State of European Tech in 2024 (Ft. Ring Capital)

And in France, we have this this model that is called entreprise à mission, so purpose-driven company. But it it has been really you know formalized in okay how do I define my mission or my raison d'être in French? It's very poetic.

Venture capital is a key lever for economic growth and innovation, and literally has the power to influence our society. But we need to factor in certain biases, especially funding biases that we have today, and we should create equal opportunities for women fund managers and entrepreneurs. This is the reason why I have invited Marie Capucine. She is a partner and investor at Rhene Capital. It's a French venture capital firm that helps and empowers impact tech startups that have a strong commitment towards social and environmental change. So I think we have a lot to learn from you, Marie, especially around what is the concept of tech impact startups, the VC ecosystem, and most importantly, the state of European tech today. So thank you for joining us today.

Thank you, Abby, for having me.

Okay, amazing. So Mari, I think I would like to start with your journey. I know that you had— you started with the banking industry and then you pivoted to the VC space. It's been over 6 years that you've been working in the space. So how did you end up here and what is your journey?

Well, so yeah, I've been working at Ring Capital for the last 6 years. And actually, I joined the 2 founders when they started the management company and raised the first funds. And prior to that, I've been working 10 years in marketing positions in online banks and fintech companies, which is not the classic, let's say, path for a foreign investor. But this is also One of the differentiations of Ring, when we created it, we wanted to create this team with people coming from different backgrounds, with the idea that this diversity of backgrounds could be very strong and help us invest better and support better the entrepreneurs and their team in their journey. So yeah, this is my journey, which is not, as I said, typical for an investor. We see a lot of funds that try to hire investors that already have a track record that comes with their deal flow and their LPs. I had nothing of that. So that was funny. I think, well, the first deal that we've made, the first deals that we've made, We needed to learn together. That was something very strong because since we didn't come with all our experience, we needed to work as a team to really share the experience one another had. So I think it really created also a specific culture that we have at Ring, and especially with a very strong value that is the one of the collective.

That's amazing because I love the fact that you came from a different background. I think that's when it really contributes holistically in the team and you kind of had a different approach as far as the team dynamics are concerned. So I have a question related to Ring Capital's business model in general. You know, when you think of impact accelerators, what really strikes your mind are the NGOs or governments that are helping startups making a change in the society or environment. At what point did Rain Capital think of venturing into the space and why?

Basically, we believe that we are at a moment where the urgency of environmental and social challenges changes all the paradigm in terms of impact. I think we come from a period where it was quite difficult to align economic performance with impact performance because people didn't see it this way. And now, given the urgency once again of the environmental transition, but also of the social transition that must come at the same time, Right. It's actually, it's easier to see models that can align both because there is a real, real value for companies that are capable to bring a solution to one environmental or social issue. And this is definitely what we do at Ring Capital. We have one mission. Our mission is to support entrepreneurs that bring solutions to to solve the most, the major and the most essential environmental and social issues. And those are the ones that maybe less visibly but more deeply innovate to find new business models that align this economic performance with this impact performance.

Interesting. And how do you see Ring Capital As a firm trying to strike a balance between business performance and societal impact, especially when you evaluate potential startups?

Well, I think that it's a new way of doing our job because when you would invest in a company and look for economic performance, Basically, you have a business due diligence to do. You take a look at the size of the market, you take a look at the strengths of the companies, you take a look at the differentiation factors, etc. This still goes on when you're an impact investor. In our definition, we still need to go into businesses and markets that are capable to grow, that have a strong dynamic, and with strong companies that can have their positioning, their unique positioning on this market. But it's not the only thing you take a look at. You need to take a look at all the impact that this company can have. So there is this, in addition to this business due diligence, you need to do the impact due diligence. So you need to take a look at, okay, what is the problem that I solve? Am I really solving it? What is the size of a problem? How do I do it? Is it really what I want to do? There is a question of intentionality of the team and of the company on what they want to achieve. And how does it— and can it be measured? And this is really, really important to be able to measure this impact, this extra financial performance. Is key to show and to prove that you actually bring a solution to an environmental or social issue. I can give you— well, I think the easiest example to understand is the question of tons of CO2 avoided. We are in a phase where we need to decarbonize our economy. So we need to avoid to avoid tons of CO2 and avoid CO2 emissions. So this is something that we measure and we are capable to put in a business plan. So investing in a company, in an impact company for us, is looking at, okay, what will be the growth of our revenue? What will be the profitability of the company? And what will be the performance in terms of CO2 emissions avoided. And this is— we try to put it at the same level, financial performance and financial due diligence, impact performance and impact due diligence. So it's really a new way to do our job as investors.

