Sustainability, a lifeline for start-ups – Sustainable finance

The current economic and geopolitical context has not failed to weaken French Tech, namely through a significant drop in valuations and fundraising in recent months. To pass through these trials, startups must strengthen their economic and environmental sustainability and in their relationship with their shareholders.

At the start of the year, the lights were green for the startup ecosystem. Fundraising increased considerably, with almost €5 billion in the first quarter, suggesting a prosperous period for French Tech. The number of unicorns had also increased. But quickly, the future darkened. In a few months, the significant increase in interest ratesThe war in ukraine it is a significant inflation came to play spoilersport.

In such a context, How can startups make a difference? What are the best practices to follow for registering for the long term?

Reasonable fundraising

The fact that a company has managed to generate significant revenues gives the founders guarantees about the potential of the project they are carrying out. However, keep in mind that this is not the only criterion for success and that growth no longer carries the same weight in investment decisions as it did a few months ago.

For too long, investors have focused on a startup’s ability to grow. Now is the time to seek the achievement of profitability. Concretely, investors will be more sensitive to a start-up’s ability to execute the business plan while consuming less cash and achieving profitability more quickly. This will undoubtedly lead to more grounded reviews and fundraising, but also hopefully more often. We can also see the success of some growing companies by the frequency of fundraising.

However, a substantial fundraising does not necessarily mean the sustainability and growth of the company in the long term. Therefore, they must necessarily be accompanied by a relevant financial strategy and the definition of precise and realistic objectives.

A strong commitment to CSR

After being considered only from a financial point of view, the sustainability of start-ups gradually extended to the environmental and social issueπŸ‡§πŸ‡·

Although the regulations reinforce the obligations regarding the publication of companies’ extra-financial data (extension of extra-financial reporting to a larger number of companies), start-ups must position themselves as protagonists of CSR. Disruption must no longer be just technological, it must also respect environmental and social issues, especially as investors are increasingly sensitive to them for their investment decision (through dedicated media or criteria that are clarified over time) .

Faced with such demands, founders must imperatively prioritize the issue of sustainability in their strategic choices, in the definition of their business model and their industrial model, as well as in the development of their relationships with stakeholders. πŸ‡§πŸ‡· In a word, concern for the environment and the well-being of its employees must go hand in hand with its economic development.

Build a relationship of trust with investors

The sustainability of a start-up is, even more than in the past, closely linked to theefficiency of its shareholder structureπŸ‡§πŸ‡· This can, in fact, lay the foundations for a solid governance that will allow the company to face uncertainties but also, if its development perspectives allow it, to face the challenge of internationalization.

The shareholder structure must be in constant search of a balance between the interests of the companyof your founders and his investorsa balance that is built from a relationship of trust between stakeholdersπŸ‡§πŸ‡· To this end, the start-up must, with the help of shareholders, establish a reporting system with performance indicators adapted to the company’s sector of activity and the need to demonstrate the progress made and the value created. Once trust is lastingly established, investors can feed managers their past experiences and the investments they have managed to make in other structures and participate in subsequent funding rounds.

Admittedly, investors are more hesitant than they were a few months ago. But let’s bear in mind that French Tech, from the start, knew how to deal with sometimes limited financial resources. This has not slowed down its development, far from it. The French tech genius undoubtedly still has a bright future ahead of himπŸ‡§πŸ‡·

To know more

Jean-Pierre Valensiwhich is associated KPMG France and Head of Capital Market Advisory. He supports many issuers in managing their financial information and communication issues, producing regulated information and dealing with investors and market authorities. He leads training and coaching programs for managers, finance departments and members of governance.

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