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How to Build The Late-Stage Ecosystem of Europe
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00:00Good afternoon. As the editor of a publication called The Innovator, I can tell you that one of the most
00:09important things about innovation is the ability to adjust to unpredictable environments.
00:16So with the agreement of my two panelists, we are changing the title of this session to focus on how
00:28to grow, raise capital, and survive during economic turmoil, something I think that is top of mind for everyone in
00:38the room.
00:38We're currently in an economic environment where stock markets are collapsing, inflation's at a 40-year high, and startup capital
00:48is tough to acquire.
00:50If not carefully navigated, many startups could fail.
00:55So today we have two speakers who are perfectly positioned to provide insights on how to grow and raise capital
01:03during a crisis.
01:04It's my pleasure to introduce Clara Chappez, who has worked for startups for 10 years and is now the director
01:13of La French Tech, which is a kind of bridge between the startup world and government.
01:19And it's my pleasure to announce former Cisco Executive Chairman John Chambers, who is widely considered one of the best
01:29-performing U.S. CEOs during his 25-plus years tenure at Cisco.
01:35He helped grow the company from $70 million when he joined in 1991 to $1.2 billion when he became
01:44CEO in 1995 to $47 billion when he stepped down as CEO in 2015.
01:52John oversaw 180 mergers and acquisitions during his tenure at Cisco, and he managed the company through multiple economic downturns.
02:04So he's seen this movie before, and he knows how to navigate through it.
02:09He currently runs a venture capital firm in the U.S. called JC2 Ventures.
02:14There are 20 companies in his portfolio, and eight of them are already unicorns.
02:22John is, I would be remiss if I didn't mention that John is very bullish on France, and he serves
02:28as a high-tech ambassador to the country.
02:32So, John, let's just jump right in.
02:35Have you seen this kind of economic environment before?
02:41What's the same about it?
02:43What's different about it?
02:45And what do you think it means to the people sitting here in this room?
02:50Well, first of all, when you think about the future of the global economy, job creation, standard of living, which
02:57countries will lead or not, it's about startups.
02:59That's where almost all the job creation will occur, the innovation, et cetera, within it.
03:04So our future is very bright.
03:06I think if you look at the number of unicorns being created on a global basis, you all know the
03:13numbers very well within this.
03:14And unicorns are an indication of job growth and future opportunity for a country and beyond.
03:21France is leading in all of Europe on the growth of unicorns at 27 currently.
03:26India is leading in Asia in terms of the growth of unicorns.
03:30And one of the commonalities here is the two country leaders, Modi in India, Macron in France, built their strategy
03:38around a digital nation, a nation of startups that work with large companies and government and business and citizens working
03:45toward a common goal.
03:46So if I were in two countries outside the U.S. that I wanted to bet on, those would be
03:51the two.
03:52Now, what is different, and Jennifer alluded to it in her opening comments, we've gone 12 years since the last
04:01economic slowdown.
04:03That's a very nice way of saying almost no CEOs of the startups were CEOs of startups 12 years ago
04:09or large companies, same of government leaders.
04:12And we haven't seen inflation like this for 40 years.
04:17And if you haven't seen it, you don't understand some of the implications.
04:22We understand the geopolitical issues that are occurring with Russia, China, North Korea, Iran.
04:28We also understand the supply chain issues, which are slowing the economies regardless of industry and the changes occurring fast.
04:35But I'm really the optimist on the future of startups and the direction.
04:40We will probably go through a correction here.
04:42The average correction lasts about a year.
04:45And even though I wish none of us would go through this, it's actually healthy for the industry and healthy
04:50for startups.
04:50The evaluations were probably 2 to 3x what they were 10 to 20 years ago on multiples.
04:58And a lot of areas got funded that probably should not have gotten funded.
05:02So it's a very healthy area into the process.
05:05But I like the startup community.
05:07I think it's going to be even more exciting.
05:09And right after this, I'm going to go present the Unicorn Award winners throughout all of Europe.
