– Startups in the K-tech field must read the international market flow to enter France –
– Learn success know-how through examples of startups that have succeeded in attracting investment in France –
Kotra Paris Trade Center tried to examine the factors of success and failure accurately by listening to the success stories of startups from Mr. Cerival, an accelerator who has successfully led many startups to attract investment in France. Through this, we had a long on-site interview with the investor in the hopes of helping domestic startups contemplating entering the overseas market to understand the trends and ecosystems of the French and international markets.
Q1. Please briefly introduce your company.
A1. Our company is called 'Herb Stars' and was inspired by 'Tech Stars', a global accelerator company and our model. Our main job is to support startups with education, networking and overall mentoring for their success. Sometimes they find strategic partners and engage in various activities to attract successful investments. Think of it as a 'hub' that provides all the overall support for the success of a startup. We are also more interested in international startups, such as Asian and American companies, rather than French ones. The reason is that our company aims to pursue diversity and originality, and to apply and graft new things.
Q2. What is the most effective strategy to win the hearts of French investors?
A2. There are many ways to an effective strategy, but the most important to me is the 'team'. It is very important to exist as a team of even two people rather than a company run by one person. In particular, it is important for startups to have a multi-talented team that allows projects to run well, fills gaps and covers risks. I think we need to form a really strong and capable 'dream team', including managers, business developers, and capital-related personnel. Occasionally, when I meet startups, the CEO starts alone, but I think that entrepreneurs need to know how to form a team of experts. Second, I think there should be a tool that can verify the validity of the concept. You need to be able to prove that the products your startup offers are based on a sustainable business, not a flashing-and-fashion concept. I think there must be something innovative or at least different from existing companies. Furthermore, it is an ideal company if it has a vision that can create long-term value. The initial 'sales' of starting a business is not that important. However, whether there is some positive 'market feedback', or a community of followers, etc. is established, it must be able to prove the results of the first performance. The third important part is the 'business plan'. It is not just an idea, but a detailed business plan that can be 'quantified' and verified one by one is needed. You should be able to provide detailed forecasts and blueprints for monthly growth and profitability for at least the next two years. The more detailed the business plan, the better. When many startups pitch or give presentations in front of investors, they often make vague presentations about their business model or business profitability, which I think is very difficult to convince investors.
Q3. If so, what sectors, businesses or technologies are currently most likely to be successful in France? What are the areas for future development? What areas should I target?
A3. I think we can answer this question from different perspectives. First of all, I would like to say that if you want to make a startup successful in France, provide a BTOB solution. In addition, I would like to say that it is a technology that can be applied across various fields in a horizontal form. An 'online accounting program' is a prime example. If you want to differentiate yourself like this, I want to tell you to target the interface.
To help you understand, here are some success stories. In the aforementioned online accounting and health tech fields in France, there is 'Doctolib', a telemedicine appointment platform that is now impossible to live without. It is a real-time platform that makes it easy to make appointments with doctors, nurses, various therapists, pharmacies and testing institutions. In the past, in France, to make an appointment with a doctor, you had to hold on to the phone, and sometimes you had to endure the rudeness of those who manage the doctor's schedule. Alternatively, there is a company called PayFit, a French fintech startup that developed software that allows employees to download salary certificates directly from the platform by digitizing the payroll process of small and medium-sized enterprises (SMEs). The startup succeeded in attracting an investment of €9,000 million earlier this year and was also selected in the French government support program Next 40. Since its establishment in 2016, it has raised a total of 1 million euros to date. As such, 7,900% of French investors are investing in Software-as-a-Service (SaaS) companies.
Q4. So, what do investors look for when selecting a startup? What approach or path do you use to select startups?
A4. The most important thing for French investors is metrics that can analyze and check startup data. Investors first refer to this metric and compare and analyze the data to be monitored. It is a method of examining potential from different angles and meeting various requirements to determine whether it is suitable for investment.
LTV (Life Time Value) is one of them. Briefly, it is a method of estimating and calculating the revenue that a customer can make during the lifetime of using an app. It is very important to closely monitor these indicators. Cohort methods and the like can also be used. It allows you to measure the cost and effectiveness of acquiring new customers, as well as your customer support costs and retention rates over time. If 100 people registered today, how many of them are left tomorrow and the day after tomorrow is monitoring. Based on the solid background of existing customers, it is possible to check whether the new customer acquisition rate and the persistence rate are high or low, and it is an indicator that directly affects the evaluation of the value and potential of a startup. Anyway, our company is using a total of 8 metrics.
Hubstars metrics
Cohert Analysis Table (Customer Lifetime Value)
Q4. What fields of startups are investors interested in?
