1.1.1.1. The characteristics of start-ups

In France, the first investments for new white coal companies were made between 1920 and 1928. These are the first speculations for these new companies. On Wall Street, the movement was even earlier, in 1912, with radiomania¹. Many start-ups taking advantage of technological advances in financial services technology (FST) have been able to receive significant investments to finance their development. The example of Hewlett-Packard (HP), which was founded in 1939 in a Californian garage, shows that, very early on, enthusiasm for these initiatives was significant.

The term gained significant popularity in the late 1990s with the emergence of small start-ups linked to information and communication technologies, promising huge profits. These start-ups, now known as GAFAs² (for Google, Apple, Facebook and Amazon), are now web giants who dominate their market and have a particularly important place in society. (Facebook has more than two billion users.)

Today, the sectors that are most attractive are services, communication (including social networks), on-demand services, health (biotechnology, nanotechnology and other MedTechs³), information, e-commerce, but especially Big Data and artificial intelligence technologies. They are home to some of the 15 start-ups with a value of at least $1 billion.

Start-ups appear to be the future of entrepreneurship and offer benefits for both entrepreneurs and investors, as well as for innovation in a broader sense. Start-ups alone represent the race to modernization and innovation.

On the other hand, the context in which these structures are created is a direct component of their success. Bill Gross Entrepreneo (2016), a multi-entrepreneur and American financier, agrees that the criteria for a start-up’s success vary according to the project, but certain criteria are essential:

• – the idea or concept and the need it addresses;
• – the team that will carry out the objectives and the ability to find the necessary skills;
• – the business model to make investments profitable;
• – financing to support its development and the cost of development;
• – the timing of the market.

Patrick Fridenson, a business historian and director of studies at the École des Hautes Études en Sciences Sociales, characterizes a start-up as a company with very strong growth, using new technology, targeting a new market with strong potential and meeting a significant financing need, hence the call for fundraising.

This last point is the central issue of a start-up, which faces significant financing needs to support its development and growth. Turning to external funders is a necessary step for all these structures. Fortunately, the proposed alternatives to these structures have multiplied and now allow a large number of projects to deal with these problems.

1.1.1.2. Financing motivations and theories of young innovative companies

The choice of investments in start-ups is made according to many criteria:

• – Profitability and liquidity risk: for venture capital investments, after analyzing the project, the market and the team, experienced investors pay particular attention to the exit scenario envisaged by project leaders. The exit is the only way to make the investment profitable. These routes are mainly:
  • - industrial transfer,
  • - initial public offering (IPO),
  • - sale of shares to historical shareholders,
  • - sale to new investors.

Only transfers to an industrial company or initial public offerings make it possible to make significant profitability multiples. Analysis of the market situation, as well as the presence of both powerful industrialists, and the evaluation of the zone stock market power are an essential element. Geopolitics is therefore central to the decision.

• – Financial projection, value proposition and market potential: this takes into account the nature of the investment, the time required to reach break-even point, the company’s level of development and the maturity of the fundraising (ability to already have guaranteed investments). It is essential that the project has clear financial data, indicating the time required to reach break-even point. A large (demographic and wealth) and stable (economic, political and social) market is therefore essential. Legal protection also plays a role in this market; the project must be able to protect its main assets (the result of its R&D) through patents and an efficient and valuable intellectual protection system.
• – Macroeconomic criteria at the level of the equity portfolio: the investment decision will depend on the expected overall profitability of the portfolio and the ability of the portfolio to achieve the profitability objectives. This factor is all the more true for investments in the start-up phase for which the loss ratio is high. It can be calculated by estimating the flows generated by the company in the short term (venture capital investment does not exceed 7 years for the longest equity investments).

1.1.1.2.1. Agency theory

The agency theory, which was postulated by Michael C. Jensen and William H. Meckling in 1976, studies the economic consequences of the separation between the sources of capital (investors) and managers (start-up managers). The most accurate definition would be: “An agency relationship is a contract by which one or more persons (the principal) engage another person (the agent) to perform on their behalf any task that involves delegation of some decision-making power to the agent” (Akerlof 1970).

