EDHEC Launches €40 Million Investment Fund To Support Startups With Impact

Earlier this year, in an interview with Poets&Quants, EDHEC Business School dean Emmanuel Métais asserted a clear claim on the future it wants.

“We want to be the school that, thanks to its research, thanks to its educational program, and thanks to its graduates, puts the power of business at the service of future generations,” Métais said in February.

EDHEC just took an oversized step toward that goal. This month, it announced a new €40 million investment fund for socially and environmentally responsible startups. GENERATIONS Powered by EDHEC will be co-managed by Ring Capital, a private equity firm dedicated to supporting companies that have positive impact in their communities and the world, and will focus on seed and pre-seed startups.

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EDHEC Business School is a nonprofit founded in 1906 by a group of entrepreneurs in the North of France. It now has three campuses: in Lille, in Nice on the French Riviera, and in Paris. It also has research campuses in London and Singapore, and 50,000 alumni around the world.

EDHEC welcomes about 9,500 students from 110 countries per year in undergraduate, graduate and executive programs. In 2020, it launched its 20-25 Strategic Plan in which the school aspires to be a leader in climate finance, sustainability and business for good.

The new GENERATIONS fund will start with €20 million investment from the EDHEC Business School Foundation, EDHEC itself and school alumni. The goal is to reach €40 million by its second round in a few years. Some 50% of profits will be directed back to the foundation to fund scholarships and other programs.

“We are witnessing the emergence of a new generation of entrepreneurs who are keen to propose solutions to the social and environmental challenges of our time,” say Ring Capital co-founder Nicolas Celier in a statement. “This is a unique opportunity for impact investors to identify and support these entrepreneurs, helping them to solve the biggest challenges facing the next generation.”

Poets&Quants recently sat down again with Métais to learn more about the GENERATIONS investment fund and how it helps EDHEC become a champion in the business of doing good.

Let’s start with an overview of the entrepreneurial ecosystem at EDHEC.

We were created in 1906 by entrepreneurs, industrialists and family business people in the north of France. At the time, the region was like the Silicon Valley of Europe in terms of textile and the coal industry. EDHEC is a private, not for profit university, but we still have members of these big, very important families on our board, and I think that they left us with that entrepreneurial spirit in our DNA.

We have three incubators in which we incubate more or less 70 startups a year: We are part of Station F in Paris, the biggest incubator in Europe, and we are the school with the highest number of slots. We have an entrepreneurial incubator in Lille, located in Campus Jean Arnault, a building given to us by the Arnault family. And we also have an incubator in Nice in the south of France operated jointly with an engineering school devoted to startups that are tech intensive.

We also have, of course, educational programs. We have a Master of Science in entrepreneurship where we welcome 80 students a year from all around the world. We have a bachelor degree as well as a specialization in entrepreneurship. And we have a research center in what we call Responsible Entrepreneurship.

We have developed a methodology in order to foster the creation of startups that are, as we call them, “responsible by design.” Startups that, from their inception, will not only try to create a market and to earn money and to grow, but also to tackle a societal issue. This is the kind of startup we really want to see and to incubate.

Three years ago we sold Scientific Beta (a spinoff company selling the professors’ IP to industry and to investors) for €200 million to benefit the EDHEC Foundation. It’s still probably the best evidence of our entrepreneurial spirit as a school. Part of this money is used to fund the GENERATIONS Powered by EDHEC venture fund.

Well, let’s talk in more detail about GENERATIONS. What is the purpose behind it?

This is an idea that we have had for many years. Over the last year, we really decided to make it happen, especially thanks to the sale of Scientific Beta, which provided us with some good funds.

We called it GENERATIONS because it relates to our strategic plan which is called EDHEC for Future Generations. Long story short, it’s a plan that aims to put EDHEC even more at the service of society and to tackle societal issues like climate change. We want the fund to reflect this philosophy.

It’s really what we call an impact fund. It is funded mostly by the EDHEC Foundation, and the money as a consequence we hope in 10 years from now will go back to the foundation and to hopefully increase. Part of the money also comes from the school and part of it comes from alumni investing directly in the fund.

We hope to have a first closing at around €20 million euros, and in the coming two or three years, we hope to have a second closing at around €40 million. It is seed and pre-see, so it’s really for small startups, to help them from the beginning.

What is the timeline for picking startups and awarding money?

We have started already. We have not invested yet, we are still in the middle of evaluating the first applicants. We already have startups who applied, including one that we declined because it was not enough in line with our impact philosophy.

