“France is the next big thing,” said John Chambers, Cisco’s executive chairman, in an interview with Fortune in 2015. Indeed, France has made tremendous progress in making itself relevant for the digital era. Just three years ago, I was writing an open letter to the French president, insisting on the need for France to develop its relationship with California’s Silicon Valley if it wanted to be a major player in a post-industrial world.
New technologies and business models come from smaller teams who challenge the status quo, whether in startups or in smaller independent teams in larger organisations. And, at the time, with very hierarchical organisations, relatively few startups and a very old, complex employment law that was favourable to employees, France was lagging in many ways.
But under the leadership of several visionary officials, things have changed for the better, and Chambers and many others have noticed.
In 2014 Fleur Pellerin – then the French minister delegate for SMEs, innovation and the digital economy – launched the “French Tech” brand, a coat-of-arms for all startups, business angels, government agencies, venture capital firms and schools that contribute to the startup ecosystem in France.
It is incredible how much a simple label can achieve. I have been a startup CEO for over 20 years, and for most of that time, I did not know that there were other French startup CEOs facing exactly the same issues I was facing, and who were ready to share their experience. Today I am part of an informal network that, just by the power of this French Tech label, has accelerated my ability to learn and to find solutions to problems that most startups face during their hypergrowth.
Another initiative that has had a formidable impact was the creation of BPIfrance, a private bank owned by the French state, whose mission is to invest in companies to foster growth and employment in France. Under the leadership of Nicolas Dufourcq, BPIfrance has revolutionised investment in startups in France.
France used to lag far behind the UK and Germany, both in terms of number of startups receiving financing, and in terms of the amount invested every year in venture capital. According to a recent study from CB Insights, there were 486 startup financing deals in France in 2016, for a total amount invested of $2bn. This compares to 133 startups for a total of $542m in 2013, these simple numbers show the breadth of the change. Investment levels in France are now on par with Germany.
Beyond the numbers, the quality of the French tech scene has improved tremendously. Many business angels, who bring experience as much as money, have become active. Several growth funds have been created by venture capital leaders such as Partech, Idinvest or Iris, ambitious new funds such as Daphni Purple have joined the veterans, tuition-free coding school Ecole 42 is now a reality, both in Paris and in Silicon Valley; several incubator programs such as the Refiners are helping French startups to succeed in the US, and France is becoming recognised as a leader in artificial intelligence and machine learning.
Thanks to an initiative by Jean-Jacques Barbéris, former adviser for economic and financial affairs to the French presidency, as of 2016 corporations can amortise, over a five-year period, any investments made in corporate venture. This related tax advantage means France has had a strong resurgence of activity in corporate venturing.
Corporate venturing represents over 20% of venture capital investment in the US, but in France it comprises less than 10%. For startups, corporate venture capital is important because an investment from a strategic investor brings much more than just money – it also brings credibility and possibly a distribution network.
Finally, thanks to former economy minister Emmanuel Macron, and the law bearing his name, it is now possible for startups to give free shares to their employees. Free shares are much more motivating than stock options, since they allow every employee to benefit from an exit in the same way as the founders of the company.
Today we are seeing more and more French-born startups establish offices in Silicon Valley and gain traction globally. As a matter of fact, a recent study from the Tech Tour Growth 50 – which lists 50 of Europe’s fastest-growing pre-exit companies – revealed that seven French-born startups were considered “potential unicorns”, and that is up from four just a year ago. Indeed, the combination of the initiatives discussed above has been an incredible boost to the startup ecosystem in France.