[Interview] Guy Gourevitch: “It is urgent to fill the cracks”

What was the trigger for the creation of Defense Angels?

In 2020, two reports pointed out the difficulties of financing the companies of our Defence industrial and technological base (also known by its French acronym ‘DITB’), starting with the youngest and smallest of them. These reports—which came from the Defence Committee of the French National Assembly and the École de Guerre—made the same alarmist observation and expressed concern about the impact of the European Commission’s green taxonomy project, which would allegedly exclude defence and strategic technology-related activities from the “canon” of sustainable investment. The occurrence of the health crisis—which revealed the disappearance of entire sectors of strategic production on our soil—and now the war in Ukraine, have amplified this awareness.

Why do technological nuggets that are useful to our security and defence find it difficult to obtain financing?

Investors shun them for reasons of image or the duration of equipment programmes. These sectors are often governed by public calls for tender that extend beyond the profitability horizons that investors are used to. All compartments suffer: pre-seed and seed, where the average ticket size is less than 1 million euros; series A, where the amounts raised are between 1 and 5 million euros; and development capital, beyond that. As a result, many French nuggets are acquired by our American, British, or German competitors, or indirectly come under the control of Middle Eastern or even Chinese funds.

Are all technology segments affected?

Yes, in proportion to their weight. The digital and cyber segment—whose share of the ecosystem of nuggets needing to raise funds I estimate at around 40%—is very vulnerable to this problem. All the more so as it is the source of many disruptive innovations: I am thinking of technologies for processing very large quantities of data, learning algorithms, signal processing, and high-performance computing.

Is this not simply the consequence of a lack of capital?

Absolutely not. The proof is that the Defense Angels network, inaugurated on 15 February, has recruited 30 individual investors in three months, and 150 others are knocking on its door. On the other hand, 70 companies have submitted their financing applications on our platform. Two of them are on the verge of completing their fundraising (in the “closing” phase).

A real success, then…

It confirms the existence of a “crack” in the pre-seed and seed financing of startups. This craze has led me to extend this initiative by launching a second tool: the “Technological sovereignty seed fund” (also known by its French acronym, FAST). Its mission will be to invest minority tickets of 1 to 5 million euros in companies working for defence or positioned on dual niches that wish to develop strategic technologies or gain an international foothold. FAST will thus be the link with the two funds dedicated to capital development recently created by the French state and operated by Bpifrance (Definvest and the Defence Innovation Fund) that invest larger amounts.

What will be the specificity of FAST?

Our ambition is to eventually raise nearly one hundred million euros from industrialists, and then from institutional investors. To these investors and companies, we will guarantee the origin of the capital and the application of exit clauses in accordance with both the standards of risk profitability and our strategy of sovereignty; there is no question of selling a stake at any time or to anyone. Many industrialists and private individuals were waiting for such an approach, and the international and European situation is now favourable for sovereignty technologies and markets.

What is your definition of financial sovereignty? Will FAST refrain from raising funds abroad?

Initially, we will seek French investors. Then, we could open the capital to foreign funds—preferably European ones. This is the framework within which we intend to deploy our sovereignty strategy. This opening is supported by guarantees regarding governance offered to the companies financed. We will always take minority stakes and we will ensure that the majority of the capital of the targets remains French. Clauses will protect their board of directors or their strategic committee from any problematic entryism.

And in case of co-investment?

A minority of management companies are interested in sovereign investments in the development capital niche. This is currently the main crack in the financing of our strategic nuggets. The offer in this segment is too weak to support the growth of the beautiful SMEs and ETIs. The good news is that the state has become aware of this. Bercy has opposed several times the raising of funds deemed dangerous for national interests, and the Hôtel de Brienne has supervised the creation of the two funds mentioned. It is now necessary to accelerate, because the means remain insufficient to cover a whole spectrum of needs—from cyber technologies to space technologies.