It can be translated into the following formula:

where:

• – U = the usefulness of manager;
• – W = the position (or order) of manager;
• – P = the social status of manager;
• – A = self-realization;
• – J = the manager’s remuneration;
• – B = the invisible income of the manager;
• – C = income required by prevarication.

This theory can explain the relationships between the actors in a funded start-up. Their only common objective is to make their investment grow. There is thus a problem of asymmetry of information between the investor and the manager who wants to keep his weight in his company.

1.1.2.1. Traditional financing solutions

To finance themselves, start-ups use “classic” or historical solutions with some specificities (Finance Innovation 2016).

The first funds come from the entrepreneur himself, his accumulated savings sometimes supplemented by a bank loan. He can spend the first few months in an incubator that provides him with premises and services in exchange for a small percentage of the young company.

• – “Love money”

Family or friends are often some of the first investors. The primary motivation is affect and then interest in the project rather than financial reasons. The amounts raised are usually a few tens of thousands of euros.

• – Bank and personal loans

These are one of the most commonly used forms of financing as an SME. But when it comes to investing in start-ups, banks are more cautious. The objective is to convince them with a business plan to inject money into a risky project. However, in this case, the bank does not acquire any shares in the company. It therefore turns to more or less heavy guarantees. Ueda (2004) assumes that external financing may come from banks or venture capital firms. But, with the bank, the firm faces an anti-selection problem, while the expertise of the venture capitalist allows it to objectively identify the risks related to the company.

• – Business angels

They are individuals who seek to make their skills, as former executives or company managers, available, while investing part of their personal assets, at the same time, benefiting from tax exemption. They are found early enough in the company’s life to provide concrete support for the start-up’s development. They therefore have an important place in the lives of these start-ups as funders and mentors. They also play a prominent role in society by participating in financing immediately after the company’s creation. They generally expect an internal rate of return of 20%.

• – Venture capital

These are companies that operate on slightly higher amounts (€500,000 to €5,000,000) and at a more advanced stage of maturity (La Tribune 2016). This step is to professionalize the company with a view to rapid and global development. Unlike business angels who invest their own funds, venture capital raises funds to invest when business angels invest their own funds (Van Osnabrugge 2005). By repeating what Ueda (2004) said, these actors have more expertise in financing start-ups. Their presence is inseparable from the development of start-up ecosystems. They require an internal rate of return of 36–45%.

• – Debt investor

It is not advisable to use this alternative in the case of Internet start-ups or personal services. It is only if the start-up uses assets whose value is independent of its activity (vehicles, equipment with a secondary market) that it can resort to debt. The sectors concerned are a priori catering, trade, transport and so on. It is only when the start-up validates a reliable business model that it can consider this alternative.

1.1.2.2. New financing solutions

Since the beginning of the 21st Century, other financing methods have emerged. Strongly influenced by the Internet, financing is now more direct between a larger number of investors and innovative projects (Myexperteam 2015, pp. 13–32).

Investments are also benefiting from the technological advances of the 21st Century, such as the digital revolution, which offers vast opportunities through the interconnection of actors and spaces. New investment solutions are emerging, which democratize more traditional models that provide many opportunities for investors and fundraising projects.

• – Crowdfunding⁵

Crowdfunding is a participatory finance, or “crowding”. It is a mechanism that collects financial contributions, usually small amounts, from a large number of individuals, through an Internet platform, to finance a project or company. Investors acquire shares in the company and become shareholders. Throughout history, many works have been financed by crowds, such as Mozart’s music (18th Century) or the Statue of Liberty (19th Century). A firm specializing in crowd equity⁶ estimates that crowdfunding platforms provided nearly $26 billion in financing worldwide in 2015.

• – ICO⁷

ICO, or Initial Coin Offering, (Maddyness 2018) is a cryptomoney fundraising event. Blockchain⁸ start-ups can raise millions in just a few days. The principle of the ICO is to receive investments in exchange for tokens. In 2017, more than $4 billion was raised through ICOs around the world. It is a practice that is developing rapidly (two ICOs per week) with amounts reached in record time: Filecoin⁹ raised nearly $257 million and Brave raised $35 million in 30 seconds. One of the limits is the high volatility, which does not guarantee the value of the investment. Moreover, the quality of the project itself remains a challenge made on the Internet, without any in-depth expertise. There are two types of tokens: equity tokens¹⁰ and utility tokens¹¹.