A4. Among the fields that investors are most interested in right now are Fintech, Biotech, Health Tech, Insurance Tech, and Retail Tech, especially 'new purchasing experience through applications'.
Q5. Can you explain what a 'new buying experience' in retail tech is? I wonder what kind of success stories of startups are there.
A5. There is a very interesting Korean company in this field that has recently settled in France. As I said, it is a RetailTech startup that provides a new shopping experience, and has recently been selected as Apple's default app for relocating to France, developing and using 'Wish Upon', a wish list app for a Korean startup. The new shopping experience provided by this app is said to be an app that allows customers to create a wish list in a shop and wait for it to automatically make a purchase when the price is lowest. After being incubated by Apple, it has now succeeded in providing a new shopping experience to consumers in France and the United States, and now has about 2 users.
Q6. Do you have any experience in investing or accelerating in Korean startups? If so, could you please explain why you chose these companies?
A6. I have been introduced to some Korean startups. I will introduce three startups among them. The first is a technology developed so that the contents of cosmetics can be used up to the last drop by using the inner bottle so that cosmetic contents are not wasted. The second company is an automatic cleaning robot for solar panels, and the third company uses recycled seaweed as packaging material. All three companies have very interesting technologies and are currently in contact with projects that are in demand from French investors and potential buyers.
Q7. What are the top 3 most sought-after startup technologies in France? Please introduce examples of each part.
A7. The top 3 most popular startups for investors are Biotech, Robotech and Remote IoT. Let me introduce some startups in these three fields. The first field of biotech is Vedanta Biosciences, a company that develops new microbiome drugs. It is a life science company based in Cambridge, Massachusetts, USA, and it is said that it succeeded in attracting $6,800 million in investment for Series D in the middle of this year.
The second field of robotech includes logistics robots developed by Exotec, a French company founded in 2015. It is said that it has developed and designed a solution called Good to Person that enables the preparation of all retail logistics orders in the warehouse, providing an optimized logistics solution that combines robotics and software. We have already signed contracts with a number of global companies, and we heard that in September 2020, we succeeded in attracting an investment of 9 million USD (9,000 million Euro).
The last IoT field is remote Internet of Things technology developed by WeMaintain from France. It is said that they recently succeeded in raising 3,000 million euros. Also called Protech, they are an elevator maintenance specialist company that has already had dozens of companies as customers since its establishment in 2017 and they are said to be interested in many countries and cities. I think they have successfully penetrated a niche market and strategically approached the technology that is absolutely necessary. I think they are a very suitable company especially in the COVID-19 era. From the perspective of technicians who have to fix broken elevators. I heard that they have also successfully secured a contract with the London Underground.
Another example is a trash can robot that does the manual emptying of trash cans in train and subway stations. I know there are both in Korea and France. It is a robot that moves by itself and disposes of garbage. As such, start-ups that are sufficient to attract the interest of many investors are emerging one after another by replacing human tasks with robots or by enabling sensors or applications to efficiently perform cumbersome and inefficient tasks.
Q8. How should startups prepare to receive investment in France? Are there any certifications or patents or anything that needs to be preceded?
A8. There are only two things a startup needs to prepare. A business plan that clearly shows a business model filled with numbers, a simple and clear presentation that can be easily understood by even a non-specialist and visually comparable, an IR pitch deck that introduces core skills well, and professional pitching training. This is a 10-minute pitch of the presenter received. Rather than simply reading the prepared script, you need to train yourself to speak naturally. In addition, the pitching time must ensure an interactive Q&A session with investors in the last part. Occasionally, there are startups who pitch without considering the Q&A time sufficiently, and I want to tell you that these seemingly minor errors are the biggest cause of failure to convince investors or buyers and draw empathy. That's why I'd like to say that you need to be able to pitch to someone who is coached by experts like us or who is dedicated to giving presentations with sufficient training.
Usually, IR introduction materials or pitching moments are the moments when meeting investors and making a first impression, so I don't think anyone should do it. This is because no one is interested in treasures that are casually wrapped in newspapers, no matter how good content or treasure-like technology they have. Another common mistake is when you have too much confidence in your technology, which is a result of a lack of objectivity, so I think it's a factor that can lead to big failure. It must be visible from a third-party perspective. The ability to judge from various angles is also a quality that entrepreneurs must possess. This is because we can find out what investors want, what society wants, and what potential buyers and end-customers want. One-sided presentations or pitching without feedback often lead to disappointing results. Therefore, interactive pitching, not mononarration, is important.
Startup pitching site
Q9. What has changed the most in the investment sector before/after the COVID-19 outbreak? Which sector has been hit the hardest?
