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French Tech Journal: Funding Fine Print And The Digital Minister's Electoral Dilemma

Not all funding announcements are created equal. A closer look at the rounds announced by Innovafeed, Bump, and ZePlug.

Innovafeed's Nesle site. Photo ©Innovafeed
Innovafeed's Nesle site. Photo ©Innovafeed

After a sluggish start to the 3rd quarter, the funding pace has picked up over the past few weeks, though it's still likely to fall short of Q3 2021. According to Dealroom, Q3 2022 funding for French startups is now $2.2 billion, compared to $3.9 billion in Q3 2021.

That would still be the 6th largest funding quarter in French Tech history. And it's a big improvement from the start of September when funding was a mere $545 million for the quarter.  

While there has been a solid increase in the rhythm of funding announcements, the big leap in totals has been driven by three main announcements:

  1. Innovafeed raised $250 million for its insect protein production.
  2. ZePlug raised $240 million for its EV charging station network.
  3. Bump raised $180 million for its own EV charging network.

However, not all fundings are created equal. None of these deals are as straightforward as they might appear at first glance. That's not to imply that there is anything shady happening here. There's not.

Still, just adding up the numbers might give some the appearance that all is well and that funding is flowing as it has in recent years. Nope and nope. Instead, it's worth looking at the fine print on these announcements for hints of how the funding environment has changed and how startups are adapting.

Let's start with Innovafeed. The announcement notes that the investors included the Qatar Investment Authority (QIA) as well as previous investors Creadev and Temasek. Joining an investment round for the first time are strategic agribusiness giants ADM and Cargill.

Earlier this year, Cargill announced a 10-year partnership with Innovafeed to purchase its insect protein for its animal feed products. In February, Innovafeed struck a deal with ADM to commercialize insect protein for pet food. The two companies were already building a massive insect protein production facility in Illinois as part of a joint venture.

And so, the funding breaks down like this: $38 million in debt, $10 million in government subsidies, and $202 million in equity. That structure makes sense given that it will be used in part to build out Innovafeed's production facilities.

Though the announcements don't say it explicitly, I would assume that the long-term contracts with Cargill and ADM also helped secure the debt. The debt is being provided by La Caisse d’Epargne Hauts de France, Groupe Crédit Agricole, BNP Paribas, Arkéa Banque Entreprises and Institutionnels, and Société Générale.

Next up is ZePlug, which provides charging EV stations for multi-occupant and office buildings. ICG announced the $240 million investment, but also noted that as "part of the transaction," ZePlug had acquired Bornes Solutions, which has been owned by another portfolio company of ICG. It's unclear if that value represented an asset transfer, or if involved cash in some way.

I've reached out to both ZePlug and ICG to clarify. Also, I've asked them if this means that ICG is now the majority shareholder or owner of ZePlug, given that the company's only previously disclosed outside investment was $5 million in 2020.

Finally, we come to Bump. In announcing its $180 million funding with DIF, Bump, describes it this way: "This partnership translates into a major fundraising destined to finance an investment plan of €180 million between now and 2030."

That's pretty good for a company that was just launched in March 2021. But, given that the money is apparently stretched over 8 years, this also translate into a substantially smaller investment now, with a promise to provide some kind of financing over time. In other words, the company did not just pocket $180 million. Indeed, Bump says that the 180 million figure is to help finance the deployment of more than 25,000 EV charging stations. Still, Bump is getting enough now to hire 100 more employees.

However, Bump also omits one detail that is included in DIF's press release: DIF now owns 55% of Bump. That is a hefty chunk for such an early stage round.

I reached out to Bump to clarify the details of just how the financing works. A spokesperson for DIF declined to comment.

Just to reiterate, no one is doing anything wrong here. (Though I do wish again) that these firms and startups would be more straightforward in their communications around these deals.) But there is certainly a difference between taking out a loan, giving away equity as part of an investment, and selling a company.

As the investment climate continues to toughen, expect to see more companies get creative around their financing. That's just being smart. But if they are having to give away the majority (or all) of the company, that's just a sign of how the balance of power has shifted. Lacking transparency, it makes it harder for people outside these companies to truly evaluate their progress and sturdiness.

And when a founder is no longer in control of their company, they could be stuck at the whims of an investor or partner who doesn't share their values or vision in the event things are not going as planned. (Just ask the folks who work at Zenly.)

The Digital Minister's Electoral Dilemma

French Digital Minister Jean-Noël Barrot
French Digital Minister Jean-Noël Barrot 

Following the re-election of Emmanuel Macron earlier this year, the French Tech ecosystem waited anxiously for him to name a new Digital Minister. The process was delayed by the legislative elections which resulted in a plurality, but not a majority, for Macron in the Assembly.

After that drama, Macron unexpectedly named Jean-Noël Barrot to the post, passing over several other rumored faces who were better-known within the French Tech world. Barrot's appointment was apparently part of a deal with a political partner, and came with a governmental rank higher than his predecessors.

Still, many entrepreneurs and investors were left wondering: Who is this guy?

After a quiet summer, Barrot hoped to make a big effort to introduce himself around the ecosystem starting at the rentrée (the back to school/back to work period at the start of September). And indeed, I saw him speak for the first time last week at the French Tech Rentrée Soirée at the Economic ministry offices.

However, Barrot's agenda has been complicated by an unexpected item: He must run for re-election. This coming Sunday he will be a candidate for his Assembly seat again in a first round of voting. The top finishers advance to a 2nd round on October 9.

Barrot is expected to win. But if he does not, it's likely he would have to resign as Digital Minister and Macron would have to find a replacement.

Why is all of this happening? The drama turns on some rather obscure elements of French elections. When a candidate runs for Assembly, they run on a ticket with a "suppléante", basically a number 2 who replaces them in case they can't serve. Or, as was the case with Barrot, they are named to a ministerial post. Following his appointment as Digital Minister in June, his suppléante, Anne Grignon, took his Assembly seat. But a few weeks after Grignon replaced him, she resigned.

The reasons are insanely obscure: In the 2017 election, Grignon was listed as suppléante for Martin Lévrier who won a seat in the Senate. Under the vagaries of French law, she technically remains the suppléante for the Senate seat, and therefore, can not serve as the suppléante for another candidate. Somehow, the members of Barrot's center-right party, the MoDem's, missed this quirk when submitting their electoral lists. But someone filed a complaint with the French Constitutional Council, and rather than waiting for a final decision, Grignon stepped down.

With the Assembly divided, Barrot decided to run again for the seat himself. In theory, he shouldn't have trouble winning. He scored 64.3% in the second round against a left-wing candidate back in June. Barrot hails from a relatively conservative district west of Paris.

Still, there are plenty of wild cards at play. This is not a national election, and so it's unclear how many voters in his district may even be aware there is an election this weekend. Barrot will face several candidates on both his left and right, and he must finish in the top tier to advance to round 2. What if voters decide to use this vote to send some kind of message of discontent to Macron's government? And to make the situation even stranger: Voters are being asked to back Barrot again, knowing he will again quit the seat and turn it over to his No. 2.

Adding to all the drama is a rule put in place by Macron back in June: All ministers who are candidates for the Assembly have to win to keep their posts. In fact, 3 did not win and were forced out.

Barrot hopes to avoid being the 4th. But that won't be official until after Oct. 9. Until then, his status is just one more bit of uncertainty and an unwelcome distraction for an ecosystem trying to navigate tricky economic times.

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