05:13So clearly, I believe in the future, the people in this room.
05:17Okay, thank you.
05:18Clara, let me turn to you now.
05:20So, you know, we've already alluded to the fact that France is, you know, become a startup nation.
05:26It's one of the best, if not the best place in Europe to start a company.
05:31And it's, France is also taking a leading role in promoting scale-ups across Europe.
05:39So, you know, tell us a little bit about what the government has done to date.
05:44And then what you might need to do differently in the current environment.
05:49I'll start by saying why, why the government really 10 years ago, almost 10 years ago now,
05:56thought we need to do something for this ecosystem.
05:59Because this was true in 2013.
06:01This is still true today.
06:03There was a strong belief that I think, John, you alluded on,
06:06that startups are not only the solution for innovation to find the solutions towards all the challenges that we're facing
06:13and that are so numerous.
06:15And we saw it during the pandemic.
06:16Like, the fact that the first company that released the vaccine was actually a startup,
06:20I think, is quite a good sign on how this belief was right.
06:24But it's also because there was this belief that startups would be the driver of the jobs of tomorrow.
06:32Today, we have 1 million people working in companies, in startup companies in France,
06:37directly or indirectly.
06:38This is much more than anyone could have imagined back in 2013.
06:42And you were probably here when the French government decided to create this administration for startups,
06:48unite forces with entrepreneurs, with investors, regulators, work all together,
06:53so that we can create a French tech ecosystem that is going to be recognized globally.
06:59Probably nine years ago, no one really believed that would be feasible.
07:03That would be probably kind of a dream or kind of a crazy thing to think about.
07:08But here we are with 27 unicorns.
07:10We're kind of the unicorn factories of Europe now.
07:13And this is the result of working collectively together, changing regulation,
07:17making sure that France can have the most attractive laws to welcome entrepreneurs
07:22when it comes to tax regulation, when it comes to attracting talents with French tech visa,
07:28when it comes to financing with the BPI or Public Finance Bank being one of the top contributors in the
07:35ecosystem,
07:35and taking all those challenges towards the European level.
07:39And that has been, I think, very important towards the success of this ecosystem is
07:44how do we all work together, how do we unite joint forces so that we can create the success we're
07:49seeing today?
07:51Is there anything that you feel like you have to do differently now in the current environment?
07:57So I do think John is very right.
08:00Most of the startups, even the biggest, most advanced startups,
08:04some of them were on stage, I think, just a few minutes ago.
08:07They have been growing scaling in the last five, ten years.
08:12So they are going to enter a phase that they haven't faced before.
08:16They haven't been necessarily through this type of economic downturn.
08:20And this is where I think government and startups have the entire opportunity to even work closer together
08:26to make sure that we can help them navigate this climate.
08:30We can help them with strengthening our financing capabilities.
08:33There was a big announcement made in February by our Minister of Economy and Finance, Bruno Le Maire,
08:39committing 4 billion euros towards European funds of funds.
08:43Why?
08:44Because the truth is, the 12 billion euros we raised last year,
08:4860% of it came from foreign investors, mostly in the U.S. and in Asia,
08:53which is amazing because in 2013, it was probably close to zero,
08:57the amount of funding that investors from the U.S. like you would want to put in French startups.
09:04But it also means we have the risk to be much more impacted by the global economic context.
09:11So if we start having those European financing capabilities, it also means more stability.
09:17It means we can help build the sector and bring this serenity to the sector
09:21because they know they will also find financing here.
09:24Thank you, Clara.
09:26John, can you help us paint a picture?
09:30How difficult do you think it's going to be to raise capital in this current environment?
09:35What are your VC friends telling you?
09:38What do they want to invest in?
09:40What are they avoiding?
09:43What's it like out there?
09:46So this answer may surprise some of you.
09:49There's an awful lot of money available.
