Insights & Perspectives

The Start-Up Business Climate in France

The entrepreneurial spirit of Silicon Valley takes hold in Europe, most particularly in France where policies, large-scale projects and venture capital funding are encouraging a unique start-up climate. France is a country that is traditionally considered risk-averse, yet it also has a young generation of minds formed by the national school system’s rigorous math and engineering programs.

Politics & Policies 

While the election of President Emmanuel Macron has especially boosted start-up activity in France, early efforts began in 2013 with the creation of BPIFrance, a state-owned investment bank channelling venture capital to start-ups. The French Tech Acceleration Fund, which supports nine start-up ecosystems around the country, and the Large Venture Fund were soon launched by the bank, which has over €42 billion under management. Also, France created a special tax status for “innovative new companies”, granting over €1.17 billion in tax exemptions for 6,600 start-ups since 2004.

Since his election in May 2017, Mr. Macron forthrightly invited the world’s innovators, engineers and business-builders to come to France. He aims to shift the country’s image to one of rigid labor laws and heavy taxes on wealth and stock options to one that is business-friendly with a focus on the future and technology. He has announced another €10 billion public fund to invest in start-ups and has created a “French Tech Visa”, which is a fast-track four-year residence permit for entrepreneurs and their families.

Venture Capital Funding

In 2016 and 2017, BPIFrance was the most active venture investor in Europe measured by the number of venture-capital funding rounds. This positions France in second place behind the UK as the leading European country for venture capital investment in transaction amounts.

“Business angels” are another source of investor activity in France. However, the majority of the activity is focused on one man, Xavier Niel, founder of French Internet Service Provider ‘Free’ and France’s most active business angel. He has invested in over 300 start-ups from around thirty countries through Kima Ventures, which he co-founded in 2010, alongside numerous personal investments. He is followed by Fabrice Grinda, who has invested €26 million in at least 170 start-ups.

Incubators & Accelerators

In addition to his presence as an investor, Xavier Niel is also a prominent supporter of program mentorship.

Mr. Niel co-founded 42, a computer-programming school with a capacity of 2,500 students that charges no tuition fees. Graduates are particularly skilled in the “deep tech” sector which comprises artificial intelligence (AI), machine learning and big data.

While this is one of at least 250 start-up incubators across the country including School Lab, Le Tank, The Family and Numa, another took root a few years ago when Facebook and Cisco set up artificial intelligence research operations in Paris to recruit talented engineers—today France is considered to be one of the world’s leading center for AI research and development.

This first Silicon Valley venture into French territory has evolved into the country’s largest incubator, Station F. Opened in June 2017 and as long as the Eiffel Tower lying down, it aims to amass the largest group of entrepreneurs, venture capital firms, incubators and accelerators anywhere in the world.

Xavier Niel is investing €250 million in Station F; Facebook and Amazon are also backing the venture. Microsoft is basing its newest artificial intelligence program there, joined by the French video game publisher Ubisoft and the Japanese messaging app, Line. Silicon Valley native and former head of French Microsoft start-up activities, Roxanne Varza, serves as Director.

Station F offers 30 different programs focused on peer-to-peer learning and encourages a climate of diversity and foreign talent. Companies must have a minimal viable product, strong and committed management team and a path to growth to be considered. An independent podcast program, Hold Tight, interview young companies within the accelerator, and reports not only the diverse profiles of entrepreneurs involved but also general focus on adding a social purpose or incentive to the products and service being developed.

 

Uniquely French Advantages 

From figures such as Descartes to Villani, to its highly competitive institutions l’Ecole Polytechnique and l’Ecole Normale Supérieure, math and engineering skills have been the foundation of the educational system in France. The country, for example, leads the Fields Medal in mathematics total on a per inhabitant basis — second only to the USA in absolute number. 

Considering math is the foundation for big data, France’s traditional skillset has never been so aligned with the world’s demand. France has plenty of talent to create start-ups but are the administration’s regulations and taxes in line with making businesses not only start, but flourish? 

France is forming its own unique microcosm of innovation to watch for the future, in whichever way it may evolve.

SOURCES: BPIFrance; The Economist; The New York Times; Le Figaro; Business Insider; CB Insights; VentureBeat; Medium; “Hold Tight”, a podcast interviewing start-ups of Station F.