From ride-sharing licorne BlaBlaCar to high-end audio brand Devialet, some of the biggest household names in Europe are French businesses that have bloomed in recent years.
With support from business superhubs, the French Tech visa, and increasing investment into the country, France is quickly picking up the pace to propel the European start-up ecosystem further.
Investment in France has been accelerating year on year and hit a record of €2.2 billion from 574 fundraisings in 2016. This is further cemented by the fact that the first generation of successful home-grown start-ups like Criteo and BlaBlaCar have started investing in the next generation of entrepreneurs.
“If you look hard facts, you’ll see that France has the highest birth rate of new companies in right now. More money has been invested in French start-ups in the last quarter than anywhere else in Europe; higher than the UK,” says Pascal Cagni, president of Business France.
If the pace of activity in the first half of 2017 continues for the rest of the year, France is set to surpass its own 2016 record by 40 per cent in terms of deal volume, and almost double total funding in terms of value.
Years in the making
A cursory look at the European start-up world reveals that Paris is a growing entrepreneurial hub, but this is only a trend that started to pick up speed over the past decade. According to Cagni, this is symptomatic of years of poor PR.
“We haven’t been marketing our immense talent correctly. We have the sixth largest GDP in the world, 66 million inhabitants, and are the best entryway to a unified economic area of 500 million inhabitants called Europe,” Cagni tells GrowthBusiness.
“I’ve seen 10 to 15 years of French-bashing, starting from 2001 when the French refused to leave US airplanes crossing the territory to go to Iraq. We saw the front cover of magazines talking about the protectionism of the French government,” Cagni says. “A taxi driver in New York once asked me if it’s true that we pay 75 per cent tax in France. Less than a 1000 people ever have been taxed at that rate, but people outside France believe these misconceptions. This is why we’ve been pushing the start-up revolution in France.”
It’s a perfect mix of the right skills, opportunities, timing, and mindset, he adds.
“I’m not going to tell you everything changed on May 8th, when President Macron came to power, but clearly something unique happened. It crystalised years of effort made by the French economy and President Hollande to make France the best place for research and development.”
Right place, right time
France’s advantage lies across sectors within the rapidly growing world of tech, from medtech to artificial intelligence. For Cagni this is a clear reflection of the strength of French engineering schools, churning out top tier innovators year on year.
“Who could have imagined that a few years ago? We are producing as many engineers as Germany. We are welcoming 400,000 PhD graduates, half of them are foreigners. France is open to new ideas, new businesses, new innovation,” Cagni says.
In terms of business support, France boasts 450 incubators and accelerators, including the world’s biggest hub, Station F; but not all of the action is saturated in Paris. From biotech in Lille to social innovation in Bordeaux, specialisation hubs are growing in popularity across France, which Cagni believes will help the nation grow an all-rounded support system that won’t be diluted by duplication.
Of course, without growth capital, start-ups have little room to scale, which is why the government introduced radical incentives to lure investors to be more generous with their purse strings.
Historically, venture capital in France has generally erred on the side of caution, perhaps shading why the term for it in French is ‘capital risque’. For business angels, investing in start-ups was never a natural choice. “We have something called CIR, a scheme offering 30 per cent exemption on your tax base up to $100 million of foreign investment, for example. This is massive one. A game-changer.
“When our young, smart, aggressive, glamorous president came to power, we are able to carry the message, and the French Tech was able to grow,” Cagni explains.
“Even if you don’t speak French, you can come to France, get a work permit for four years. It’s an accelerated process to work. Essentially, you have a full ecosystem which has been built from scratch.”
La French Tech: a movement
France’s start-up revolution didn’t happen by accident. While Business France has a government mandate and a two-pronged mission to encourage home-grown business to export, while attracting foreign talent and investment, La French Tech is less tangible and strictly defined. It’s the spirit of French entrepreneurship as it is today. “La French Tech is not an organisation or bureaucracy, it’s a movement,” Cagni explains.
“La French Tech is everything France has never done before. It’s something that is immaterial, it doesn’t have a space. It’s a handful of people relying on the goodwill of leaders in various French cities and abroad to band together; a community of entrepreneurs and capital-risquers (VCs), together with the support of the government.”
The movement in question is iconised by a refreshed symbol of France, a red rooster, which Cagni says has had immense success in making the most of a new wave of entrepreneurship.
It’s a movement that is captured in the spirit of the people, he adds. “The French no longer want to be civil servants or work in a bank. They want to create companies in IA (AI), fintech, internet of things, medtech and so on. It’s an amazing journey of something that started years ago. The country has in its DNA the ability to create brilliant innovators. We’re just rediscovering the genius that has made our country what it is.”
Cagni was quick to point out that ‘entrepreneur’ is a French word, something that former American president George Bush used as a barb against France. “Bush was quick in stating that it’s a word that we invented that we cannot spell, typical of his poor sense of humour.
“We’re bringing back the word ‘entrepreneur’ which has always been at the heart of French society. Being an entrepreneur is an icon of the modern times,” he says.
Statistics back this up. A survey in January this year by trade show Salon des Enterpreneurs revealed that 60 per cent of 18 to 25-year-olds in France want to start their own business. With collaboration at its core, it’s like the stars have aligned for start-ups in France, egged on by an open-minded, progress-first government.
“What we’re doing is not very different from what the Germans are doing so well with their great Mittelstand, or what the UK has been doing with the financial industry,” Cagni adds. “Business France took the leadership of carrying French tech internationally, in the spirit of La French Tech.”