• – Online kitty

The financing is participative, in the form of donations to companies or entrepreneurs without return of actions for repayment of the amount. The donor may, in exchange for his contribution, receive compensation in kind such as an object or a citation.

Some theoretical works have even focused on the question of alternatives between financing methods for a start-up. For example, Bernhardt and Krasa (2005) studied the impact of competition between financing actors: banks, venture capital companies, business angels and “external” finance companies.

This experience shows the importance of having many solutions to facilitate both the financing of start-ups and their rapid development. The theory shows that to optimize an ecosystem, projects must be allowed to benefit from numerous market and financial opportunities, such as Silicon Valley and the models that have been inspired by it.

1.1.2.3. The cycles of a start-up: permanent support

According to Mazzucato (2013), “venture capital has been most successful in the United States when it has provided not only financing, but also management expertise”, but not before adding, “It is naive to expect venture capital to lead at an early stage the risky development of any new economic sector today such as clean technologies for example. In biotechnology, nanotechnology and the Internet, venture capital has arrived 15 to 20 years after the first investments”, suggesting that public investments are important, but the presence of initial private investors is also essential in the early stages of start-up growth.

Incubator – accompanies entrepreneurs during the ideation process (maturing the project and testing its validity before the company is created).

Business incubator – focuses on creating start-ups and supporting them at this stage. It provides the company with a workplace shared with other entrepreneurs with access to technical tools, solutions and so on.

Nursery – intervenes from the start-up and during expansion issues. Offers a work ecosystem and entrepreneurs, ideally from the same sector. There is no proposal for a financing or business development offer.

Fab Lab – (also called the Manufacturing Laboratory), aimed at start-ups who create a material product and support them in the design of the prototype. Open to entrepreneurs as well as to students and citizens in general to experiment.

Accelerator – focuses on the seed and scale-up stages, and provides training for business and sector experts. Above all, it offers financing solutions in cases of mutual interest.

1.1.3.1. Western ecosystems with many similarities

The study of environments with a high standard of living is the objective of the following study. The development challenges of start-ups are major themes in rich countries (Atelier BNP-Paribas 2016).

The European Union provides many advantages to companies, particularly start-ups, by giving free access to a vast European market thanks to the Schengen Treaty and the creation of a European Economic Area. This market, dominated by France, Germany and the United Kingdom, has a population of 508.8 million and a total GDP of €13,000 billion (Journal de Net 2014).

It therefore offers important opportunities, namely major sources of financing and growth. Bonnet (2015) states that “Europe can and must become the reference in terms of digital development and entrepreneurial initiative through digital twinning.” To this end, Europe has created an entrepreneurship Erasmus program to facilitate access to experiences across Europe, a “European Innovation” platform to share initiatives and good practices between each of the ecosystems, and a grant program for entrepreneurs ranging from €50,000 to €2.5 million.

• – France
  • - Population: 68 million inhabitants
  • - GDP: €2,575 billion (2016)
  • - Start-ups: approximately 10,000
  • - Fundraising: 613 operations for $3,185 million, including 342 million in Paris (Les Echos Entrepreneurs 2018)

More than two out of three French people are in the middle class. France is a developed, stable country with one of the most efficient health and education systems in the world. This advantage allows the country to benefit from a significant talent pool and economic stability conducive to the development of new opportunities. Paris alone concentrates between 3000 and 3500 start-ups for approximately 70% of investments¹². The average fundraising ticket was €3.8 million in 2017. France has three unicorns (BlaBlaCar, Venteprivée.com and Criteo) valued at $8.1 billion cumulative.

• – Germany
  • - Population: 82.3 million inhabitants
  • - GDP: €3,358 billion (2016)
  • - Start-ups: approximately 6,000 to 7,000 since 2012
  • - Fundraising: 382 operations for $3 billion

Germany is undoubtedly a reference in Europe with a large number of start-ups in many sectors. Through numerous structural reforms implemented in recent years in favor of start-ups, private entrepreneurship and companies, Germany has continued to take an important position on a global scale.

