Mixing funding sources strategy
When a startup announce that it raise a certain amount of money, it’s always a package of varied money sources. Not every penny is risk money.
In France, the common way to raise money is to make a 40/40/20 split share with :
- 40% in risk capital : money from BA and/or VC in exchange of company shares
- 40% in grant and subsidies : in France, mostly the BPI
- 20% in debt : money from banks with or without interests.
The proverb “Money calls money” is so true here, as each step is use to leverage the following one. Let’s say you’re raising 1m€ :
- You do your best to raise 400k€ from in risk capital.
- With now 400k€ in treasury, you can leverage public grants with a minimum of cash required at a 1-1 ratio. Means that : you raised 400k€, the subsidy abounds another 400k€.
- The publics subsidies comes not only with money but also with states guaranties. Using this guaranty, you can go to the bank and leverage a loan at a 1-2 ratio. The bank is now more akind to accept, because you both have states guaranties from your previous money round and a significant financial contribution.