The different types of startups
Let’s start with the basics. A startup designates a recent and innovative company – the beginning of the phenomenon is informally dated in the early 2010s –, in full growth, and evolving in the digital ecosystem. Unlike traditional companies, start-ups stand out for bringing to the market an innovation – product or service – with a very strong potential for economic growth.
Startups are therefore more focused on their rapid growth, or overgrowth in jargon than in its profitability. This is why many finance themselves with venture capital: they do fundraising (in the beginning, a few hundred thousand or a few million euros, then more) to finance their research and development and their commercialization. Profitability is a long-term goal for them, a consequence of their market penetration. Startups can thus lose money for a long time if investors continue to support them to continue to grow rapidly.
Two spellings of the word are commonly accepted: start-up or startup, the first is the exact resumption of the popularized English word, the second is its francization.
This Anglo-Saxon term indicates a startup that has already managed to carve out a place for itself in its market and that is in full hyper-growth, especially internationally, but has not yet reached unicorn status (see below). The scale-up stage corresponds to the moment when the startup must really structure itself to go through an additional stage of growth. Generally, scale-ups have huge funding needs: they must raise tens of millions of euros to massively recruit, open new offices abroad, possibly carry out acquisitions to grow.
Unlike the word startup, which is Frenchized by removing the dash, we write scale-up keeping the dash.
With each fundraising, the startup defines an evaluation with its investors. The more the company grows, the greater its valuation, calculated on the basis of a multiple of its turnover that varies according to the sectors and the growth potential.
After several increasingly substantial fundraisers, the startup becomes a unicorn: an unlisted startup valued at at least a billion dollars. Today there are over 1,000 unicorns in the world, including just 26 in France and over 200 in Europe. The overwhelming majority are Americans or Chinese. Half of the world’s unicorns have achieved this status since 2021. 75% of unicorns in Europe are software startups.
When a unicorn reaches a valuation of $10 billion, it becomes a decacorn. This level is difficult to reach: there are only about fifty decacorns in the world, including 17 in Europe at the end of 2021, none in France. finally, the pentacornes are unlisted startups that reach a valuation of at least $50 billion. There are only four in the world: the Americans Stripe and SpaceX, as well as the Chinese Bytedance (publisher of TikTok) and Didi Chuxing. There is none hectocorn (an unlisted startup valued at at least $100 billion), though Bytedance briefly achieved that status before losing it.
Not all startups are destined to become unicorns. Other animals were therefore chosen to qualify them. So, a zebra is a startup that seeks a balance between growth and profitability, and does not sacrifice the latter for the benefit of the former. Zebras are often startups that operate exclusively in BtoB, or impact startups. They are closer to traditional businesses in the way they operate. The term emerged in 2017.
For its part, the cockroach it is mainly characterized by its resilience and its relevance in a niche market. Hypergrowth is not your goal. The term emerged in 2016.
It’s the new buzzword in French technology. Created in 2022 under the penalty of the investment fund Bessemer Venture Partners, it designates startups that earn at least 100 million dollars inARRWhere annual recurring revenuewhich is the dominant economic model in technology.
With the number of unicorns exploding since 2021 due to the delusional inflation of valuations in post-Covid technology, investors are now looking for more realistic financial indicators to measure a startup’s success. A centaur is therefore an elite club of very economically successful startups: there are about 10 in France, for 26 unicorns. Some centaurs, because they focus on income and not on hypergrowth, are not even unicorns, like Silaé, champion of HR software.
The vocabulary of the technology ecosystem
- French Technology, French Technology Mission
Not to be confused. O french technology refers to the French technological ecosystem as a whole. As a common banner that brings together entrepreneurs, investors and all players in the ecosystem: incubators, accelerators…
In turn, the French technical mission is the state agency responsible for federating the ecosystem and developing public policies to help startups. This structure was created in late 2012 by Fleur Pellerin, then Minister Delegate for Digital Affairs, and chaired from 2013 to 2017 by David Monteau, from 2018 to 2021 by Kat Borlongan and since 2021 by Clara Chappaz. Under the supervision of Bercy, and in particular the Delegate of the Ministry for Digital Affairs, the French Tech Mission develops support programs such as Next40 and French Tech 120 – the index of the most successful French technology startups -, Green20, Agri20 or even Tremplin, intended to open up technology to economic and social circles that are furthest from it.
