Season 10 - The second round of fundraising

Episode 5 - April to August 2022 - The infrastructure route

Romain Payet — It turned out that it was a mistake to approach venture capital funds. Even becoming asset light and getting rid of the industrial part of the project, we’re still not on their investment radar. Even in an era where capital is flowing towards software start-ups, they won’t fork out to fund us. Despite these companies being the same stage as us, there’s definitely nothing that can be done.

Adrien Aumont — That disinterest among VCs has another consequence. Indeed, alongside our roadshow, we contacted numerous angel investors, wealthy individuals who invest in companies they believe in. They don’t have an investment thesis, and instead follow their entrepreneurial hearts. They support projects that speak to them, and that will shape a future they have faith in. With them, we hit the mark. Almost everyone we talk to wants to put in a ticket. Small sums in general, but altogether, with the capital invested by our initial shareholders, it could be substantial. The only problem is that these sums aren’t actually transferred to our accounts, but instead they’re promised sums until a venture capital fund commits as a financing leader. Despite the emotional commitment of angel investors, they come secondary to the desire and analysis of a fund.

Romain Payet — At this stage, things don’t exactly seem set in stone. After the latest setback, as is customary every month, we submit our conclusions to our shareholders in a monthly report. One of the shareholders has an idea, and calls us to let us know that we’re on the wrong track. According to him, we shouldn’t rely on venture capital funds, but infrastructure funds. The shareholder is a partner at one of them and offers to advise us on the subject, as well as with his investment teams.

We didn’t think about this type of investor, because it’s a very different financial universe from our own. However, they offer a lot of qualities that the VCs don't have. First of all, they buy heavy assets: ports, airports, highways, etc,. They’re therefore capable of mobilising enormous sums, and working on them over a long term period, sometimes around fifty years. They’re not afraid of the two years of train construction. No port or highway is built overnight. They also have more moderate performance requirements than VCs.

With this fund, we’re starting to establish a scenario where it would finance the entire project. The strategy of this type of player doesn’t consist of investing a few million euros and taking a minority position shadowing management. It’s quite the opposite. They quickly tell us that they’re ready to cover all our needs – the trains and the launch of the first line – but that we will all move forward together, collaborating for thirty years. Like a team. The idea appeals to us and we like it a lot. Our only reservation is that we don’t want to sideline the ROSCO. A conversation starts up between the ROSCO and the infrastructure fund. Together, they come to an agreement on how they will share the pie. In fact, this new scenario really reassures the ROSCO. Its investment committee is excited by the infrastructure fund's proposal: that they will have permanent holdings and deep enough pockets to see this adventure through to the end.

Adrien Aumont — The discussions with this new potential partner is exciting for us. We’re dealing with brilliant, reliable people who are scrutinising our entire economic model and moving us forward. The fact they’re taking us so seriously is validating – we’re not crazy and there clearly is something behind this project, despite previous rejections.

Nicolas Bargelès — However, this is not the end of the road. Despite their qualities, and that they’re accustomed to concession models and asset leasing, the infrastructure fund is not used to working with start-ups. The amounts we’re asking for are too small, even for them. Oh, the irony…

Romain Payet — In general, infrastructure funds get involved in the projects of large, already mature companies. Giants in their sector who need a new asset. The investment teams don’t like that this project is so new, and that we’re not already railway operators. So much so that they end up saying no. They’re frightened by the profile of Midnight Trains and, for the most part, aren’t sure that investing in railway assets makes sense for them. But whatever. Now we have our sights set on this trio of an infrastructure fund, the ROSCO and us, we’re not going to back down, and plan to knock on all the doors in the vicinity.

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