How has the entrepreneur / venture capital environment changed in Europe in the past 10 years?
Romain Serman: Firstly, Europe has changed dramatically over the past 10 years. 2017 will be another record year for the European venture capital industry. Europe has reached around $19 billion of investments in tech companies. There is no doubt tech startups are booming. Sweden, as an example, has produced quite a lot of amazing companies. There is something very interesting going on in Stockholm and the Nordics.
Secondly, the exit market in Europe still remains small. The bar is much lower in Europe to do an IPO and the depth of the market is nothing in comparison to, for example, New York.
Thirdly, the European tech landscape has changed dramatically. Four or five years ago, you would have one tech hub based in London. Now you have three tech hubs based in London, in addition to Paris, Stockholm and Berlin. Paris’ tech community has literally exploded over the last three or four years. In addition, there are other, smaller hubs that are very active like Barcelona, Amsterdam, Dublin and other cities. Eastern Europe is also becoming very interesting.
But what strikes me is this, I do not think these tech hubs are collaborating to the same extent as they do in the U.S. Let us take a VC from San Francisco as an example. They invest in companies in Los Angeles, New York, Boston and so on. In Europe, we have not reached the same level of collaboration like in the U.S. It baffles me considering that the distance between London and Paris is the same distance as between San Francisco and south of Monterey. However, the European investment environment is slowly changing - and we can now see how big players in London are more open to investing in the Scandinavia, Berlin, Paris, Barcelona, and so on.
I think to summarize: there is a good trend of increased collaborations in Europe, but there is still a lot of work to be done in order to really connect European communities. In the future, there will be more and more connections across tech hubs in Europe.
Trusted Insight: What challenges can you see in the U.S. ecosystem versus the European ecosystem?
The imminent market in Europe is improving, but it is still quite a challenging environment for European VCs and European companies. The number of big tech companies in Europe -- the equivalent of the Intels, the Googles or the Facebooks of Europe -- is limited. Whereas in the U.S., you have so many. Moreover, the large non-tech corporations in Europe are becoming increasingly active, but are still quite shy. Active in the sense of corporate investments, but not active in terms of working with and/or buying startups. Usually, it is more common for U.S. corporations to buy European companies.
The pool of experienced and talented entrepreneurs is still small in Europe. That is one of the main issues that I can see. Now that tons of capital is available on the market, some may say too much, the culture is changing. The French government is now very positive to startups and business innovation.
Even though there is still quite a small supply of experienced entrepreneurs, you still see talented people in Stockholm, like the founders of Spotify, and several very experienced entrepreneurs in London and across Europe. What I am missing are the men and women who are building not their first or second, but third or fourth company. There is a lack of really experienced VCs as well. It is natural because the system is still young. This can make it more difficult to get traction to the European ecosystem and cannot guarantee an output of several unicorns per year, like we see here in the U.S. With that said, I am extremely positive and have a strong faith in the European VC industry as a whole.
Trusted Insight: You have been at Bpifrance for roughly 3.5 years. What did the portfolio look like when you joined and how has it evolve since. What caused this evolution?
Romain Serman: It has evolved in two ways. One, we have made new investments in more mature late-stage companies than two or three years ago. Just last month, we invested in a marketplace called Mano Mano. It was a € 72 million round , which is not bad for an European company. We have also invested in Doctolib (raised €70 million this year).
The second trend is that we have invested and added companies that are already extended in the U.S. market to our portfolio. We have increased the number of international companies. Between the seed round and series A, you had an average around 24 to 26 companies three or four years ago. The trend is that now the companies raised funds much, much faster (15 months on average between seed and A). Same thing for our series B. So our portfolio is growing faster than before.
Trusted Insight: What are the differences in investment mentality and behavior between European and American investors?
Romain Serman: There still are big differences between the mentality of an American and European investor for one simple reason. In the U.S., you have an industry that is really big and well-developed. There is a large number of people of diverse backgrounds and industries in investment teams - not only people from the finance industry. There is a larger mix between pure financial people, operational people and former entrepreneurs. In Europe, at least in France, this is not the case. There are more and more former entrepreneurs who enter as VCs, but mainly the investment teams consist of men and women from the finance industry.
