Phen we barely follow the country’s economic and financial news, it is quite easy to see that private equity companies (an area that includes all operations consisting of taking stakes in the capital of unlisted companies) are increasingly active. In Morocco, private equity funds have been much talked about in recent months. Indeed, several venture capital and development capital operations were recorded.
The 212 Founders program, carried out by CDG Invest, launched in 2019 and which, until October 2022, materialized 12 Seed and Series A financings for a total amount of 57 MDH, is an instructive example on a national scale (www. .fnh. bad). At the end of November 2022, Nama Holding, an investment company dedicated to the development of industrial sectors with a high export content, owned by CDG Invest, announced the acquisition of a minority stake in the capital of Grupo Vita Couture.
The other very recent novelty in this area is the acquisition of a stake by Red Med’s Columbus 1 fund in the capital of CEFA Industries, which operates in the pasta and couscous area. In fact, the Competition Council received notification of this operation involving 35% of the capital and voting rights of the young industrial entity, launched in September 2020. In addition to this memory, the unavoidable question is the following: what is the typical profile of start-ups -ups or companies attractive enough for funds specializing in private equity? The right target “For venture capital firms, the right target is a start-up with high future revenue potential,” explains Amine Diouri, Director of Research and Communications at Inforisk. In other words, venture capitalists look for start-ups that do not generate large revenues at the time of investment, but whose long-term development prospects (given the business model) are promising.
“The valuation of the target start-up depends on the future. Venture capitalists are, in principle, looking at the profiles of the management team of the start-up they invest in”, he continues. Obviously, innovation is an important criterion for venture capitalists. However, this is not exclusively linked to new technologies. For example, the way to market a product or service can be innovative and attractive to finance providers. Also note that the ability of start-up leaders to create an ecosystem or network of partners around their company is a huge advantage. It is important to specify that venture capital activity is particularly risky, given the importance given to the future, which involves dangers that are sometimes difficult to control.
“For their part, funds specializing in development capital look for more mature companies, with a certain amount of seniority and a healthy financial situation”, observes Diouri, who draws attention to the crucial character of the professional quality of the company’s manager and shareholders . It should be noted that, in addition to a relevant business model and good organization (organization chart, efficient information system, etc.), the structures in which development capital funds invest generally have a development strategy and programmed growth , having as main, among other things, settling abroad or making investments in productive units. This requires funding and experience.
These are two advantages that abound in growth capital funds, generally endowed with a profitable network for the company benefiting from the investment and good management and strategy skills. In the end, the ideal target for development capital funds are SMEs of a certain size and structure, achieving an annual turnover (AC) of more than MAD 50 million. Intermediate-size companies (FTE), likely to achieve an annual turnover of up to 500 MDH, as well as SMEs in the Elite Morocco program (www.fnh.ma), supported by the Casablanca Stock Exchange, are also prime targets.