The country benefits both from the important operations of its unicorns such as Delivery Hero/Foodora and from the many innovative start-ups created. The country’s advance is symbolized by these two driving cities, Berlin and Munich. Berlin is said to be the capital of European technology. In figures, it is now the seventh most attractive city in the world for start-ups, due to its capacity for significant venture capital investment.

• – The United Kingdom
  • - Population: 65 million inhabitants
  • - GDP: €2,848 billion (2016)
  • - Start-ups: approximately 16,000
  • - Fundraising: $5.2 billion for approximately 350–400 transactions

Many analysts have spoken up after “Brexit” to highlight the risks associated with this geopolitical decision to the British economy. On the other hand, the irremediable fall of its economy is still pending, and the figures for the start-up ecosystem, in particular, are still very encouraging in many respects. One of the figures that shows London’s superior attractiveness is the number of engineers and developers: from 303,594 across the Channel, we go down to 180,659 in Paris. The United Kingdom is undeniably the host country for start-ups in Europe. The ecosystem has the largest concentration of start-ups in Europe (in number and value), fundraising is on average higher, and companies and their founders have many tax advantages.

British culture, closer to North American mentalities, helps London to shine considerably. The United Kingdom also benefits from the presence of corporate funds that are not afraid of venture capital or investment in the youngest start-ups (Löning 2017).

• – North America (Dutrey 1971)

Between Europe and the United States, the balance is still very negative for Europeans in terms of the challenges to be overcome. The figures speak for themselves: in 2016, venture capitalists invested around €6.5 billion in the European Union (EU), compared to €39.4 billion in the United States.

Of the 196 unicorns recorded worldwide, 111 are North American, 59 are Asian and 26 are European. In the United States, a start-up can develop within a linguistically unified territory of nearly 400 million inhabitants (including Canada). In addition to a vast market, entrepreneurship is very developed (145,000 start-ups, i.e. 1 per 2,000 inhabitants) and the structures to support it are well established (more than 1,000 incubators and $50 billion to finance innovation).

1.1.3.2. The emerging countries ecosystem: the case of the African continent

With less financial diversity than the countries of the “economic North”, African countries have other characteristics that allow for effective development to some extent (Abdelkrim 2017).

The choice to study Africa stems from the development potential of this continent (Fleury and Houssay-Holzschuch 2012). For more than a decade, indicators have been encouraging:

• – sovereign debt increased from 85% of GDP to 40% on a continental scale;
• – growth rate of 5% on average over the last 12 years;
• – per capita income up 35% (continental scale);
• – implementation of policies to fight poverty, strong urbanization of States;
• – growing processing industries (refineries in Niger, textiles in Ethiopia);
• – significant population growth and young population (one billion in 2010, two billion in 2050);
• – increasingly important regional integration and “south-south” exchanges to enrich the poorest countries.

We can also distinguish several types of countries among our selection. First of all, there are States such as the Ivory Coast and Ghana that play an important role in Africa thanks to economic stability (L’Association d’Economie Financière 2014). Their development is due, in particular, to a certain political and social stability, an increasingly globalized economy and a rapidly expanding education system. Then there is another set of nations, including Nigeria and Botswana, that owe their wealth mainly to the raw materials that they exploit.

Despite these positive points, handicaps remain:

• – the infrastructure is insufficient (roads, electricity, education system, etc.);
• – the savings rate is low (income inequality and savings flight);
• – social inequality remains (too few in the middle class);
• – the unemployment rate is very high;
• – dependence on primary commodity exports is the result of underdeveloped industrialization.

The first obstacle in Africa is the lack of funding for risk and innovation. The deficit of seed investment¹³ or seed bank loans is significant and counts enormously in the early death rate of African start-ups.

• – Ivory Coast
  • - Population: 26.6 million inhabitants
  • - GDP: €31.7 billion (40% of West Africa’s GDP)

The Ivory Coast is inexorably once again becoming the pillar of West Africa after more than a decade of political tension and instability. The country is looking to build a stable economy, a project in which the start-up ecosystem decided very early on to take an important part. The World Bank’s forecasts are reassuring (growth rate rising over the next three years from 8% in 2017).