The other difference, of course, is that here in U.S., you have investors who have been doing this for decades, sometimes 30 years. There is a real difference in terms of maturity. Investors who have seen less companies have less experience. It is the beginning of a fantastic story of France and Europe, but for historical reasons there is a gap between the industries.
Culturally, France is less exposed to the world. Here in the U.S., we see entrepreneurs from the U.S., from Israel, from Sweden, from Japan, from China, from Africa, from India, from everywhere. In France, they see people from France. Meaning, investors have less exposure to a smaller pool of talent. But things are changing as I see more and more non-French talent and entrepreneurs flooding to France. The flourishing tech scene in France and the new visa regulation put in place by the Macron's government to attract foreign talent explain the exciting trend.
Trusted Insight: Will machine learning and artificial intelligence impact markets and investment strategies in the near- to medium-term?
Romain Serman: I believe AI and ML have become buzzwords, which makes us careful when we hear these two words. However, the best founders in AI and ML that I have seen were amazing at collecting data. By doing so, you are able to fuel the engine. We strongly believe that AI, using the billions of data that you have in the healthcare field, will be key if we want to decrease the price of healthcare. Without AI, we do not think it will be possible. This is super promising.
Our AI investments are concentrated to the healthcare industry. To give you an example, Cardiologs - a fantastic company - has real data and produced real machinery in order to analyze patients’ health.
You can view our full catalogue of interviews with institutional investors here.
Bpifrance is a financial institution providing assistance and financial support to small and medium-sized enterprises, as well as facilitating access to banks and equity capital investors. The firm particularly focus on French enterprises in high-risk phases. Acting in the French Regions, Bpifrance supports SMEs through a decentralized network of 37 regional offices, being in direct contact with the entrepreneurs and their partners. Even though the firm is private, the corporate model is a mix of many different structures with diverse sources of financing. The banking branch of Bpifrance is similar to a private bank in a legal sense, but with a high level of involvement from the government that acts as the firm’s main LP.
Bpifrance’s mission to support and develop French entrepreneurs is close to Serman’s heart. Having an office in the Bay Area enables him to observe and learn from U.S. entrepreneurs, and pass on best practices, culture, and mindset to French entrepreneurs based in Europe and the United States. Prior to Bpifrance, Romain Serman was the Consul General at the French Consulate in San Francisco. Between 2009-2010, he served as the Secretary General of France - Africa Summit 2010, to boost economic development in Africa. Serman also held the title of Advisor of the French President (2007-2009), First Secretary of French Mission to the United Nations (2003-2007), as well as Ministry of Foreign Affairs (2000-2003). According to Serman, his political career has helped him in terms of negotiating and navigating the life cycles of startups and the success of entrepreneurs better in his current role.
Serman holds a master’s degree in law, economics and public science from Institut d’Etudes Politiques de Paris.
Trusted Insight: How has the entrepreneur / venture capital environment changed in Europe in the past 10 years?
Romain Serman: Firstly, Europe has changed dramatically over the past 10 years. 2017 will be another record year for the European venture capital industry. Europe has reached around $19 billion of investments in tech companies. There is no doubt tech startups are booming. Sweden, as an example, has produced quite a lot of amazing companies. There is something very interesting going on in Stockholm and the Nordics.
Secondly, the exit market in Europe still remains small. The bar is much lower in Europe to do an IPO and the depth of the market is nothing in comparison to, for example, New York.
Thirdly, the European tech landscape has changed dramatically. Four or five years ago, you would have one tech hub based in London. Now you have three tech hubs based in London, in addition to Paris, Stockholm and Berlin. Paris’ tech community has literally exploded over the last three or four years. In addition, there are other, smaller hubs that are very active like Barcelona, Amsterdam, Dublin and other cities. Eastern Europe is also becoming very interesting.
But what strikes me is this, I do not think these tech hubs are collaborating to the same extent as they do in the U.S. Let us take a VC from San Francisco as an example. They invest in companies in Los Angeles, New York, Boston and so on. In Europe, we have not reached the same level of collaboration like in the U.S. It baffles me considering that the distance between London and Paris is the same distance as between San Francisco and south of Monterey. However, the European investment environment is slowly changing - and we can now see how big players in London are more open to investing in the Scandinavia, Berlin, Paris, Barcelona, and so on.