Totally. I think it's very important to have a number, even as far as impact is concerned. I mean, that's when you can truly gauge the performance of the portfolio companies that you have today. How big is this market today, tech impact?

It's not easy to put a figure on it. I would say, first of all, you need to take a look at the— well, it's not a sector per se, it's not a market per se, but at the end of the day, you can relate to a certain number of sectors where the impact stakes are very important. So, as far as environment is concerned, we can talk about energy transition, circular economy, agriculture and food, waste management, mobility. Well, there are others, it's not exhaustive, but you have a scope of sectors that are concerned. When you talk about social impact, you talk about education, accessibility to the job market, accessibility to health and to care. Those are also some thematics that we take a look at. So impact is not a market, but there are some sectors where you can see it. And I would say that if you take this market sizing exercise in another way, you can take a look at the companies that are— the number of companies and the size of companies that are indeed impact companies. And what we see is that there is a huge shift in new startups because at RING we have 3 funds investing in companies plus 1 fund supporting nonprofit organizations. But as far as classic, let's say, companies are concerned, we take a look at— we have a seed fund taking a look at very, very young ventures, then a venture capital fund taking a look at young startups with a stronger traction, and a growth fund. For the companies that are created in 2023, 2024, the rate of impact companies is huge. It's close to 1 out of 2 companies that are created right now to solve a problem either on environmental or social topics. It's huge with this idea to measure their impact performance. And the more you— the bigger they are or the The older they are, the less, the fewer this proportion of impact companies is. So it's a market that is not huge at the moment, but will be huge because there is a new generation of ventures that is really dedicated to all of that. So, but what I can say is that there are a lot of sectors concerned, plus a new generation of ventures that will really change the way this market goes.

So I know that you're a woman in this space, and that's why I want to pivot a bit to the gender diversity aspect. You know, today the numbers, they underscore that gender diversity, it's not just a metric, but it has a direct correlation with the performance of companies and the return on investment. I was going through certain reports, you know, and trying to measure what happened right from 2019 to 2023. And so if you look at this report, it shows that from 2019 to 2023, this year, uh, women entrepreneurs have not been able to raise VC funds in Europe. The number hasn't increased beyond 17% as compared to 85%, 83%, 82% men. Why do you think we have this kind of a gap? What could be the potential reasons?

Well, I think there are many, many reasons. What I can say, because it's a huge problem, there are several reasons. First of all, I think there are less women in entrepreneurship than men right now. A lot of reasons as well. I think the way, and it's very cultural, the way we educate the girls compared with the boys, it has a very well the the the strength of the cultural background is very strong. Then there is the question of women entrepreneurs raising funds. Figures show that the the companies that that are created by women raise less funds and try to raise less funds than men. Either they want to be more independent and not be dependent from external investors, either they just, at an equal stage of the company, they would ask for less funds than guys would do. Once again, might be cultural. And this, we need to change this part. And finally, and I think it's not something that we must put aside, is the responsibility of the investors.

Right.

Investors are less likely, or were less likely, I hope, to invest in companies led by women. And why is that so? According to me, when you invest in a company, for investors, you take, as an investor, you take a big risk because at one time you decide to put sometimes a lot of money in a company and to trust a founder, a male founder or female founder, to manage correctly this money in order to give more in 3, 4, 5 years.

Right.

So you take a risk. And as an investor, you try to mitigate this risk by doing your due diligence for sure. That's the objective part of the job. But then you have all your bias and your subjective approach on the deal itself. Do you know the sector? Do you know the company? Do you know the founder? Do they look like you? Are you reassured by the way the team is presenting, would you do the same? And I think this last part about reassurance is very strong for an investor. They need to be reassured, and it's once again very subjective. And the fact that investors and the ones taking the investment decisions are here again most likely males makes it easier for them to invest in male teams because they project themselves. They think that they reduce the risks because they take people that look like them. And I think the figures is about 15% of partners in the VC funds that are women. And then you can make a parallel with the number of female entrepreneurs being financed.

That it's, it's, it's amazing that you touch upon it because this is exactly what I had found. Um, you know, the source is, uh, European Women in Venture Capital. And I see like about 15, 16% of women that represent the group of founding partners, general partners, managing partners. This is the group that indeed makes the final decisions, you know, with or as an investment committee. So, and these are the numbers just in Europe. Speaking about Europe, certain European studies have shown that there is a direct relationship between diversity in the investor team and the decisions that they make in terms of investments and how diverse those investments are. So what is your take on that?