The Ivory Coast owes its wealth mainly to agriculture and the massive export of cocoa (the world’s largest producer: 40%), coffee and bananas. In addition, the country is rich in mineral resources that tend to guarantee a promising economic future through the exploitation of its resources.

• – Nigeria
  • - Population: 191 million inhabitants (60% are under 25 years of age)
  • - GDP: €490 billion (2016)

As the largest economy in sub-Saharan Africa, Nigeria also has a large population, making it a major player on the African scene. The name “Giant of Africa” attributed to Nigeria reflects the economic and demographic weight of the country. The country has recently launched major structural reforms to strengthen its economy by reducing the importance of oil and gas revenues (14% of GDP today).

The ecosystem is concentrated around two major metropolitan areas: Lagos, the economic, technological and financial lung of Nigeria, and Abuja, the political capital located in the center of the country. The start-up ecosystem is still developed there and reaches a value of $2 billion in Lagos that judiciously benefits an emerging middle class (36 million people). Nigeria’s significant potential attracts venture capital investors, particularly those who hope to be able to convert their financing with an initial value of €1 million to €100 million within one or three years. Some notable examples show that Nigeria is a start-up country: “Iroko TV” where the African Netflix has completed several rounds of financing at $30 million, as well as Jobberman, a job search application that was valued at $167 million for its acquisition by a local media.

1.2.1.1. The State, the first organizer

In France, a report by the Court of Auditors in October 2012 (Cours de Comptes 2012) expressly requested that public policies should focus more on “identifying companies with potential that will create the jobs of tomorrow and offering them specific support from the outset by coordinating all the players....”

Mazzacuto (2013) also agrees: “Entrepreneurship success is not only about start-ups, nor venture capital. It is the willingness and ability of all economic agents to take risks resulting from a public incentive policy.”

In the light of these studies, it can be said that public policies have a fundamental role in the establishment of this “ecosystem for start-ups.” These interventions are reflected in policies that promote the establishment and interaction between start-ups, companies in all sectors and actors wishing to implement all the conditions of scalability and prosperity for these start-ups. These major actors can be subdivided into categories such as universities, funding agencies and support organizations (incubators, accelerators, co-working spaces, legal and financial service providers). The common objective is to see the emergence of nuggets that will have an international influence in the short term.

In light of this information, it is easy to understand that the main challenge of the start-up ecosystem is to enable start-ups to have access to significant funds as soon as they are created; the objective of a start-up being rapid start-up and then acceleration or take-off of the activity. Therefore, it is by providing them with significant investments that this ideal is more likely to be realized. A mix between public and private funds is therefore essential, which is why we will study the main attractiveness levers to attract private financing in start-ups.

1.2.1.2. The importance of support: a factor that accelerates the success of financing

Often neglected by entrepreneurs with no entrepreneurial experience and full of ambition, support plays a key role in the successful development of innovative projects.

Supporting start-ups is a major subject in the life of a young company and a factor not to be neglected, as the advantages in the start-up phase can make the difference to their future.

Lionel Aré (Boston Consulting Group 2018) explains that “the current macroeconomic context favors a trend of financing needs with record raising for venture capital funds and a strong political will of the new government to encourage business creation. Accompanists therefore have a key role to play in supporting and amplifying this trend.” Moreover, he adds that a well-supported start-up is twice as likely to survive as a company that is not.

Support strengthens links within the ecosystem, enables the linking of actors, increases visibility, optimizes projects and gives credibility to financing actors with large budgets.

Figure 1.2 explains the value of supporting both certain structures and key players in the start-up ecosystem. The importance of transparency, risk visibility and the guarantee of a solid structure are often provided by the coaches.

Each actor has been impacted by its predecessor and will itself condition the continuation of the financing rounds of the following actors (with larger budgets). Insofar as the various actors involved in financing have a common need to secure their investment, through the provision of clear and rational information, support plays a key role.

In France, there are more than 400 incubators and accelerators (including Station F, the largest incubator in the world), 2,255 operations with business angels, and 114 with corporate funds since 2008.

Among venture capital, growth is significant with the three most active: Kima Venture (18 OPs), IdInvest Partners (13 OPs) and CapHorn Invest (10 OPs) for a growth of nearly 35%. The amount invested in France in start-ups was €2.7 billion for 590 operations (2017).