- Deeptech, martech, fintech, cleantech, biotechnology…
These are the various technology subsectors. As digital is transversal and transforms all sectors, startups from each sector come together under various names, sometimes with their own professional federation, such as France Biotech, which brings together all French biotechnologies, or France Fintech.
So, the fintech – contraction of finance and technology – are the startups that bring digital solutions to the financial sector. O martech are marketing startups, adtech are those in the advertising sector, agritech for agriculture, green technology for energy, clean technology in the environment, the space technology for space technologies. There are even the sextech – startups that develop innovations in the field of sexuality and intimate health – or the church technology, or innovations aimed at digitizing the practice of faith.
Sometimes multiple words refer to startups in the same industry. So, the health technology brings together health startups, but within this ecosystem, there are biotechnology -solutions based on biotechnology-, medical technology – new medicines – and solutions for and healthas everything related to improving the patient experience through digital technology such as Doctolib.
Note that the biotechnology are implemented in different sectors. The OECD (Organization for Economic Co-operation and Development) defines biotechnology as all applications of science and technology to living organisms or their parts “. Consequently, the fields of application are very wide: from health to the environment, including cosmetics, food or chemical industry.
Like biotechnology, deep technology refer to startups that can evolve in very different industries. Your common ground? These are innovative technologies, the result of long years of public research, developed in laboratories and then transferred to companies to find an industrial and commercial application. These startups face specific issues that require adequate public policies, such as the Deeptech Plan developed by the State with Bpifrance since 2018.
- Entrepreneurship, growth, early stage
These words, all Anglo-Saxon, designate the maturity stages of a startup.
The adventure generally refers to fundraising of less than EUR 50 million, while growthWhere equityrefers to funding rounds above 50 million euros.
the phase ofearly stage specifically corresponds to the seed: this is the beginning of the startup, when it needs resources to develop its technology and find its first customers.
These are the names given to startup fundraisers.
The seed corresponds to fundraising (there can be several), often a few hundred thousand euros, or even a few million.
When the startup is ready to attack its market, it raises funds from institutional investors. Each new funding round is designated by a letter of the alphabet: Series A is the first post-seed institutional fundraiser, Series B is the second, Series C is the third, etc. Some unicorns are in the F or G series or beyond. With each new round, the amounts collected and the valuation of the company increase.
As the purpose of fundraising is to grow quickly to conquer your market, there comes a time when investors want to get the return on investment, preferably with a hefty profit. Startups have, therefore, the vocation of, at one time or another, “getting out” of their investors’ portfolio: it is the famous exit.
There can be several types of outputs. The first option, the one that most tech entrepreneurs dream of, is to become profitable and go it alone. The start-up then becomes, over time, an ETI or a large group, such as the American GAFAMs (Google, Apple, Meta-Facebook-, Amazon and Microsoft), which were start-ups financed by venture capital before become giants. In France, the startup Veepee also followed this path: from a small startup fueled by its investors, it became an e-commerce giant that employed 5,500 people worldwide at the end of 2021, it reached 3.8 billion euros in business. . largely profitable.
The second form of exit, honorable for entrepreneurs and investors, is the acquisition, or M&A (merger/acquisition). When a startup achieves a comfortable place in its market, it can sell itself to a bigger player, which takes its technology/customers/brand. Investors encourage this type of exit.
The third honorable way to make a exit is going public, which is called an IPO (initial public offering), which allows investors to recoup their investment and, if the IPO is successful, hit the jackpot. OVHCloud and Deezer, which were among the first French unicorns, went public on Euronext in October 2021 and July 2022, respectively, no longer being unicorns.