European VCs bin majority of entrepreneurs' business plans

Posted by Mike Magee in Paris, France

 While widespread gloom and doom afflicts VCs in the USA, their European equivalents report that things are definitely picking up across the pond. But if you're an entrepreneur, make sure you get all of your ducks in a row because bright and shiny business plans mean nothing.

That emerged from the last Roundtable of the Etre conference in Paris, with panellists Jean Schmitt, managing partner of Sofinnova; Tomasz Czechowicz, managing partner of MCI Management; and Frederic Rombaut, managing director of Qualcomm Ventures Europe.

But while business is looking up for the VCs, disabuse yourself of the notion that presenting them with a 60 page business plan is going to cause the heavens to open and the trees to rain gold.

Schmitt said that he received 1,500 business plans a year but they're all consigned to the trashcan. He said these business plans were full of "bullsh*t" and were a "complete waste of time". He said: "I don't care if we have a full 60 page business plan - I want people to give us ideas." They were generally speaking full of cut and paste stuff based on financial analysts reports. There are very few original ideas around, he said.

Qualcomm based its investments to some extent on strategic matters related to the parent company's interests, said Rombaut. He said that while generally speaking there was a drive to push Qualcomm's wireless business, it also took an interest in startups and entrepreneurs which didn't pose "anti-strategic" problems.

Czechowicz struck a rather positive note to the proceedings. His firm looks at companies in Eastern Europe and has a wide portfolio which extends beyond tech to healthcare, bio and other areas. He said there were widespread opportunities for companies in the region to grow and to create successful businesses, and therefore there were also good opportunities for successful exits and for the VCs to make money.

Schmitt said that he wasn't interested investing in "crazy projects in crazy countries". He said that to pick up clients, the VCs have to be very open and very curious to new ideas. "Entrepreneurs start wherever they start," he said.

To those who do have bright ideas, Schmitt posed a warning. He said that Sofinnova often ended up with 70 percent or 80 percent ownership. Having only 20 percent of a company was a very frustrating experience, he said. The whole matter is a game of foxes - the VCs - and rabbits, the entrepreneurs. As the foxes get more successful at hunting, supplies of rabbits dry up and the fox population diminishes. That gives the rabbits the chances to breed and multiply again.

* Disclaimer. I moderated this panel. One of the delegates bought me a gin and tonic afterwards and that was my lot.