A9. It is no exaggeration to say that COVID-19 has completely changed our way of life. The sectors that have been hit hardest by COVID-19 are the tourism and entertainment industries. Although there will be a day when they will be revitalized, investment in these industries will be difficult for the time being.
Q10. Then, on the contrary, what are your predictions for the future investment market trends after the COVID-19 era? In which areas do you expect to see the most active investment?
A10. The areas that will develop more actively in the post-COVID-19 era will be the representative trends of convergence education where technology and education meet, “Edutech”, “Remote Internet of Things”, and “Robot Tech”. Educational platforms that are developing even more in the era of untact, and robots that replace people’s work, have already appeared before. Also, the era of technologies that improve human convenience by allowing technicians and operators to manage cumbersome and inefficient work more conveniently through sensors or applications is approaching. In Korea, these technologies have already been developed a lot. For example, the front door of a Korean-style apartment can be locked and closed with a single code without a key. In France, people still have to fill their pockets and bags with a bunch of big keys. These are technologies that already existed, but I guess they will penetrate into our lives more deeply than they do now.
I believe that the era of startups that can quickly adapt to changes will come as we experience many changes across society due to COVID-19, such as 'non-face-to-face' and 'social distancing'. This is an era where forward-looking companies will succeed. Many companies are already actively operating.
Q11. Can you introduce one success story in each of the fields mentioned above?
Could you please explain what technologies and companies you have?
A11. Examples of remote IoT include WeMaintain (a company specializing in elevators) in France, which I described earlier, and in the field of robot technology, there is a trash can robot that directly empties trash that was emptied by humans at train stations or subway stations. An example of the edutech field is a start-up called Kartable, a French company similar to Udemy, a global online education platform in the United States. The startup is a digital learning platform responsible for online classes for elementary, middle and high school students in France. Founded in 2013, it successfully invested 120 million euros the following year.
Q12. I am curious about which startups your company has successfully accelerated recently. Can you give an example?
A12. Let me introduce you to a Singapore video editing editor startup and a French courier app startup that our company recently mentored. There are already countless video editing editors, and you might be wondering how they succeeded. This is a successful case of systematically checking the above-mentioned metrics and developing an app similar to TikTok targeting Generation Z properly. So far, we have succeeded in attracting XNUMX million dollars of investment, and recently, we have succeeded in purchasing by a global company in the United States.
A second example is a French startup called Welco that it is currently accelerating. It's a RetailTech field, and it's a delivery app that lets neighbors pick up packages for you when you're not at home. In 2020 alone, 14 billion parcels were delivered from France. It is gaining explosive popularity among users who had to experience inconvenience because they did not receive the parcel on time and at the promised place. It is a startup with very good prospects. So far, we have succeeded in attracting an investment of 100 million euros and we cannot give more details because global companies are showing great interest, but we are taking steps to meet strategic partners and advance into a larger market.
Q13. Lastly, what advice would you give to Korean startups?
A13. I would like to give you a lot of advice, but due to time constraints, I would like to give you some advice on presentations and pitching, which is the first meeting with investors. Investors hear dozens or hundreds of presentations and pitches a day. It is true that various competencies are required to penetrate numerous competitors and to attract investors' attention and form consensus. In particular, I advise you not to overlook the visual aspect of your presentation material. Because it is an important place to make an impactful first impression on your company. It should not be forgotten that the material that has been carefully and fluently worked is an important factor that can be directly connected to an investment in the future. This is because it is important to mix a concise key message with 'figures' and appropriate examples to convey the flow well and leave a strong visual impression.
I would advise you to prepare to help the audience understand with a visualized image rather than a text, and especially, leave the presenter to someone who is skilled or trained in presentation. It's important not to disturb the audience's immersion, as it's important to present as if speaking naturally. No matter how good content or innovative technology is, I have seen many unfortunate cases where the wrong IR pitching material or the selection of a clumsy novice presenter fails. I hope you do not make these mistakes and wish you success in your investment.
implication
Korea's innovative technology and the ingenious and creative ideas of K-startups that are created every day are well known to the world. Nevertheless, there is an urgent need for an opportunity to analyze and reflect on the failure factors of domestic startups, which reveal their inexperience in the strategy or process of attracting foreign investment. It can be seen that the process of attracting the attention of influential investors in French and global markets and forming a consensus to make an investment decision is not a one-day process. It is judged that it is necessary to learn the competencies to succeed in attracting investment one by one. There is no doubt that this will be the start of many success factors.
Source: HUBSTARS, clevertap website, Kotra Paris Trade Center