Fundraising, IPO, buyout: what should you decide to finance your growth?

This article was originally published by Stéphanie Gallo.

Internationalization, innovation, commercial rollout, recruitment... All growth and changes in gear require financial resources. While there is a wide range of tools available to finance all or part of your projects, either on your own or with your banking partners, some ambitions require external capital to go further and/or faster.

To grow, ETIs, SMEs and growth start-ups mainly use three levers: raising funds, going public or joining forces with a larger partner. Which is the best option? There is no universal truth because each of these options has its advantages and disadvantages. To help you understand, here is the game plan for financing growth, analyzed by companies that have recently entered the competition and managed to win not gold but silver.

> The IPO

This option has apparently seduced a great number of companies in recent months. The high level of available liquidity and the good performance of the stock market have attracted an unprecedented number of companies. According to a study by EY, published in mid-July, 597 IPOs have been registered worldwide in the second half of 2021, for an amount of more than 110 billion euros.

Alongside the XXL deals, some SMEs have been able to pull their weight. This is the case, for example, of the Lyon-based operational marketing platform Obiz (2020 turnover: €15.4 million, i.e. +62%/2019; 38 employees), which was floated just before the summer on Euronext Growth. With great success, says its founder and CEO, Brice Chambard. With a market capitalization of €31.3 million, Obiz has raised €11.8 million. This should give it the fuel it needs to reach its objectives: €50 million by 2025 with 80 employees, via international development and franchise deployment. "The stock market seemed to me to be a more appropriate tool than raising funds. The number one reason is that I retain my freedom of decision. Of course, I have to be accountable, but I don't have anyone calling me every day to ask me for my results," explains the man who had never before brought in other investors to his capital. Another major asset identified by Brice Chambard is the notoriety and credibility his company now enjoys. "We have gone from the shadows to the light...". He also points out that the stock market offers him new arguments for attracting and retaining talent, through share bonuses. He also points out that the stock market could prove to be an excellent tool for future external growth.

The Obiz manager warns, however, about the financial communication constraints associated with a stock market listing. "I have no particular problem with being transparent, but today we give access to our documents to potential competitors. We must also be vigilant about insider trading, and we will be providing training to avoid mistakes. On this point, he will be supported by Julien Radisson who has just joined the company as CFO, a position created for this IPO. Until now, he was deputy CFO for April.

The choice was the same for BOA Concept, a SME with 50 employees (2020 sales: €5.4 million, 2019 sales: €9 million) that specializes in the design of intralogistics solutions (robotics and software). It too was listed on Euronext Growth just before the summer. And it too is rubbing its hands, with a valuation of €15.9 million. In order to flirt with the €30M turnover within five years, the company needed funds to advance faster on its industrialization and innovation capacities. "Two points pointed us towards the stock market. First, we keep the control of the company's strategy. That's what we really wanted. Secondly, we operate in a sector of activity with very large companies: this listing reassures them. The stock market will also allow the company to raise funds if necessary. "We intend to use the stock market as a real financing tool," says Chantal Ledoux, co-founder of the company, who is in charge of financial matters.

> Leaning on a larger player

Another option for growing faster than our own resources can offer: to join forces with a larger player. This is the choice made by Seekube, founded in 2011 by Paul Cassarino, a virtual recruitment forum platform (40 employees, turnover: not disclosed, 300 events organized in 2020). "In 2019, we saw an interesting market traction, we had to accelerate. We had two avenues: traditional fundraising or a buyout by a larger player. Very quickly, we went for the second one," recalls Paul Cassarino. Last March, he handed over the keys to his company to the Hellowork group (350 employees, 50 million orders recorded in 2020), publisher of several recruitment brands (RégionsJob, JobiJoba, Diplomeo, etc.). Why this choice? Mainly for the rapid implementation of synergies with a player already well established in the employment market. "The acquisition allows me to anchor my company in the long term, it is very different from a fundraising strategy where the money raised is spent in two years. In a context of crisis, I didn't want to flip a coin. The entrepreneur also notes the satisfaction of exchanging, in this operation, with other entrepreneurs rather than with financial interlocutors.

If Paul Cassarino says he is extremely satisfied with his choice, he remains aware of some drawbacks. First of all, the one concerning the governance. Although he continues to run the company, he is well aware that he is no longer the only one to decide on strategy. And then, in terms of corporate culture, he will have to make concessions. "In a marriage, you have to leave some convictions aside, it's normal even if the match between the two parties is perfect.

> Raising funds

This is perhaps the most common option, especially for start-ups. A success that does not seem to deny this year, despite the Covid crisis. According to Maddyness calculations, French start-ups under 10 years old raised 1.251 billion euros last July. That is one billion more than in July 2019 and July 2020! In the top 10: ManoMano, Voodoo, Verkor, or the fintech Spendesk.

Biotech Keranova already has two under its belt: an initial €3M fundraising round carried out in 2016 and another €24M in 2019. Keranova (40 employees) is developing a non-invasive surgical technology to treat cataracts using an ultra-fast robot. Marketing horizon: 2023. Its CEO and CFO, Denise Hoblingre, is already planning for the future, with a fundraising target of around €40 million in 2024. "Our plan A is traditional fundraising, since we know that our investors are ready to follow us. There are many advantages when the marriage is well matched like ours. Our investors understand that our industry takes time to get to market. Yes, there are reports and process discipline to respect, but this allows us to improve and move forward. Our investors have chosen us, but we have also chosen our investors, and that's crucial.