Yeah, I fully agree. I mean, you really need— it's really interesting to see how an investment team and an investment committee works. Because, and this also depends a lot on the culture of the fund themselves, either it's really one person leading a lead and trying to sell them to the other one, either the team will take a look at the deal as a collective. This changes also a lot the way you can keep your bias or mitigate or limit your biases. So it's really key the way you create your investment team and the way you create your investment decision process, because you can have huge impact on the way, on the deals you will decide to finance and on the way you make your decisions. And I think in certain contexts where there is very few diversity within the investment team And the process is very centered on one person trying to sell the deal to the rest of the investment committee rather than a collective working together, taking a look at the deal at the different steps, etc., would do. So yeah, once again, with this paradigm of mostly male partners with few women partners, little collective in the way the decision is taken, you will not accelerate but improve or raise the bias you can have. And then you will go into this, okay, I will invest in people that just look like me, that I know, that I'm reassured on. The more collective you are and the more diverse you are within the team, the more you will be able to, yeah, to be open to diversity within the founder's team, I think.

No, I totally agree. Talking about this, you know, there was a Harvard study done wherein they tried to divide the group, 2 people into 2 groups, and they showed them the same pitch of a woman pitching the same business idea. Group 1 was told that this woman was backed by male investor and group 2, female. What they observed was people judged her competency and the idea of a startup based on if she was backed up by a female investor or a male. When they heard that it was a female, they were less likely to think that she was competent, but more that she got support. So I think it actually builds on your comment that it's more about having diversity than just focusing on women helping women. Because at the end of the day, during later stages, people think if she received— if a woman received investment from a female funding manager, it's mainly because of her gender and not her competency.

And this is something that I've learned recently trying to dig into this diversity issue. You can't solve diversity issue or the part of the women within the entrepreneurs or within the investors, just by putting them together and trying to bring these links between women. You need to make sure that you erase the bias linked to this gender and you look for other criteria that will reassure you, and you will not focus on the gender, you will not focus on the origin, you will not focus on the age. And all of this is trying to find other criteria that create a link, because you need to create this trust link between an investor and a founder. You need not to say that you cannot say, okay, I will invest, I don't know the guy, I have no idea who he is, or You need to build trust, but trust must not be built just on finding the same criteria, especially gender, age, social background, ethnical origin, etc. You need to find other criteria that create this link of trust, that create this bond that will help build a strong relationship after all. And if you have already worked on this, when working on your team, your investment team, you already have these other criteria or these other common denominators that are not gender, age, social origin, educational background, etc. It will help you do that for the funders.

I totally agree with that. I think people should factor in this, what you just mentioned, more because that's the only way female entrepreneurs can receive funding in the later stages of their ventures.

Sure.

That's the only way I see that gender is literally penetrating. We started with, you know, the gender gap as far as funding is concerned. Now we are on to the other side of the table, which is the VC ecosystem. And then I also read another report that was talking about the portfolio companies that you have today. And how VCs are laying emphasis on the gender diversity of the teams, of the portfolio teams, to sum it up. And from this, I'm reading it aloud. There are literally— there were 65% VCs who said yes, they would like to make a decision to invest in a portfolio company based on their diversity and inclusion strategy. And 67% of them said that they often monitor and report progress made in the portfolio company's diversity and inclusion strategy. Is this something that you've been doing as well? And why do you think it's important to think about this aspect?

Well, yeah, I think now the investment industry is very good at measuring things. And I think it's the beginning of a of good decisions and of good actions. But sometimes we only see people limiting themselves to measure things.

Right.

So it's good. And I think we may mostly— most of the funds do that right now. So which brings awareness about this topic when we talk about mixing, for example. But it's not enough. Regarding the portfolio companies themselves, I'm really convinced that this is where we can have most impact because, I mean, the investment sector, very, very little. I mean, we talk about investment teams in France, for instance, we talk about, Yeah, maybe thousands of persons, but it's a very small industry. We talk about entrepreneurs, once again, a very small community. But then when you talk about, okay, the managers in the company, you talk of hundreds of thousands, millions of persons. So there you can, if you manage to change things at this level, not only will it cascade and then have a huge scale, But I'm sure it will, it will go up, right? Then we will, we will also change things at founders' level and investors' level. So I think focusing on the management layers of portfolio companies is extremely important. And the figures— I can talk about the figures in our portfolio companies. We have 25% of women within the C-levels in our portfolio companies, with a very strong representation of these women in HR, finance, and marketing.