09:52However, getting the money to match the bid-ask price between what you as CEOs want
09:59and what the VC community or private equity wants to do in the new environment is going to be hard
10:04because candidly, the valuations are down by 2 to 3x what has been the traditional rates.
10:11However, when you talk about difficult, this is relatively easy to manage through.
10:15What was difficult was what Clara covered.
10:18Five years ago, when we'd ask VCs from the U.S. or from Asia to come to France
10:23to talk about the future of France and invest jobs here,
10:27and we were talking to the startups here about staying in France versus coming to the U.S.,
10:31they said, John, your vision of France is wrong.
10:34It's a wonderful place to live or to visit,
10:36but it really doesn't have what is needed for a startup community,
10:40a vision for the future, and it's the last place I would put jobs or money.
10:44On the airplane on the way over to this just two days ago,
10:48I saw six of the top venture capitalists in the U.S. coming to VivaTech without a special invitation to
10:53come.
10:54Five years ago, we had to almost encourage nicely friendships to just listen.
11:00So I think we're positioned very well in Europe, but especially in France, for the transition.
11:06Now, I think what each of you need to realize is that how you manage during periods of growth
11:12is different than how you manage during an economic downturn
11:15and realize there's natural pain that isn't unique to Europe or France.
11:20It's already in the U.S.
11:21Our top public startups, companies like DocuSign, the stock's going from 300 to 60.
11:32Cloudflare, a great startup company, the stock's going from 200 down to 40 last time I looked.
11:40Cisco in 2000, the most valuable company in the world.
11:44We could do nothing wrong.
11:47Our growth rate went from 60% growth to 15% growth in one quarter,
11:56and our stock went from the most valuable company down by 75%.
11:59So this is a natural process.
12:02Evaluations were over.
12:03Cisco came back very strong.
12:05We didn't miss a beat.
12:07And you actually break away during the downturns.
12:09But what you have to do now is you're not selling your investment purely on growth.
12:14The VCs, private equities, sovereign wealth funds,
12:17and a lot of the VCs have $7, $10 billion funds.
12:21The money is there, but they've got to see what you have in terms of your basics,
12:27what's your path to free cash flow, a path to profitability,
12:31what are your relationships with your customers.
12:33So growth just for growth's sake is probably over.
12:37I think you have to strike the balance of it.
12:40You'll probably have to come to that new bid-ask price I alluded to earlier.
12:44The market see it first.
12:45It usually takes about three months.
12:47Then the VC community, private equity sees it.
12:51It usually takes two to three months.
12:52Then us as CEOs suddenly realize what we wanted isn't quite there.
12:57So you'll either trade what you would have traded at 18 months ago or at a smaller premium.
13:02But they will be tough on you.
13:03If you can't differentiate, it will be hard to get cash.
13:06But I think this country and Canly startups on a global basis are well positioned.
13:11You see that from the unicorns.
13:12And remember, the important thing about a unicorn isn't achieving the financial success.
13:16That's when you start to add jobs.
13:18That's when it becomes relevant to a country about job creation, inclusion across France in 13 regions.
13:24And that's where 90% of your headcount occurs.
13:28So, Claire, how are companies, how are startups in France being impacted?
13:35Are they feeling that same sort of, you know, hit on their valuations and their fundraising?
13:40And what do you think LaFrench Tech can do to help?
13:44So the situation is a little bit different in a way that most of our big startups are still private.
13:50So they are less exposed to the direct, like, numbers you can see when you wake up and you look
13:57at your stock market and your stock price.
13:58And you can see your valuation is dropping that much as all the examples you shared.
14:03That being said, we completely see, like, there is a dimension where because the uncertainty that has been created with
14:12this financing environment in the U.S.
14:15And all the, especially the crossover funds and the American funds that have been supporting most of the financing,
14:21especially in the late rounds in France in the last year, especially in 2021, there is some uncertainty.
14:28There is no down round yet because most of the company, they've been so well financed last year that they
14:34have the luxury to delay their fundraising
14:36because no one wants to be priced in an environment where your price is probably not going to be as
14:42good as it was three, four months ago.
