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Why France’s Startup Scene is About to Surprise the World

August 18, 2016 business / Entrepreneurship / futurism / Investing / Technology

paris-sun-france-startups

Why French Startups are About to Change the World

It wasn’t long ago that France was considered unfriendly to startups.

As recently as 2014, Robin Wauters, Tech.eu’s co-founder and editor-in-chief, conceded that the French government was “at least learning to listen to tech startups.” However, he noted that French startups were being promoted internationally, and foreign investors were seeking opportunities not just in Paris, but also in Lyon, Toulouse and Bordeaux.

And the government is doing more than just listening. It’s subsidising startups with long-term tax breaks and has programs designed to nurture both French and foreign businesses.

It Looks Like it’s Time to Startup France

Some people are still firmly on the fence.

Jon Evans at TechCrunch, for instance, is critical of the government’s involvement. He calls the policy of fostering tech startups to support the country’s largest companies misguided, saying that it will lead to the death of those very startups. Outside of the government, though, Evans, a former resident of Paris, views the scene for French tech startups as positive.

sidewalk-painters-france-startups

Favourable Changes

Evans cites the change in cultural attitude, which now sees tech as cool, as well as the actions of French entrepreneur and Illiad telecommunications company founder Xavier Niel, who created the free coding school 42.

At The Next Web, Laure Albouy, who’s attending university in Paris, agrees with the positive outlook. “Investment activity in French startups has been on a steady rise,” she says. “It’s somewhat unexpected, but it’s happening and it’s coming from all sides of French society; from the government, to the corporations and the new wave of entrepreneurs.”

Unlike Evans, Albouy thinks that at least some of the government’s involvement is helpful. Tax cuts, for example, are available to startups over their first eight years, and are “a strong and sometimes necessary incentive for young companies.”

Something seems to be working: “According to the French Minister of the Economy, Emmanuel Macron, 1000 to 1500 startups were created in France in 2015,” Albouy writes.

La French Tech

She also gives France high marks for La French Tech, a national program designed to encourage local tech entrepreneurs, with its offshoot, the French Tech Ticket, specifically for foreigners to kickstart their businesses in France. The team is of course enthusiastic:

#France = a booming ecosystem: capital raised doubled in 2014/2015 & numerous companies received + than $100 M in #funding #FrenchTechTicket

— Meet La French Tech (@MeetLaFT) July 15, 2016

The international aspects of French Tech is seen as crucial for the startups themselves to grow and become globally competitive. Equally, though, successful startups that originate in France will, the team hopes, entice entrepreneurs and investors to that country.

To that end, there are currently 11 French Tech hubs, accredited by the government, in cities around with the world, including London, Hong Kong and Barcelona.

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The French Tech Ticket

Applications for the second season of the French Tech Ticket are being accepted. The year-long program runs from January 2017. A total of 70 startups will be selected in the competition and will join one of 41 incubators in France, with winning teams receiving 45,000 EUR and an acceleration program, plus fast-tracking a French residence permit and help with relocation.

Roxanne Varza of TechBaguette serves as an ambassador for the French Tech Ticket. In March, she spoke at an event welcoming foreign entrepreneurs to France. Held at the Elysée Palace, French President François Hollande and Minister of the Economy Emmanuel Macron were on hand to receive 50 teams from 23 different countries, with projects ranging from robots to water purification.

“France may not have a reputation for being the easiest country to do business in — but that reputation is dramatically changing,” Varza writes. “The government is striving to make radical changes and is really listening to the needs of the local ecosystem. Today’s event was proof to me that the administration is willing to make a difference. Obviously it’s even harder when once is a foreigner in France — which is why the French Tech Ticket’s approach is really spot-on.”

France Digitale

France Digitale is another force that’s been driving French entrepreneurship, within it borders and abroad. It mission is simple: to bring digital entrepreneurs together with investors. The goal is to help France become an ecosystem that nurtures digital businesses of a global stature.

To bring all this about, the France Digital team lobbies “French public institutions, major economic players, the media, and the European Commission.”

Station F

Xavier Niel, the same French telecoms and tech tycoon who created the free coding university, has also developed Station F, the “world’s largest incubator” which should be ready next year. Simon Davies of Tech.Co Paris says the project means so much more than the creation of 4,000 jobs.

“This investment,” he writes, “both through private funds and the government, exemplifies the effort being put in to create a city that can nurture new talent and business. Though competition is likely to be high to get one’s startup in the impressive center, it reflects a culture that is spreading throughout Paris of innovation and drive for results.”

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Sixth in the World

Paris is making strides in becoming a city touted as favorable to international startups. It took sixth out of 35 best tech startup cities in the world, according to the European Digital 2015 City Index. The EDCI points to both France Digitale and La French Tech as creating a strong ecosystem, and also notes the city’s well-developed venture capital industry.

The momentum in the French startup scene started with France’s first unicorn, BlaBlaCar, Stefani Bozadzhieva writes at the startup valuation platform Equidam. “Today Paris alone has 5,000 startups and is hosting almost a thousand new startups a year.”

It’s also the formula where success breeds confidence, risk-taking and expansion and more success, she says. “Past successes have added synergies. Past generations of entrepreneurs become investors, risk takers, teachers, and mentors, fostering the growth of the ecosystem.”

Brexit is a Big Boost

And with Brexit, the venture capital that might otherwise have found itself in London startups will likely go to continental Europe. At least that’s the opinion of the head of Publicis, one of the world’s biggest advertising groups. CEO Maurice Lévy told the Financial Times that “Britain’s referendum decision … to leave the EU could be a big boost for France’s start-up scene as international investors look to keep access to the EU.”

Brexit may well cost many startups the ability to scale easily across the continent. “A big pull before was the single market and the ability to scale very quickly across Europe, and now we can’t do that,” explains Wonderush founder Nelson Sivalingam, a London-based online activities and entertainment marketplace. “We don’t have a domestic market big enough to build a $1bn company.”

Pros and Cons

In her Euro Trip, Sophie Cohen of the global executive search group MitchelLake looks at the startup landscape in Paris, breaking it down by:

  • Sheer numbers — 12,000 startups, more than London or Berlin
  • Unicorns — BlaBlaCar, Criteo, Sigfox, Deezer, Dente-Privee
  • Biggest VCs — Kima Ventures, ID invest, Elaia Partners, Partech, Isai, Newfund, Alven Capital

While one of the pros of creating a startup in France is that it’s one of the “biggest business angels in the world” and startups enjoy multiple tax incentives, Cohen writes that drawbacks include endless paperwork, inflexible employment laws, difficulty with scaling and the country’s very strong unions.

Cohen doesn’t mention the cost of living in Paris, but it can prove a deterrent to some cash-strapped entrepreneurs, writes Davies in his TechCo Paris article, although he notes there has been a “sizeable drop” of late. “If this trajectory carries on,” he adds, “the city will become more manageable for startups.”

images by: Unsplash, skeeze, 35069, M_Horn71

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