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Successfull fund raising in a constrained environment

Mistral AI

Fundraising has dried up. It is no longer possible to attract an investor with just a good idea and a few slides. Before they consider a start-up’s future profitability prospects, investors want proof that the company’s financial foundations are solid. The experts at AURIS Finance, a consultancy specialising in mergers and acquisitions, give you their advice.

Project leaders are now finding it difficult to raise funds. While for a few months French tech innovators seemed to be able to withstand the general downturn in financing, they are now being hit hard by the rise in interest rates to fight inflation. In 2023, French Tech raised €9 billion. This is 36% less than in 2022.

Indicators are down at half-mast

Even alternative funding methods are being affected, as the latest Mazars Crowdfunding Barometer for Financement Participatif France (FPF) shows. In 2023, funds raised totalled €2,089 billion, down 11.3% compared to the previous year. This is the first decline recorded since the Barometer was launched in 2015. This historic downturn has so far mainly affected the financing of property projects. However, funding for SMEs and very small companies is also suffering. In February, the October platform announced the end of its SME lending business, selling its technology to giant Sopra Stéria.

Getting back to basics

In an uncertain macroeconomic climate, financiers (business angels, venture capital funds) are becoming more cautious. They therefore assess the acceptability of risks in relation to the fundamentals. While the disruptive aspect of the innovations presented by promoters remains important, innovations will not pass the test if they are not based on solid fundamentals. With the exception of deep-tech technologies, early-stage funding is harder to come by. It is now necessary to prove that the project works before any funding can be raised. The company’s financial strength and internal structure also need to be verified before external investors can be approached. Investors now favour short-term profitability and, in a tight economic environment, find it harder to position themselves for long-term growth.

AI continues its seductive rise

Nevertheless, some sectors are holding up well. Disruptive deep-tech technologies are successfully attracting early-stage funding. In addition, projects with generative AI components continue to be closely watched by funders. Tech companies that have raised the most funds are those that place AI at the heart of their value creation. A case in point is Mistral AI, which raised a record €385 million in December 2023. Proof that the topic is now inescapable: this year, the use of AI was included in Truffle Capital’s Fintech 100, the annual ranking that analyses the dynamics of the fintech ecosystem and the fundraising achieved by the top 100 movers and shakers in innovation over the course of the year.

Our experts at your side

Against a backdrop of shrinking liquidity, storytelling is no longer enough to raise funds. Convincing with figures is essential. Only financially stable companies can stand out through innovations. But only if they know how to meet the demands of venture capitalists. Due diligence, valuation and pricing are all fundamental steps that should not be overlooked. AURIS Finance’s experts are specialised by sector and will support you throughout your search for financing.

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