Investing in startups is appealing: high returns, innovation, the idea of spotting the next French unicorn before anyone else, from Doctolib to Mistral AI. But the reality is more nuanced: the majority of young companies fail, and capital remains locked up for several years. This guide reviews the advantages, risks, methods, and taxation, then shows how to access, through Fundora, promising opportunities long reserved for institutional investors.
Why invest in startups
High return potential
Over 10 years, French private equity has shown an average net return of 12.4% per year (France Invest/EY, data as of 31/12/2024), compared to 8.9% for the CAC 40. The dispersion is significant: the top quartile of funds achieved nearly 25.4% net IRR per year, while the bottom quartile came in at -6.2% per year, a difference of over 31 percentage points. At the right time, multiples reach x5, x10 or more, but a handful of gems concentrate most of the gains, while many investments are lost.
Significant tax advantages
Tax incentives act as an accelerator. For direct subscription to the capital of eligible SMEs, the IR-PME scheme offers an 18% income tax reduction. The framework for funds has been significantly modified by the 2025 and 2026 finance laws: the 25% reduction only remains for FCPIs invested in young innovative companies (JEI), and Corsican and Overseas FIPs are eligible for 30%, in exchange for a minimum holding period (often 5 years).
Diversify your assets
Unlisted assets with low correlation to the stock market, startups allow you to diversify your portfolio without relying solely on stock market cycles. A dynamic, riskier portion complements more secure financial investments. To learn more, see how to build a diversified portfolio of listed and unlisted assets.
Supporting innovation and the real economy
Beyond financial returns, investing in startups funds innovation (AI, energy transition, medtech, cybersecurity) and the real economy rather than purely speculative assets. More and more investors are adding an impact requirement by targeting startups with a strong ESG dimension.
Beyond financial returns, investing in startups funds innovation (AI, energy transition, medtech, cybersecurity) and the real economy rather than purely speculative assets. More and more investors are adding an impact requirement by targeting startups with a strong ESG dimension.
Risks and drawbacks to know before investing
High risk of capital loss
This is the major drawback. According to INSEE, only 69% of companies created in 2018 were still active five years later (meaning about 31% ceased operations); and nearly half of French startups disappear before their sixth year. Total loss of capital is a real scenario, not a hypothesis.
Capital locked up for several years
Without a structured secondary market, capital is tied up for several years, often 5 to 10 years, until an exit (buyout or IPO). It's best to be able to do without these funds in the long term.
Lack of transparency and absence of recurring revenue
A young, unlisted company publishes little financial information and generates no recurring revenue: the only return comes from reselling shares during an exit, with uncertain timing and amount.
Expertise needed for evaluation
Evaluating a model, a team, and a market requires specific skills, and a polished pitch can hide a fragile project. This is why many find it beneficial to use a delegated method through professionally managed funds.
The Risk of Dilution Across Funding Rounds
With each new fundraising round, the startup issues new shares: your percentage of ownership automatically decreases if you do not reinvest. This dilution can reduce the relative value of your stake, even as the company grows. This is a risk often underestimated by individual investors, yet it is very real across successive funding rounds.
Methods for Investing in Startups in 2026
There are several ways to invest, each suited to a different profile and level of involvement.There are several ways to invest, each suited to a different profile and level of involvement.
Equity Crowdfunding
Equity crowdfunding is the most accessible method. Through online platforms, you can invest in French startups starting from approximately €1,000 per project. The advantages include educational information, webinars, and sometimes tax simulators. The drawback is that the investor is responsible for making selections and bearing the risk on a project-by-project basis.
Business Angel Networks
Joining a business angel club or network allows you to invest alongside experienced investors, with access to training, events, and pitch sessions. Investment tickets generally start around €1,000, and the added value primarily comes from peer learning and the quality of the deal flow.
Investment Funds: FCPI, FIP, and FPCI
This is the managed investment option. Instead of making choices yourself, you entrust your money to an investment fund that selects and diversifies for you. FCPIs invested in JEIs and FIPs for Corsica and Overseas territories still qualify for tax benefits, unlike classic FCPIs and FIPs since the 2025-2026 reforms. The FPCI (Fonds Professionnel de Capital Investissement) provides access to strategies typically reserved for institutional investors. This approach reduces risk through diversification and is aimed at those who want exposure to unlisted assets without managing the selection themselves. This is the rationale behind choosing to invest in venture or, more broadly, to invest in private equity.