We hope to make our first closing of €20 million by next spring and, over the next two or three years, we hope to invest this first €20 million in probably 20 or 30 startups.

Anecdotally, what kind of companies are applying?

We have four main areas that we have decided to invest in: The first one is climate transition and biodiversity. The second one is health and wellbeing, especially of employees and companies. The third is conscious consumption and the fourth is equity and inclusion.

I will give you an example, a company called 900.care. It’s not a startup in which we’ll invest because it’s already a big company, but it is the kind of startup we would be considering. It was created a couple of years ago by two EDHEC alumni, and they started from the observation that in your bathroom, the bin is always too small. You have a lot of plastic bottles from all your cosmetics that you are constantly throwing away.

Basically 900.care sells online cosmetic products and end products, but they sell them in quantities and you refill the containers yourself. So you avoid wasting some of the plastic bottles. When I talk about conscious consumption, this is the kind of startups that we would like to fund.

How much are you looking to invest per startup?

We probably will invest from €10,000 to €100,000 for seed and pre-seed. We would like eventually to also invest in startups that are a bit bigger in which we could invest something like €500,000 to €1 million.

How would you say this is different from other investment funds at business schools?

In comparison to other French business schools, I think there are at least three differences: First, the thesis of the fund. I think we are so far the only one to say we are going to invest only in “responsible by design” startups.

The second one is school involvement. We work with a fund management company because, as a school, EDHEC doesn’t have the right to operate a fund by itself, so you have to work with a company that is regulated and that will invest for you. Ring Capital is a private equity firm focusing on startups that tackle social and environmental problems, and it is very renowned in Paris for its impact. But I really wanted EDHEC to be part of the process. The incubators and the incubators team are really involved. We have a lot of alumni involved. We have professors involved, which is much less the case in other schools.

Lastly, it’s seed and pre-seed. We will invest very early in the creation of the startups, and it’s a bit different from what other schools have done.

What kind of EDHEC support will the startups get, besides just the investment?

It is mostly access to investors, obviously, to the incubators and all the services that the incubators offer – mentoring, coaching, development, counseling and so on. And benefiting from our RED methodology – “responsible by design.” We will choose startups for this reason, but we hope they will choose us for this same reason.

Speaking of “responsible by design”: When we last spoke earlier this year, you talked about wanting EDHEC graduates to lead on climate and impact. Has this always been an ethos of EDHEC, or has it developed more gradually over time?

I would say from the beginning. If I go back to the texts of the people who founded the school, they wanted to educate what they called complete leaders. At that time, they were Christian leaders from the north of France paying attention to the living conditions of the workers and impact of business decisions on the environment at large. As for me, my first research article in 1993 was pertaining to corporate social responsibility. At that time, it was a bit original.

And, I think that this notion of responsibility EDHEC goes back 20 years ago when my predecessor said we want to do research, but not only for the sake of doing research. Research is very expensive. It’s very important, but we don’t want to do research only for publishing good articles in scientific journals. We want to do research to have an impact on society. The end of that story is Scientific Beta for which we were able to perform research that was useful to society. We used €20 million we earned from Scientific Beta to launch a research center in climate finance, EDHEC-Risk Climate Impact Institute.

I would say that over the last 20 years, sustainability is something that has been very present in the strategy of the school and that we really decided to accelerate in 2020.

Who is on the investment selection committee for the GENERATIONS fund? Who selects the startups?

We have two people from Ring Capital. We have four senior venture partners – EDHEC alumni that have been very successful in their career in terms of entrepreneurship and venture capitalism. We have one EDHEC professor and someone from EDHEC management, either myself or my CFO.

Will it mostly invest in French or European startups, or do expect startups from around the world to apply?

This is an interesting question because this is also a difference from what other schools have done. We have decided that the money would not just fund startups created by EDHEC students. As long as startups stick to the fund’s philosophy, we will invest in it.

At the end of the day, I think that the majority of the investments will go to startups created by EDHEC alumni and students, but we have really opened the door to startups coming from other horizons. We are talking about inclusion, so I don’t want this fund to be only for EDHEC people.

Anything else you’d like to add?

Something important is that we chose to work with Ring Capital because it was the company that agreed to give back the most significant amount of money in carried interest to the EDHEC Foundation.

Of course, part of the interest will go to the investors, including the school and the foundation, but also to the alumni who have invested. But a certain amount beyond this will go back to the foundation. This was something important to us because, in the end, the foundation will have more resources to invest in its main priorities: scholarship for students, research and so on.

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