14:44So this is, I think, what struck me the most when we talked with the entrepreneurs is they're very aware
14:50and they're acting.
14:51They're acting towards making sure they can show this path to profitability that you mentioned.
14:56They're thinking, what are all those expansion plans we had in mind?
15:00Are they all relevant today or not?
15:01If not, how do we move closer to refocus on our core, refocus on our core business, product, markets?
15:08And I believe this is also the result of this maturity of the ecosystem we've discussed.
15:14We have now this record number of unicorns.
15:17We have CEOs who have been through a pandemic.
15:21They're more and more ready than they were before to adapt quickly.
15:26And that's extremely important if they want to stay ahead of the curve, if they want to really understand what's
15:30going on.
15:31I will also say that there is money.
15:33And by, I think, just this week, 1 billion euro was raised in France for French tech startups.
15:40We just crossed the 8 billion euro mark, which is much more than what was raised entirely in the year
15:472020.
15:48So before the year of the kind of excitement of 2021.
15:53Because in the year 2020, only 5 billion euros were raised in France.
15:57Just this week, we had our 27th unicorn, EcoVadis, raising 500 million euros.
16:03We had a bunch of biotech startups like Imchec raising close to 100 million.
16:07So the money is here, but I couldn't agree more.
16:10It's how do you portray your company?
16:12How do you show that you've understood that the context has changed?
16:17And how do you adapt quickly to show that you're going to be the winner here?
16:20And one last thing I would say is what I'm particularly proud about is most of the entrepreneurs have also
16:26understood that this uncertainty means opportunities.
16:30Opportunities to acquire a great company at a great price.
16:33Because all of those companies were not lucky enough to have raised that much last year.
16:38They're probably not going to want to raise this year.
16:40It means they're probably going to be up for sale, or at least for some of them.
16:44And we've seen companies like Insect, which is doing vertical farming in the north of France, buying an American startup
16:53called Job Producer.
16:54Vestia Collective, in the circular economy, buying its American competitor, TradeZ, which a few years before was actually trying to
17:01buy them.
17:02So the entrepreneurs are actually thinking, how do I take advantage of this?
17:07How do I stay ambitious?
17:08And M&A is a great way to think about that.
17:12And I think you have quite a good experience on that front.
17:15I've made every mistake there is to make at least once in sharing that.
17:19But, you know, Jennifer, where Clara is leading us, what's your actionable plans?
17:23We talked about how you raise capital and how you navigate through it.
17:27When you think about where we are, there's a playbook you should automatically run.
17:32And this is true of the big companies and maybe even governments as well.
17:35But especially for us in the startup community.
17:38As you start into it, realize there is something fundamental in the market that's indicating we're probably going to hit
17:44some bumps.
17:45You want to be realistic to develop an A plan, a B plan, and a C plan with B being
17:50your most likely.
17:50But know it could get worse.
17:52And if it gets better, here's how you navigate through it.
17:54And in that, the first thing you want to do is say, how much of the issues were self-inflicted?
18:00How much of the issues do you have to deal with that just your growth covered up?
18:04And then you want to say, what are the macro issues?
18:06Then you break it down to the five or six major platforms or programs you're going to run that are
18:12going to address this.
18:13How are you going to interface to your customers differently?
18:16How are you going to prioritize?
18:18M&A actually might be an option that wouldn't have been an option before.
18:22Both being acquired or somebody acquiring you.
18:25You regularly communicate to your shareholders, your investors, your customers, your employees, what's going on.
18:35And that means regular frequency.
18:36You don't hide.
18:37You don't want to suddenly sit in a back office and be calculating.
18:42You need to be out and be very visible.
18:44And then you paint the picture of what you're going to look like when you come out of that.
18:48And you want to paint the picture of maybe one thing you're going to do differently that you wouldn't have
18:52done before, like an M&A move.