Direct Investment
Direct investment involves identifying a startup yourself, conducting your own due diligence, and acquiring equity. The potential for gains is maximized, but so are the involvement and risk. This method is reserved for experienced individuals capable of actively supporting the company. Venture capital is, in fact, just one entry point into private equity: for more mature companies, strategies shift towards others like growth equity, or even leveraged buyout for already established and profitable companies.
Life insurance: via unlisted unit-linked funds
Certain life insurance policies provide access to unit-linked funds invested in unlisted assets (eligible private equity funds). This offers an indirect entry point, housed within a tax-advantaged wrapper after 8 years, but the offering remains limited, and not all startups are eligible. This needs to be checked on a contract-by-contract basis.
However, it's important to remember that past performance does not guarantee future results, and the dispersion of returns between the best and worst funds is much greater than in the stock market.
How to choose a promising startup
Analyzing the sector and market
It's better to invest in a sector you understand. Identify major growth trends (AI, energy transition, cybersecurity, healthcare) and ensure the target market is sufficiently deep and growing. A good understanding of the domain is a decisive advantage for assessing true potential.
Evaluating the founding team
Experienced investors often say: you invest in a team first, not just an idea. Experience, complementary profiles, execution capability, and resilience matter more than a brilliant concept. A strong team bounces back; a disorganized team will cause even a good idea to fail.
Verifying scalability potential
A high-potential startup must be able to grow quickly without its costs skyrocketing. Three key indicators: international replicability, controlled customer acquisition cost, and a digitalizable model. The more scalable an activity is, the more it attracts investors and the higher the potential returns.
Conducting thorough due diligence
Before investing, scrutinize the company across four areas: financial (accounts, funding plan), legal (articles of association, shareholders' agreement), operational (traction, actual clients), and intellectual property. The goal is to identify blind spots.Before investing, scrutinize the company across four areas: financial (accounts, funding plan), legal (articles of association, shareholders' agreement), operational (traction, actual clients), and intellectual property. The goal is to identify blind spots.
Mistakes to avoid:
- Putting all your eggs in one basket instead of diversifyingv
- Investing without understanding the business or the team
- Forgetting to check liquidity and exit conditions
- Neglecting the tax implications (lock-up, IR-PME conditions)
- Getting carried away by a trend: buzz doesn't equate to solidity
What returns to expect and over what timeframe
Let's be clear: most projects fail or stagnate. It's a few rare gems, acquired or listed on the stock market, that concentrate financial gains and drive the overall performance of a portfolio. This is known as return dispersion: a single major success can offset several losses.
Regarding the timeline, expect 5 to 10 years before liquidity can be anticipated. In return for this patience and risk, target multiples can reach x5, x10, or more on the best investments, though without any guarantee. This is an investment that rewards patience and diversification, not haste.
Successful startup investing
A few simple principles increase your chances of success:
Only invest what you are prepared to lose. Allocate a measured portion of your assets to startups, the most dynamic part of your portfolio.
Diversify across multiple projects and sectors. Investing in many small tickets allows one success to offset several failures. Diversify themes (health, AI, greentech) to avoid depending on a single trend.
Monitor your investments over time. Read the reports, communicate with the founders, and anticipate exits and new funding rounds.
Get guidance. Going through a fund, a club, or professionals reduces errors and provides access to better deal flow, especially when you're starting out.
Invest in leading startups with Fundora
Fundora makes leading startups accessible to individuals, even though institutional funds typically require investments of several hundred thousand euros. The idea is to capture value creation before the IPO, during the period of strongest growth.
Objective not guaranteed, past performance is no guarantee of future results, risk of capital loss.
The FPCI + SPV mechanism for pooling
In practice, Fundora relies on an FPCI and a dedicated vehicle (SPV) that pools subscriptions from multiple individual investors. This structure then invests in the target strategies. This mechanism allows for a lower entry barrier where traditional funds require high amounts, while offering immediate diversification across a basket of positions rather than a single bet.
Good to know
Rigorous selection, structured management
Fundora identifies and offers opportunities, with effective management provided by Kyoseil Asset Management, an asset management company approved by the AMF (license number GP-99040), as part of the mandate. This regulatory framework provides strict oversight compared to direct investment or certain platforms. For individuals, this is a way to become a shareholder in leading startups, without having to manage the selection or due diligence themselves.
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THE WAY TO ACCESS PRIVATE FUNDS
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