InnovaFonds Partenaire Croissance
InnovaFonds Partenaire Croissance

Paris- and Lyon-based private equity fund InnovaFonds dedicated to industrial businesses

InnovaFonds is a private equity specialist at the service of industry

The key role of industrial investment funds in French industrial businesses

1. The role of industrial investment funds

Investment funds are an investment vehicle that collects equity or quasi-equity from underwriters (such as institutions, banks, family offices, business owners, etc.) and invests them by acquiring shares in the capital of unlisted companies (by buying either existing securities from former shareholders, or newly issued securities during a capital increase, fund raising or financing round).



Private equity funds intervention

Industrial investment funds can operate at different maturity stages of businesses:

  • ✔︎ Venture capital: investment takes place at the start-up phase (pre-seed, seed and creation) of the young company (venture capital funds can invest alongside business angels);
  • ✔︎ Growth capital: investments are used to finance the company growth, often through several financing rounds;
  • ✔︎ Leveraged buyouts (transfer capital): investments allow for the transfer of a company from which shareholders wish to withdraw;
  • ✔︎ - Turnaround capital: investments help support a company in difficulty.

Financial investors target businesses of varying sizes ranging from VSB/SME to mid-sized businesses and large groups. Similarly, the business types considered are numerous: young companies, start-ups, innovative companies, etc.



The key role of private equity in the French economy

In the French economy, industrial investment funds play a key role. At the end of 2019, there were 2,300 equity financed businesses, 77% of which are SMEs and, over the year, 20.9 billion euros were raised by funds for equity financing of businesses.

Industrial investment funds invest in the capital of companies for an average period of 4 to 6 years. Upon transferring their holdings, the funds aim to generate capital gains on their financial investment which are redistributed to the holders.

In addition to the financial investment made, industrial investment funds support companies in their development project towards achieving a new stage, through organic and external growth, by bringing in their experience and connections.

2300

sociétés financées en capitaux propres fin 2019

77%

de PME

20,9Mds€

levés par des fonds pour le financement en capitaux propres des entreprises en 2019



2. A strategy adapted to French industrial businesses

A pool of innovative industrial businesses in France

With more than 260,000 businesses, industry is a strong component of the French economic fabric. SMEs, which account for the bulk (90%), constitute a large pool of businesses.

Many of them face development and transmission challenges that traditional sources of funding can no longer sufficiently address. However, less than 1% of industrial businesses in France have a financial investor at their side.

Businesses operate in a constantly evolving world and face many challenges (globalization, digitalization, sustainable development, etc.) and executives often find themselves on their own and short of funding in the face of these new challenges.

The loneliness of managers in France is a known fact: 45% of SME and mid-sized business managers experience it. Industrial companies are even more exposed to this phenomenon due to their location in stricken employment areas which leads managers to increased loneliness. Financial investors can take on a partner role, which is key in supporting project leaders.

In addition, the industry still wrongly suffers from a poor image, deemed dusty and outdated, that makes it look even less attractive. However, France is a country where industry, representing 25% of the value added produced in France, plays an essential economic role at the local level.

L’industrie représente 25% de la valeur ajoutée en France et joue un rôle économique essentiel.

Industrial funds' relevant response

Industrial investment funds are relevant in the need for industrial businesses transformation by supporting them in the evolution of their economic and financial models (business model and business plan), their organizations, their industrial processes and tools. They have a central role to play in making businesses more competitive and globally attractive.

In France, a large majority of industrial businesses still have a family shareholding structure coming with patrimonial issues that can hinder their development. Industrial investment funds can support companies in structuring governance and thus promoting their future growth.



3. InnovaFonds, an industrial investment fund dedicated to businesses in France

InnovaFonds is the only investment fund dedicated to the industrial and services to industry sectors in France.


InnovaFonds' strategy for industrial businesses

InnovaFonds supports leading businesses in niche markets with a growing 10 to 100 million euros turnover. Target businesses are those with strong international presence, robust industrial and technological know-how and high organic and external growth potential.

The InnovaFonds team has thus already invested in the capital of nearly 50 industrial businesses, garnering proven expertise in the industrial and services to industry sectors. Its business experience puts it in a place where it can access a dynamic and qualified deal-flow, act in a reactive and agile way and support business leaders in concrete and value-creating projects.

InnovaFonds' equity investments belong to the "small cap" segment which refers to SMEs with a business value of less than 100 million euros. The industrial fabric is very dynamic in this segment. In addition, small companies generally need more partners to support them in structuring their organization and in developing their project. Finally, they don't have as many available financing options as larger groups do.


Support from participations

Beyond its financial contribution in capital, the InnovaFonds team is positioned as a capital partner and actively supports businesses in their development project by offering them its experience and connections, in particular on the following aspects:

  • ✔︎ Digitizing: a key tool for industrial sites modernization / robotisation and the development of connected offers (Industry 4.0, predictive maintenance, "machine to machine", etc.);
  • ✔︎ Internationalizing: a major growth relay in capturing more growth;
  • ✔︎ Achieving external growth: a proactive acquisition strategy to constitute high value-creating consolidation groups and platforms;
  • ✔︎ Organizations and skills development strengthening: an essential driver for carrying out transformation projects;
  • ✔︎ Promoting a responsible economy: being a key player in the energy transition, building into regions, attracting talent.

Thanks to its long experience as a financial investor, the InnovaFonds team has realized that management, however talented it may be, needs to be supported in many areas to achieve ambitious growth objectives and translate those into tangible results.

Bringing more value to businesses, InnovaFonds has set up an Industry Committee comprising experts and former business leaders. They bring valuable skills from high-level managers, boasting experience in SMEs or large groups, and open up their networks in France and abroad.

InnovaFonds' specialization in the industrial and services to industry sectors fosters synergies within the sector's businesses. Indeed, industrial companies frequently run into common problems regarding industrial / commercial organization, tools or development project.

Since its creation, InnovaFonds has raised nearly 200 million euros from institutions (Bpifrance, fund of funds, banks, insurance and mutual insurance companies) and businesses through several general and industrial investment funds and has partnered with about 30 industrial companies through investments worth 2 to 12 million euros. The team is composed of 8 investors.