18:53And then you've got to say, what are the nice things we were doing that we probably should eliminate?
18:58And this is when the great companies are formed.
19:01They are never formed during rapid growth.
19:05During rapid growth, everybody gets funded.
19:07It's hard to gain one or two or three points of market share.
19:10During the downturns, that's when I gained the most market share at Cisco always.
19:15So it's that mentality goes a long way, kind of a playbook based upon both successes and mistakes made.
19:22Could you, John, tell us what mistakes you think the company should avoid?
19:28Well, I've made them all.
19:30The first thing is the minute the market indicates there's a problem, don't immediately overreact.
19:37But take a step back and listen.
19:38I missed that in 2000.
19:41And I kept doing the right thing again and again because it had served me very well.
19:45And we had created 10,000 millionaires among our employees and the most valuable company in the world.
19:51But you don't want to overreact to it either.
19:54So I learned my lesson in 2000.
19:56It cost me and credibility.
19:58It was very painful, including doing layoffs, which I thought I'd never have to do again in my life.
20:03But when the Great Recession came in 2007, I saw the numbers indicating a problem.
20:09I corrected before anybody else.
20:11I told the stock market I thought we were headed for a problem.
20:14My stock went down.
20:15But guess what?
20:16We were ready in 2008.
20:18In 2008, we took risk.
20:20We invested in automotive companies around the world, providing technology to them, and we broke away.
20:26So you learn from the issues that you naturally go through in terms of the process that you run on
20:32it.
20:32And then last, know what you know and know what you don't.
20:35Your instincts are, as a startup, you're really smart in one area.
20:39You knew how to manage growth.
20:40You can say, I can handle this slowdown.
20:43You probably won't do it as well if you don't get people around you advising what are the lessons learned,
20:48mistakes made, et cetera.
20:50But going back to the point Claire was making earlier, I think we are so uniquely positioned in Europe,
20:56but especially here in France, compared to where we would have been five or ten years ago.
21:00and positioned in a way you actually could break away as a nation and as a startup community across Europe
21:07as well.
21:09So, it's clear France has evolved incredibly.
21:14I've been living here since 1985 and covering tech in Europe from France since then.
21:21And people used to look at me and say, you cover tech from France?
21:25Now, for the first time, I really feel like I'm in the right place at the right time.
21:32This is France's moment.
21:34And you've got this momentum going.
21:36And we've talked about how even when there's a downturn, there are opportunities.
21:42And, you know, John talked about how he capitalized on those by kind of having a future vision
21:48and moving ahead during those downturns.
21:52You are taking over the job as director at a moment when there is a lot of momentum in France.
22:00How do you keep that momentum going?
22:03How do you see France evolving five, ten years down the road?
22:09So, the big focus we have been having in the last few months, and that is even true today,
22:16is to make sure not only we continue to support those startups that have made it to this unicorn status,
22:22and because, as you say, this is just a financial KPI, it doesn't really mean much,
22:27but it's so important for the country to create those jobs, to find those innovations at scale,
22:32to go international, so really to build this ecosystem.
22:35But one of the big, big, big opportunities we are seeing is that most of those unicorns are still in
22:42digital tech.
22:44They are platforms, they are fintech, they are retail, digital retailers,
22:49and they are doing amazingly, and that's great.
22:52They're helping us change the way we consume with back market, for example, and the refurbished electronics.
22:57They're helping us change the way we move with BlaBlaCar, and I think the founder of BlaBlaCar was just there
23:04before.
23:05But what we really think needs to happen as well is making sure we can help support, create this very
23:13successful environment for deep tech,
23:16for all those sectors that have been listed by President Emmanuel Macron as part of France 2030 plan,
23:22which is looking at if we want to build tech sovereignty in a number of areas where we have to,
23:30it's medtech, it's ecological transition, it's space tech, it's low carbon and new energies,
23:37all those sectors, you have to start today.
