Market: With the end of easy money, IPOs of tech companies will become scarce

(Bahrain Financial Exchange) – Inflationary pressures and rising interest rates are complicating the emergence of future technology nuggets. France has a strong ambition to see the emergence of ten “decacorns”, these companies worth up to 10 billion dollars. To date, the country does not have any company of this size, unlike other European countries such as Sweden or the Netherlands.

The return of inflation and the high interest rates it implies are making needed investments for tech companies more expensive, at a time when Europe is hoping to take out digital giants.

France’s new technologies sector should have ten “decorations” by 2030, companies worth up to $10 billion launched, Wednesday, Economy Minister Bruno Le Maire, during a trip to the VivaTech fair in Paris. A year ago, the French president went even further during an event at the Elysee called “Scale-Up Europe” (“Making Europe grow”), wishing for the emergence of “10 companies worth 100 billion euros”. Euro 2030 today. the continent.

According to a recent “Titans of Tech” report by specialist GP Bullhound, after years of runaway growth, the continent’s tech ecosystem surpassed $1 trillion in cumulative value in 2021. It has 283 unicorns (unlisted companies worth over $1 billion in value). ) and 17 companies “Decacorn”. But the cold snap that has swept the markets for a few months bears witness to the doubts about these new targets.

There is no “Decacorn” in France

France does not currently have any “decathlon”, unlike other European countries such as the Netherlands and Sweden. The fortune of the two most important French unicorns – Doctolib and Back Market – is about $ 5 billion. “Everyone has seen that the conditions for financing are changing drastically. Easy money, (..) is over and everyone should be aware of it,” admitted the mayor. “It is our responsibility to continue to ensure strong financing through other means,” he promised, citing the European initiative “Expanding Europe” which plans to release more than 3 billion euros, or again France 2030 investment plan launched last year by Emmanuel Macron.

“The higher the rates, the more interest there is in investing in debt” and less in venture capital, Guillaume Fettrich, associate attorney at White & Case, explains to AFP. As a result, “it will be more difficult for tech funds to raise money, and therefore more difficult for tech companies to fund themselves.” In addition, now is not the time to go public, he said during a roundtable at VivaTech, as French music streaming platform Deezer prepares for a rush in early July.

A new mythical animal, the centaur?

In the US, the strong tech-colored Nasdaq has already suffered a 30% correction, with many values ​​dropping from 70 to 80%, since the highs at the end of 2021-22, according to a GP report. . Instead, all eyes are on market consolidation, as lower valuations create buying opportunities. But “evaluation cannot be the only compass,” cautions Alexander Aractingi, partner at Boston Consulting Group, stressing that the societal impact of these companies should not be neglected.

“The number of unicorns was not the ultimate goal when we launched the ‘French Tech’ initiative. What matters is that you have great stories and start-up companies that can grow and become global,” supported by VivaTech Fleur Pellerin, Digital Minister in 2014 and now Director of the Korelya Fund .

For Marguerite Berard, Director of Commercial Banking in France at BNP Paribas, “The technology ecosystem will be essential to the European economy in the long run. An advantage of the slowdown is that it allows for more sustainable patterns to be identified and adds meaning to a situation that has been a bit out of control.”

Investment Fund Bessemer Venture Partners is also introducing a new mythical animal, the centaur, to inspire entrepreneurs. According to him, this qualifies as companies that generate more than $100 million in annual recurring revenue, a category seven times rarer globally.

(with AFP)

© 2022 BFM Bourse

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