I think to summarize: there is a good trend of increased collaborations in Europe, but there is still a lot of work to be done in order to really connect European communities. In the future, there will be more and more connections across tech hubs in Europe.
Trusted Insight: What challenges can you see in the U.S. ecosystem versus the European ecosystem?
The imminent market in Europe is improving, but it is still quite a challenging environment for European VCs and European companies. The number of big tech companies in Europe -- the equivalent of the Intels, the Googles or the Facebooks of Europe -- is limited. Whereas in the U.S., you have so many. Moreover, the large non-tech corporations in Europe are becoming increasingly active, but are still quite shy. Active in the sense of corporate investments, but not active in terms of working with and/or buying startups. Usually, it is more common for U.S. corporations to buy European companies.
The pool of experienced and talented entrepreneurs is still small in Europe. That is one of the main issues that I can see. Now that tons of capital is available on the market, some may say too much, the culture is changing. The French government is now very positive to startups and business innovation.
Even though there is still quite a small supply of experienced entrepreneurs, you still see talented people in Stockholm, like the founders of Spotify, and several very experienced entrepreneurs in London and across Europe. What I am missing are the men and women who are building not their first or second, but third or fourth company. There is a lack of really experienced VCs as well. It is natural because the system is still young. This can make it more difficult to get traction to the European ecosystem and cannot guarantee an output of several unicorns per year, like we see here in the U.S. With that said, I am extremely positive and have a strong faith in the European VC industry as a whole.
Trusted Insight: You have been at Bpifrance for roughly 3.5 years. What did the portfolio look like when you joined and how has it evolve since. What caused this evolution?
Romain Serman: It has evolved in two ways. One, we have made new investments in more mature late-stage companies than two or three years ago. Just last month, we invested in a marketplace called Mano Mano. It was a € 72 million round , which is not bad for an European company. We have also invested in Doctolib (raised €70 million this year).
The second trend is that we have invested and added companies that are already extended in the U.S. market to our portfolio. We have increased the number of international companies. Between the seed round and series A, you had an average around 24 to 26 companies three or four years ago. The trend is that now the companies raised funds much, much faster (15 months on average between seed and A). Same thing for our series B. So our portfolio is growing faster than before.
Trusted Insight: What are the differences in investment mentality and behavior between European and American investors?
Romain Serman: There still are big differences between the mentality of an American and European investor for one simple reason. In the U.S., you have an industry that is really big and well-developed. There is a large number of people of diverse backgrounds and industries in investment teams - not only people from the finance industry. There is a larger mix between pure financial people, operational people and former entrepreneurs. In Europe, at least in France, this is not the case. There are more and more former entrepreneurs who enter as VCs, but mainly the investment teams consist of men and women from the finance industry.
The other difference, of course, is that here in U.S., you have investors who have been doing this for decades, sometimes 30 years. There is a real difference in terms of maturity. Investors who have seen less companies have less experience. It is the beginning of a fantastic story of France and Europe, but for historical reasons there is a gap between the industries.
Culturally, France is less exposed to the world. Here in the U.S., we see entrepreneurs from the U.S., from Israel, from Sweden, from Japan, from China, from Africa, from India, from everywhere. In France, they see people from France. Meaning, investors have less exposure to a smaller pool of talent. But things are changing as I see more and more non-French talent and entrepreneurs flooding to France. The flourishing tech scene in France and the new visa regulation put in place by the Macron's government to attract foreign talent explain the exciting trend.
Trusted Insight: Will machine learning and artificial intelligence impact markets and investment strategies in the near- to medium-term?
Romain Serman: I believe AI and ML have become buzzwords, which makes us careful when we hear these two words. However, the best founders in AI and ML that I have seen were amazing at collecting data. By doing so, you are able to fuel the engine. We strongly believe that AI, using the billions of data that you have in the healthcare field, will be key if we want to decrease the price of healthcare. Without AI, we do not think it will be possible. This is super promising.
Our AI investments are concentrated to the healthcare industry. To give you an example, Cardiologs - a fantastic company - has real data and produced real machinery in order to analyze patients’ health.
You can view our full catalogue of interviews with institutional investors here.