The German ecosystem includes several initiatives: Digital Hub (interconnecting start-ups), programs to support new entrepreneurs, Bayern Innovativ, etc. In Germany, the amounts amount to €2.0 billion for 380 operations in 2017.

The United Kingdom remains the European leader with 520 operations for a total of €3.2 billion raised in 2017.

In Africa, support systems and start-up aid are much less developed compared to Europe and North America. There are too few incubators to participate in accelerating the creation of these young shoots. Some initiatives are emerging. Thus Jokkolabs, the first incubator and co-working¹⁵ space in West Africa, based in Senegal, also wants to promote “values that go beyond a space of creativity and innovation”. He sees himself as a “catalyst that accompanies and strengthens a dynamic”, says Karim Sy, founder and director of the structure.

This point of view is confirmed by several studies, including that of Michael Oluwagbemi, co-founder of the Wennovation Hub Initiative Nigeria and member of the Board of Afrilabs (the pan-African innovation organization). The results of his research show that the first innovation hubs in Africa are bearing fruit and incubation is a major factor. According to his analysis, the business model of incubation is above all to succeed in selling incubated projects to strategic investors until they are supported by IPOs in order to continue to finance their development. There are many examples: Andela, which was a popular incubator, has become a real pool of service companies around Tech and IT development.

Before highlighting the continent’s main challenges:

For an ecosystem to be powerful, there must be bridges from one type or level of incubation and funding to another. We dream of a day when the success of these transfers will begin to resemble an important supply-chain structure as seen in industrial production. Then we can start living the dream of being idea factories and making start-ups. Of course, venture capital and accelerators need a healthy start-up culture and an innovation ecosystem to pave the way for these profitable entrepreneurs (Don’t believe the hype 2015).

In short, although the two ecosystems studied are different in terms of their levels of economic development, their tax regimes and public sector interventions, it appears that the establishment of a real ecosystem where the actors help both to create and to develop initiatives is essential for the proper financing of start-ups. If there is no ecosystem, there will be very few start-ups. Thus, if we repeat the Silicon Valley theory mentioned earlier in this study, the creation of unicorns is compromised.

1.2.2.1. Training and education

To see the number of start-ups grow, highly qualified men and women are needed (La Tribune Afrique 2017).

1.2.2.2. A stable market and geopolitical situation: the information challenge

The aim is to study the geopolitical situation of stable and unstable territories in order to measure their impact on the start-up ecosystem.

1.2.2.3. The challenge of the African continent

The African continent has the highest population growth on Earth. The countries studied (Nigeria, Kenya in particular) are among the largest populations on the continent as well as in the world (Nigeria is the seventh most highly populated country in the world, estimated at 200 million in 2050). This demography is a challenge, but, above all, an opportunity for an extremely large market to be structured and equipped. These opportunities particularly attract large listed companies from developed countries. The incubators were initiated by Orange in five countries in Africa: Senegal (ICTC), Mauritius (EBENE), Niger (CIPMEN), Mali (CREATEAM) and Guinea (SABOUTECH). However, the latter seek to take control of start-ups at the time of their investment. The ecosystem therefore cannot develop in a healthy way because, in order to finance themselves, entrepreneurs must leave the majority of their company’s shares too early; this is due to the lack of seed funding, which requires early recourse to venture capital and corporate financing. At this stage, the uncertainty factor and, therefore, the cost of the operation are very important for the start-up.

Although investment levels of start-ups in Africa are still relatively low, in proportion to the size of the continent, particularly in view of political and economic insecurity, the amounts invested (even modest ones) are growing very quickly. They break records every year to be the largest sources of financial contributions to Africa of up to $100 billion. Knowing that these investments, particularly in venture capital, are primarily aimed at profitability, we can deduce that these territories are becoming profitable and, therefore, attractive despite widespread corruption.

1.2.3.1. New technologies are shaping new markets

NICTs (New Information and Communication Technologies) have a major role in changing social behavior and allow unprecedented transformations on States and companies (Fintech Mag 2017).

