“A corporate investor should not weigh more than 15%”


PUBLISHED ON 20/12/2017

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CEO and co-founder of Octonion and PIQ, member of The Galion Project, Cédric Mangaud explains why a limit should not be crossed in the capitalistic relationship between a start-up and a large group.


In the capitalistic relationship that can unite a start-up and a large group for better or for worse, and in the same way as in a marriage, everyone must be able to find a space for development and an area of action that are specific to it. To be effective, the start-up and large group alliance must respect the specificities of each. Two clauses are essential for the good understanding of both parties: the first is to limit, in the articles of association as well as in the shareholders' agreement, any acquisition of a stake by an industrialist or a large group at more than 15%. The second is not to give the large group a pre-emption right but rather a Right to information.

Blocking minority

Beyond 15%, we are in fact crossing the red line that delimits the role of the industrial shareholder from that of the founders. This symbolic barrier offers advantages to the start-up in the daily management of the company and also in the event of a future sale. In terms of day-to-day business management, this 15% limit forces the large group to remain in its role as shareholder and does not give him control over the future and evolution of the start-up. Offering a blocking minority to the industrial shareholder would give him full freedom to influence on development projects who would go against his own group. This very strongly puts the start-up at risk. removing all independence on its strategy and its ability to pivot in new markets or new business models.

The attractiveness of resale

In addition, in the event of an exit, this clause for the acquisition of a stake by an industrialist must be reinforced by a lack of right of pre-emption. Giving this right to an already established industrial shareholder is the best way to discourage other potential buyers. Who would take the risk of investing time and resources in tedious “due diligence” if another player has the opportunity to make a priority purchase offer at any time anyway? Moreover, this right of pre-emption often leads to a lower valuation of the start-up, since it is no longer the result of the confrontation of several stakeholders.

Start-up-large group collaboration remains a beneficial partnership for both entities, as long as its nature and future developments are properly managed, so that everyone can calmly bring their own added value. Let's remember, that of a start-up is precisely about taking risks! To dare to launch new products or new processes with a high speed of action; that of the large group is to provide, among other things, the ability to find customers, funds, and to set up an ecosystem as well as processes. For these reasons, the presence of a minority industrial shareholder in its capital is often more interesting for a start-up than having a simple investor. This is what entrepreneurs summarize by the “smart money” that they are looking for so much during the acceleration phase of their young business.


Octonion - B2C

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