23:40You have to make sure that if you want to be ready by 2030, they get the financing they need
23:44today,
23:45and 30 billion will be committed to this sector, so in a time of economic downturn, that's pretty good news.
23:53And 50% of the 30 billions will go to startups because, again, we believe they're the ones creating the
23:58solutions.
24:00And our idea is to think, okay, how do we make sure that all the regulatory context, the financing context,
24:07everything that has been the focus of building this French tech ecosystem in the last 10 years
24:12can be reproduced for these deep tech startups, so that when we meet in 2030,
24:18not only they will have found the solution, but they will also have built a real tech sovereignty.
24:23Thank you for explaining that vision.
24:26So, you know, as we get close to the end of the session, John,
24:31what are some last key takeaways that you'd like the audience to go away with
24:37to help ensure that the companies in this room are back again next year for VivaTech?
24:45And any advice in particular for France?
24:54I think the first key takeaway might surprise you.
24:57I worry we will stop dreaming and lose our optimism.
25:03It is so easy when you have 12 years of growth to say, this is the right way to do
25:09it.
25:09We're just now on crossing the chasm, if you're a Jeffrey Moore fan,
25:13in terms of Europe and the nation here in France,
25:18crossing the chasm with major job creation, inclusion across 13 regions, et cetera.
25:23And when you get knocked down, it is so easy to suddenly become critical.
25:29And I love France.
25:31And I've been bullish on France before anybody else was in the U.S. on the future in tech.
25:37But we are too hard on ourselves.
25:39And I've never seen a nation like that before.
25:42You have a hand in France that almost everybody in Europe would love to be able to play out.
25:47But secondly, moving to the bigger picture, this is the time you can break away,
25:52which Clara and I both alluded to.
25:54And you want to dream.
25:56You want to dream what is possible and paint that North Star for your employees, for your investors,
26:02and yet do it on a frugal basis of candidly killing some of the projects that were nice to start
26:07but aren't going to move the needle for you and applying those resources to the ones that would really break
26:12away.
26:13And I think it's very important to, if you go into downturn and the majority of issues were not self
26:19-inflicted,
26:20they were literally macro, the last thing you want to do is redo your strategy.
26:25That's true of a startup.
26:26It's true of a nation.
26:27I think during a period of slowdown or question, you don't want to move to the far left or the
26:32far right.
26:33Innovation, job creation comes down the middle always in terms of the direction.
26:38But one key takeaway, believe in yourself, have the courage to go for it, but do it with realizing it
26:45is not just about growth,
26:46it's how you do it in a sustainable way and how you take risk with a little bit more conservative
26:50environment behind that.
26:52If you do that, the money will be available.
26:55If you do that, France will achieve in the next five years dramatically even more than we have in the
27:01last five years.
27:02And we've led in Europe.
27:04Nobody disagrees with that anymore in the U.S., where five years ago, everybody disagreed.
27:10And so I believe in you.
27:11I think we need to have a little bit more courage to believe in ourselves and know that when it
27:16gets knocked down, critics will come out.
27:18You just learn how to keep them in proper check, and we show here's where we can go.
27:23Clara, would you like to add to that?
27:26Yeah, I would add one thing.
27:28Most of the top tech companies we know today have been created in a time like this.
27:33So not only is there a big opportunity for the existing companies to think forward, think bigger, be ambitious,
27:42and be conscious, of course, of what's going on, but adapt quickly so that they can be the winners of
27:46this game.
27:47But there is also a tremendous opportunity for all the founders or founders to be in the room who are
27:53maybe thinking,
27:54okay, like, is this the right time?
27:57Yes, it is the right time, because in this time where everything is uncertain,
28:02I truly believe technology has so much of the solutions.
28:06So, yeah, encouraging everyone to jump ahead and start.
28:12John, a last word?
28:15Dream big, have fun, and realize you are the future.
28:19I think it's simple as that.
28:22Let's have a big hand for Clara and John.
28:26Thank you both very much.
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