Huet (2017; see also L’Opinion 2017) proposes five stages of digital development in Africa:

• – telecommunication: mobile Internet is developing rapidly at the expense of fixed lines;
• – mobile payment to disrupt the traditional banking system: Africa is one of the least banking areas in the world, but mobile payment is a real alternative. It is growing faster than in Europe or America. A key example is the start-up Wari (€5 billion transaction);
• – e-commerce;
• – digital methods in the public sector supported by e-government projects: MedTech, EdTech, etc.;
• – smart cities¹⁶ in Africa.

The development of start-ups is adapted to the needs of the market in which they operate. Developing areas are characterized by both significant gross potential (demographics, wealth, middle-class development and emerging needs) and a lack of organization, financing and structure for these start-ups.

In Africa, one of the significant advantages for investors is that the start-ups developed there adopt a strategy prioritizing market research because the lack of access to financing solutions drastically reduces development costs. Projects are therefore less expensive and adapted to the market they attack: this is the definition of the concept of frugal innovation.

1.2.3.2. New technologies facilitate new financing methods

New technologies open up opportunities both for entrepreneurs who find an opportunity to tackle a new, open market and for investors who see a proliferation of projects with high growth potential (Marechal and Del Bono 2016).

In the same way, this revolution changes the means of payment and therefore investment. All processes can be completely dematerialized, which considerably facilitates the act of investing. More and more Internet platforms are specializing in new financing alternatives (Maddyness 2018b).

The situation in Africa is deficient in private investment. It is estimated that African start-ups need $140 billion a year. Although private equity companies and funds are growing more and more, they are still in an embryonic stage when it comes to seed financing (the most important step to increase the creation of start-ups).

1.3.1.1. Definition of the target population

Studies on start-ups are not numerous in France, but there is no shortage of actors. It was important to cover the whole subject, which is why the population is divided into four categories of individuals.

First, investors in the French ecosystem are at the heart of the research. They set the criteria for selecting start-ups, participate in the success of projects and are the main actors in the ecosystem. They are the first to be concerned by all the specificities of the ecosystem.

Then, we interviewed start-up coaches, incubator business managers and company managers. They are actors in the impact of the ecosystem around start-ups. They participate in their funding process.

The survey was also conducted among professionals in the field of financing and support on the African continent to justify the international and comparative dimension of this study and to study the differences in perception of this issue.

Finally, the interview with the founders of start-ups was an essential point to give meaning to the study.

The interviews had to be quick to facilitate the agenda of investors who have significant activity as the summer approaches and considering the availability of foreign speakers. The interviews lasted between 25 and 35 minutes in order to limit digressions, but to give us time to discuss an open-ended question in order to report on the proposals.

We interviewed 10 individuals from the French ecosystem and several African countries. Table 1.3 presents the summary of the interviewees for the empirical study.

1.3.1.2. Interview guide

The interview guide was written in such a way as to respond to the issue raised in the introduction and to attest to the elements of answers set out in the first parts of this research work. Several themes were addressed in the semi-directive interviews to address the research hypotheses. It was then necessary to identify the ecosystem factors that positively influence start-ups and the differences between two opposing spaces. The interview guide was used to follow a common thread in each interview conducted, and allowed no themes to be omitted and deviations avoided. On the other hand, when drafting this guide, it was necessary to ensure that open-ended questions were asked in order to allow the interlocutor to speak freely, while maintaining a strict framework. We allowed an open-ended question at the end of the interview to capture the interlocutor’s opinion.

1.3.1.3. Data collection method

The interviews were all different, with the shortest interview lasting 23 minutes and the longest 46 minutes. Eight out of nine interviews were conducted with people around a table and one interview was conducted by videoconference. Also, five interviews were conducted in full in English.

To facilitate the exchange, the following capture method was adopted:

• – on the one hand, by taking note of the essential elements in order to organize the responses. This made it possible to bounce back skillfully from the interlocutor’s remarks while keeping the thread of the discussion;
• – on the other hand, using recording via dictaphone. This ensures that the researcher is sufficiently detached from regular note-taking during the interview and facilitates subsequent transcription.

