Since 2008, we have seen five strategic funds being established in Europe with similar missions. The French SWF, Bpifrance, was set up in 2013 as a merger of three state-owned vehicles and has since become a key enabler of the country’s venture capital ecosystem. It has also succeeded at creating partnerships with SWFs around the world, and leading ESG efforts in the sector. We had the pleasure of catching up with Mr. Pascal Lagarde, its Executive Director of International, Strategy, Studies & Development.
[GSWF] Bpifrance was created in 2013 as a merger of three very different entities (OSEO, CDC and FSI) – what was the original vision and how has it evolved over time?
[BPI] The main objective was very simple: to allow any client company to benefit from a number of services – credit, equity and innovation support – with a single point of contact. Hence, we are a mix of national development bank and national development fund and have a holistic view of all French corporates from big to small. The Export Credit Agency (ECA) was added in 2018 for large contracts and we also advise SMEs/mid-caps and entrepreneurs. We can find similar models in Canada (BDC) and China (CDB) but in Europe it less common.
[GSWF] Bpifrance has three distinct lines of business – why did it merge the financing and the investing arms in 2020?
[BPI] It was a technical financial merger to raise the direct equity of the bank and of the fund, and to strengthen our loan activity.
[GSWF] Bpifrance is currently aiming at raising USD 55 bn though an EMTN – what are the main reason behind this issue?
[BPI] We are not using this money for the SWF part, but largely to refinance the bank – so it is mainly a banking activity. During 2020, we decided to issue EUR 45 bn as a covid-response mechanism, and it was distributed not only in Europe but also in Asia.
[GSWF] Bpifrance got a perfect Sustainability score in our GSR Scoreboard – what are your ambitions around ESG?
[BPI] ESG is part of our DNA as a development bank. We are an advocate for sustainability in the OPSWF group, where we co-chair a session with the NZ Superfund on the measurement of Carbon footprint and the reduction of portfolio carbon emissions. Our vision is to engage with our portfolio companies using our board seat/s and push their ESG agendas. Climate change is not only about risk mitigation but also about opportunity, and we are pursuing investments in more regions and activities as part of our ESG strategy. For example, we recently developed together with the Banque des Territoires a EUR 40 bn Climate plan for the next 5 years to help companies align with the Paris agreement and we always conduct climate due diligence.
[GSWF] Bpifrance manages USD 10+ bn of third-party equity – is this coming from SWFs or from other players?
[BPI] In 2019, we launched the Lac 1 fund, and opened it to third-party investors. We did a first closing in March 2020 with EUR 4.2 bn, to be invested in listed companies that are undergoing a structural or strategic change. The fundraising is still ongoing. We intend to play the role of an active investor and be part of the governance of the company. Two investments have already been made. Backers include Mubadala, pension and insurance funds, with a 50:50 split of foreign vs domestic investors. We also manage third-party capital in other parts of the portfolio (e.g., for the French government around VC, for other investors in our biotech fund, etc.).
[GSWF] What can you tell us about your partnerships with leading SWFs including CIC, KIC, QIA, MIC, RDIF, UFRD and SK?
[BPI] Most of these partnerships were inherited from CDC IC and are still active, some of them increasingly. Unlike Lac1, which is 100% on public equity, they focus on PE. We are also trying to find new partners through co-investment platforms or separate funds. It is a win-win situation because our partners get access to the French ecosystem incl. VC and startups. We also invest in French companies expanding overseas, e.g., in Russia (with RDIF), Kazakhstan (with Samruk Kazyna) and Saudi (with Kingdom Holding).
[GSWF] Your Venture Capital portfolio is worth USD 5.2 billion with over 143 deals – what are your main strategies there?
[BPI] Around 40% of our Fund of Funds activity is VC. We do a lot of seed and early series in the biotech markets, and we also have a growth fund that focuses on pre-IPO opportunities. We have exposure to virtually every industry within VC, and are also working with accelerators and research institutes, green tech programs, blockchain, etc. We examine how companies refinance themselves and raise funds – and both indicators performed very well during the pandemic. The challenge is to finance the rising number of French unicorns. All the SWFs we speak to are very interested in French VC, given US and China markets are more expensive.
[GSWF] How many employees work in the equity division, and how many are based overseas? Will you be opening any office outside of Paris?
[BPI] Bpifrance investissement (the equity investment arm) employs about 500 people, which is a large asset management company. They are located across France. For the seven representatives we have overseas, the main activity is the export business (ECA + export loans). The staff in Brussels focus on EU affairs. We have a focus on Africa because of France’s historical ties and because of our Averroès funds of funds, which invests in private equity funds across the continent.
