July 10th, 2009: Venture capital and the French paradox
Companies are thinking of relocating to France or European Union in order to benefit the private equity funds available there. Philippe Berthon, a board member of France Biotech and Aurgalys General Partner explains.

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March 16, 2009 – FCPI were launched in 1997. According to a study published in March 2009 by AFIC and OSEO on the 1997-2007 period, 4.4 billion Euros have been collected and 2.2 billion Euros were invested in more than 800 innovative private companies. In 2007 alone, 624 million Euros were raised through 28 FCPI funds. Major players (banks, insurers) sometime launch two new FCPI funds per year ranging 15 to 30 million Euros each.

This finance vehicle gathers individuals willing to invest, in innovative, early stage and private companies (venture capital), at least 60% of the money collected. SMEs listed on Alternext and Marché Libre are considered to belong to the private company pool within a FCPI portfolio. Also, up to 20% of the funds may be invested in listed companies (except Alternext and Marché Libre). FCPI funds could be invested everywhere in EU (27 countries) and their duration is usually of 8 years. Today, the maximum investment per FCPI fund is 2.5M€ per year, therefore venture capital firm may use several FCPI funds under their management to make larger ticket. Most FCPI funds have been managed within venture capital firm.

2007: 624 M€ raised through 28 FCPI

1997-2007: More than 2500 investments made

1997-2007: 4.4 B€ raised

A company is defined as innovative either through specific agreement by OSEO or automatically if the SME dedicates a significant part of its resources to R&D.

Why the taxpayer should invest in FCPI

In France, the taxpayer can reduce 25% off his FCPI investment from his annual tax (note: income tax is payed year +1 in France). A single person can therefore invest up to 12 000€ to obtain this rebate, while a family can invest up to 24 000€.

Since January 2008, a new regulation (called loi TEPA-ISF) applied to the so-called « fortune tax » or ISF allow those paying this tax to invest in FCPI (among other vehicules),  to obtain further tax reduction of 40% of the amount invested (ceiling 50 000€).

Furthermore, the individual FCPI investor may expect further tax reduction when the fund is liquidated.

See the OSEO-AFIC study slide deck (french) or  a summary (english)

Jan 21, 2009: Interview Easybourse, Philippe Berthon, Aurgalys Partner, « In France, in 2009, we expect up to two life science company take over ranging 75-200M € » .

You can read it (in French), by clicking here .

If you wonder what is a biotech company , why Venture Capital are compulsory  for the growth of the biotech companies in general, have a look to that  video (in french).