Okay.

So how do we change that? It's not— it's— or how do we go to more mixity within this very, very strategic layer of management that are the C-levels and even the people working with them. So I think we need, of course, to change the recruitment practices. This is something very important. You can also measure and define objectives. But what I'm sure of is that you need to have a company culture that actually favors mixedity. Because right now, the most— what slows the most all these trends and that is putting a really glass ceiling on all this is the way— the cultural background of the companies. Because You do have cultures that do not favor mixity because, and you don't know, sometimes it's very unconscious, but you have a strong, a lot of bias. You have rituals that are very manish. You have ways, processes that do not take into account this gender diversity. So it's really important that the companies and the entrepreneurs and the management work on this. does and ask themselves the question, does my culture, my values, the way that the process we have in the companies, the way we talk, the way we communicate, does it favor mixity or is it an obstacle to more mixity?

I agree with that. And another layer, and tell me what you think about it, that I think is really important, something that you mentioned as well. Apart from looking at the picture holistically, you also need to dissect it and see, okay, within this company, at which level are women operating? Because it's good to say, okay, 50/50 is our company culture, but then when you end up dissecting, you see that there are only 3% or 4% of women in C-level positions. This is the same pattern I observed in the VC ecosystem as of 2023 within Europe, general partners, senior positions, it's just 23-32%, and 46% of the women are in junior positions wherein they don't have the power to make those financial decisions. So yeah.

And then you have a culture, you often have a culture where going up in a company, going to higher positions, Is not, is very, is very difficult for women and much easier for men. So you have this gap that is created. You can have a lot of women in junior positions, but actually, once again, you put the ceiling on the salary, sorry, for them to go up. So I think about that is really to focus on very concrete things within your company. And I love concrete things. I think good ideas are great, but how— if you want to help entrepreneurs that are willing to change this, you need to find concrete things. And you need to dissect what makes your company's culture, what makes your company's singularity.

Right.

And in all the process, HR process for sure, but also communication process as well, operational process, and to see and to be very careful about, okay, at this time, who will be— who does it imply to do this and this? And how will it affect the rest of the company? And I have a figure I want to share with you that I thought was very important, was very interesting, is that there is a tipping point in terms of representativity of minorities. Below 30%. So we talk about, yeah, the objective of full parity, 50/50, but below 30%, a minority, for instance, in a C-level assembly, if there are less than 30% women within the group, they will feel a stress being less represented or being representing less than 30%. And if you go beyond this gap of 30%, this stress disappears. And this stress, if once again you have 1 woman out of 6 men within a board of directors, the stress it will cause her will have a lot of effects on the way she will behave.

Indeed.

So you're building again this paradigm or this scheme where you put a minority in a situation of minority, and then it creates, it changes the behaviors, and it creates it's not equilibrated anymore. So if you pass this tipping point of 30%, then the stress will disappear or will reduce, and then you can fully exercise your leadership, even if you're the only woman. So no, you're not the only woman, but even if you are woman, you're older than the others, or anything else. So I think it's very important to think about this tipping point. And on the other side, to think about the stress you can cause to a person because he or she feels that he's really a minority and that the other will reject him. So he acts differently.

Amazing. I think you've set a perfect base for something that I was going to touch upon. We had a conversation earlier and you had mentioned the idea of community instead of using diversity and inclusion. And I think what you just mentioned is very much related to this concept because if you're placing the word minority, oh, we are being diverse, we are being inclusive, you're just putting a label on them as if there's some kind of favor going on here than truly gauging their performance and how they are. in terms of what they give to you. So I was reading this New York Times article that talks about, you know, how many companies are now using the terms like belongingness rather than using diversity inclusion. So I want to know your take because I think it was you who first mentioned it to me. Why do you think it's so important to focus on the way we use words? How does that impact One of the points you already mentioned, but how does that impact employee motivation or the way people perform in general?

Well, I think indeed, well, I think in these terms of community, you have several things. You have, first of all, you do not talk about individuals, but you talk about the collective force. And I think not feeling alone in all these topics, diversity and inclusion, mixity, or even when you feel good in a company, it's not because you feel like one individual within the company, it's because you feel as a community member. I think it's, according to me, it's very strong. Second is when you think about a community, you think about, okay, what is the common denominator within this community?

Right.

So you can have, for sure, you can have a men community, women community, community of seniors or junior talents within your companies. But I think in those cases, the common denominator is actually very weak.

Right.