1.3.2.1. Thematic analysis of interviews

1. 1) Ecosystem issues
   1. a) A context where five to six actors interact
   2. b) An environment at the service of start-ups
   3. c) The need for support (investor and support)
2. 2) Investment conditions
   1. a) Availability of sufficient funds
   2. b) Support for private funds and Corpo
3. 3) What impact does the environment have on investment methods?
   1. a) Important incentive: main motivation of business angels
   2. b) Start-up nation: Israel, tense geopolitical context, but a country with strong growth, second stock listed on the Nasdaq
   3. c) Risk area but important opportunities//Stability (no disruptive innovation)
   4. d) Exile to the USA or China
4. 4) Financing tools
   1. a) Limited actors in risk areas
   2. b) New financing methods to catch up
5. 5) Motivation
   1. a) Problem of visibility and knowledge about the market and exits
   2. b) Quality of training: quality start-up

1.3.2.2. Interpretation of responses and validation of research hypotheses

1.3.2.3. The impact of the environment on investment methods

The factors that encourage investment are now known, they define the methods that will be used.

Mr AG answers the question of incentives and the role of public authorities as follows:

France is a bit of a tax haven for start-ups. More complex than our British or American neighbors, but there are many incentives that favor business angels. The modification of the finance law must not scare the new business angels, there are still many mechanisms (PACT, FCPI, PEA...). Public policies must have a strategy in favor of start-ups because it is the actor who must guarantee market stability. This is the case with the French Tech initiative. Finally, as business angels, we must contribute more to the animation of the ecosystem. We therefore launched on Tuesday, May 22nd, the first edition of an event bringing together the business angels of Ile de France to finance 3 projects. We brought together 300 investors, a success.

These comments are supported by Mr LL, who said, “Public actions must facilitate the conditions for success and catalyze the creation of companies. Public policies create market conditions for both start-ups and investors providing funds.”

There is a correlation between public policies and development conditions and the financing of start-ups. This observation is reinforced by the answers of Mr BG who praises the Rwandan government’s policy: “The KIC initiative for Kigali innovation City is a project launched by the government to create the conditions for a stable ecosystem for start-ups composed of a university complex, regional offices of large companies and a major incubator.” Then, he mentioned the financing methods in Rwanda: “Corporate financing and innovation funds are important in Rwanda thanks to the stability of the country for 20 years, but thanks to government policies, banks also offer products in favor of start-ups.”

On the other hand, the findings of the other interviews highlight a missing common denominator: the lack of public investment in the ecosystem. Mr AB and Mrs RT both say that “the State does not invest enough, which leads to shortfalls in funds to support the creation of start-up projects. In addition, the lack of State support intensifies the phenomenon of the scarcity of funders in Senegal. The financing solutions are therefore very weak.”

In addition, for Mr LL, Mr AG and Mr AB, the risk of short-term instability means a lack of visibility over the next 5 years. Mr MB recalled that: “When a start-up does not find financing, it is quite natural that it goes into exile in the United States where the available financing is much higher.”

However, even though Mr AG has made it clear that he does not wish to invest abroad because of a lack of tangible information on these markets, he argues that

Israel is perhaps the example of a country that uses political and geographical instability as a force. If you look closely, Israeli start-ups are among the most highly rated on the Nasdaq. Innovations are often initially military, but the Israeli system shows that, despite instability, the country is able to put in place enough reforms and policies to help its ecosystem emerge.

Mr MB then referred to the impact of digital technology on financing methods:

The digital revolution has opened up many opportunities since the interest in disintermediation was recognized. Crowdfunding makes it possible to finance projects with a close societal impact, but above all we, the entrepreneurs, can be financed by individuals throughout the world. The entire process is dematerialized, which facilitates its democratization. In the same way, ICOs are the future of start-ups’ A or B series, but we must be careful with these offers where sometimes the project is absolutely not viable.

Mr AB also shares this argument:

In Africa, actors are adapting to the situation and these innovations could well be democratized throughout the world. Take the example of Wari who turns the model towards financial services (FinTech) from mobile lines. In addition, most crowdfunding platforms offered this type of investment.

Mr LL warns about “the lack of hindsight with regard to this new method of financing but obviously it allows any type of Tech project to find several million euros of financing in a few hours. It is an opportunity to be analyzed in detail.”