All women don't look the same. All people aged 25 or 55 don't look the same. So you have a common denominator that you put, a label that you put on this community that is very weak and that doesn't create strong bonds within this community. So building strong communities with all that comes after that in terms, yes, of power, what the community can achieve is to find those bonds or those common denominators that are much more powerful than a label linked to your gender, your age, your academic background, or anything else. And this is where I'm back to my total obsession right now, which is the culture.

Right.

What is the mission of your company? What are the values of the company? And this, if they are well expressed, if they are clear, if there is a clear objective behind that, it's very strong as a common bond because people know that they are here to achieve this mission. They know that they are here because they share those common values. And this is much, much, much stronger than just being a community of people looking the same.

I agree with that. I mean, you think of it, you come to think of it. I mean, having a company culture, people often think of it as a theoretical thing in the books, but it actually impacts everything, right? Right from your performance to how you hire people, the way they feel, the way they perform. output, everything. So I think this is a beautiful concept that you've pitched, uh, thinking of it more in terms of a community, bringing in the common denominator into the picture rather than making it an inclusive exclusive club. I think that's, that's the game changer. Have you seen any of your portfolio companies kind of trying to imbibe this same ideology?

Yes. And I think From what I've seen, so once again, we are talking about impact companies. So there is a strong— in this, what makes maybe these companies specific, but they are not the only one, is that they've worked on a mission because their mission is to, once again, to bring a solution or to solve one big issue that is bigger than the issue of a company itself. It's okay, we have— our society is facing huge challenges, I'm bringing a solution to it. So mission-driven or purpose-driven companies have the ability, according to me, to build a strong culture with strong engagement from their teams and then communities Or are more likely to create a culture that favors diversity and mixity because they are bound together by the mission. And in France, we have this this model that is called entreprise à mission, so purpose-driven company. But is it it has been really you know formalized in okay how do I define my mission or my raison d'être in French? It's very Poetic. How, what can, what are the objectives that are behind these missions? And they talk about, I won't have the word in English, but there is a first level of objective, high-end objectives, and then operational objectives, then actions, then KPIs. So it's a very strong model because it goes from, you know, this philosophical raison d'être Right. To very, very measurable actions and results. And I think it's something that helps. It's not because you have this mission model that you will have the perfect culture and you will solve all your questions of diversity and mixity, but it helps you build this common denominator or this bond together because we want to achieve the same thing. And on the other part, so you have a very strong ground to work on your culture, on how you will actually do that, achieve your mission, your purpose. I think it can be very strong. So in impact companies, I think it happens a lot to think about your mission, to go through this mission model. And it will help create a strong culture. But once again, it is not the only way. And I would like to say that you can see companies with very strong culture, but that are very exclusive and not favoring at all mixity. I mean, there is not— it's not because you create a strong culture that you— so with with once again this background that is shared by the community, you have a strong community that you will favor mixity and diversity. I think there are a lot, a lot of examples with very strong corporate cultures that have nothing to do with either mixity or diversity.

Totally. I think if community is the umbrella concept that people think of, then the culture and tackling the diversity, gender diversity issue, everything is kind of sorted. And I think it's wonderful to know that when you think of raising funds, it's not just your business model and the impact that you're creating, but also the impact that you are creating within your company.

Sure.

So truly, after speaking to you, I feel like there are several layers. So when you look at the data outside, you just feel like, oh, only 17% of women have raised VC funds, but you're not truly trying to dissect the information. It literally, there's ripple effects to the company culture as well.

I think it's an ongoing issue that you need, we need to be aware of. We need to have the right keys to understand what we can do about it. And we need all to get, well, there is this question once again of the tipping point. If many people are aware of it and seeing to build other models, new models, we will make a change. But right now, and I really don't want to end this up on a negative note, but the figures we keep measuring, figures are not improving themselves dramatically. But once again, it's a long journey and we need to work actively on it. We need to try and not make mistakes because we can do mistakes. It's not an exact science. We can do mistakes. But if we are deeply and really and genuinely convinced that we need to change and to make a shift, to rely on culture, to challenge ourselves, then I think we will, we will end up doing something about it and changing those, those figures. Indeed.

Indeed. And not just at the company level, but also the VC ecosystem and tackling everything. Yeah.

And society at the end of the day, because of course there is a stronger, there is a strong link with the way our society is built and the way it works as well.

Indeed. I totally agree with that. Well, thanks a lot, Marie. It was a pleasure speaking to you. to you and having this conversation. Um, thanks a lot for your incredible insights on this topic.

Thank you, Abhi. It was very nice talking to you about this.