France’s Economy Minister on French Startups

http://techcrunch.com/2016/01/15/frances-economy-minister-emmanuel-macron-on-french-startups/

by trueduke • 11 years ago

55 56 11 years ago

bobby_9x2• 11 years ago

The problem is that it's very difficult to go from startup phase to mid-sized company phase in a system with as many regulations and taxes as France.

It means that your only shot is to get bought out by a larger conglomerate at some point.

germainb5• 11 years ago

France does have regulation, but so does the US - industrial nations are generally over-regulated today. France also does not have a legal system that is as costly as the US, so litigation risk is less important.

Taxes don't really play on this --> many startups don't make a profit ;-) . Social Security might, but a talented engineer in France still costs less overall than the same one in the Bay Area and employee loyalty is higher.

One issue is uncertainty over government intervention, there is a bad history of the French government weighing-in on M&A activity. But the real issue is raising funds - while Seed rounds are generally covered by, among other things, government loans/subsidies, the ecosystem is lacking funds financing Series A and B. Here the government tries to provide incentives but pension funds are not the right level of financing for these rounds...the VC ecosystem needs to grow and that is a challenge because of a risk-averse culture.

If I were a VC in the US, I would see France as an opportunity.

avz• 11 years ago

France does have regulation, but so does the US

It isn't about the presence of some regulation. It is about the burdens and costs associated with it.

French regulations are very cumbersome and costly, especially when it comes to labour market. For example, every company with 50 or more employees needs to establish a works council (Comité d’Entreprise). This costs money and time. It is also one of many examples of regulation that brings about the culture of hostility between employees and employers.

tonyedgecombe• 11 years ago

"industrial nations are generally over-regulated today"

That very much depends on your political ideology.

bobby_9x2• 11 years ago

"Taxes don't really play on this --> many startups don't make a profit ;-) "

I don't know how you can say taxes don't play into this. I started my company 5 years ago and if I had to pay 50%+ in tax back then, I would have failed. Instead, I used that money to grow the company.

"If I were a VC in the US, I would see France as an opportunity."

Why? More of your money will go toward taxes and the regulations will restrict your ability to grow your money. VC want a return on investment (as do most investors).

Firing someone in a company over 10 people is a court case. There have been many cases where the company loses the court case and a person that should have been fired just sits and does nothing and is forced, by law, to be paid by the company.

This has become such a problem that many companies in France don't want to hire students..because it's too much of a risk.

France has had 10%+ unemployment for over a decade. You would think they would have changed something by now.

motdiem2• 11 years ago

That's a valid problem. If you look beyond startups, the french economy is mostly benemoth (think Total, Bouygues, etc) and small shops (your local boulangerie). There aren't that many mid-size successful companies - even less so in the software space where a big part of the enterprise market is dominated by services led companies. I personally think it has less to do with regulation, and more with the way credit and the banking system works for these kinds of companies - once you're no longer interesting for VCs, the ability to get investments or loan goes down. It may also have to do with the size of the french market overall.

pofjer4• 11 years ago

The main problem is the size of the French market alone, and the reluctance of French entrepreneurs to engage directly in the European market, not the banking sector. BTW this applies to all EU/EEA countries just as equally.

gizi• 11 years ago

The startup scene consists of say 100 individuals or small groups who will try something. One will succeed and 99 will fail. This is normal. What is not normal, is that countries like France will persecute the 99 other ones, and even put them in prison, because they are unable to keep paying taxes and contributions now that their project has failed. Since none of the 100 starters knew if they would be the lucky one, they feel it is too risky to try. They are right, and the risk that they are trying to avoid, is created by the government.

There is a reason why governments prefer large companies, don't like small companies, and discourage starting one. If a large company employs 1000 persons, they only need to speak to 1 person to collect taxes on all 1000. It would be a problem, if they had to collect them from each individual person one by one, from all 1000. Large companies make life easier to them. So, they discourage people from being self-employed or create small companies. One way to do that, is to punish them harshly if they fail.

The biggest problem that the government has, is that their policy is actually working. Nobody wants to start a new company. With old companies gradually becoming outdated and disappearing, that is not such a good thing. So, now they want to encourage people to do something that they also discourage them from doing.

dmichulke• 11 years ago

There is a reason why governments prefer large companies [...] If a large company employs 1000 persons, they only need to speak to 1 person to collect taxes on all 1000.

This implies that efficiency is actually something governments (specifically the French one) care about.

I'm not sure whether I'd agree with that.

GrumpyBen3• 11 years ago

will persecute the 99 other ones, and even put them in prison

No, you won't go to prison if your company fails, unless you've done something illegal, like using company money for personal benefits.

So, they discourage people from being self-employed

No, they actually encourage self-employment. The new "auto-entrepreneur" status makes it very easy, you just need to register online.

Nobody wants to start a new company.

False again. The number of new companies created in France have been at an all time high for the last 5 years.

tobltobs2• 11 years ago

How much again you are allowed to earn as a auto-entrepreneur?

brohee3• 11 years ago

Nobody wants to start a new company.

This is ridiculously wrong, see https://media.apce.com/file/59/9/france-entiere_fs_2013.7059...

tobltobs2• 11 years ago

This numbers are completly screwed through the invention of the new auto-entrepreneur status five years ago. But this new status is not suitable for any startup. Thats nice for plombiers or other handy mans. But even those should avoid to earn more than a basic income.

germainb5• 11 years ago

Never have I had so many friends in France starting their ventures. The 10000 Uber drivers also often left jobs (were not unemployed) to become auto-entrepreneurs https://medium.com/@GerryB/uber-fighting-youth-unemployment-...

bsaul7• 11 years ago

I don't know a single french entrepeneur that doesn't think about leaving the country if its start up starts to become successful. And those who are successful all tell me either to not hire anyone ( work with contractors instead), or leave the country.

Our culture is rotten to its core. Emmanuel macron is trying to change that, but he has no power at all, and every single president is scared to death of the risks he would take by going too far on the liberal side ( liberal candidate never make more than 10% ). French like big, safe, and conservative structures. They complain a lot about it, and then vote for the candidates that promise to maintain the status quo.

yodsanklai2• 11 years ago

I don't know a single french entrepeneur that doesn't think about leaving the country if its start up starts to become successful.

In that case, why don't they start their companies abroad from the start? basically, they want to enjoy the security offered by their country in case of failure, but they don't want to pay their share in case of success.

French like big, safe, and conservative structures

What's wrong with that? many elite graduates (not only in France) choose to work for big corporations that provide great benefits and little risk. It seems to be a rationale choice.

catwell• 11 years ago

why don't they start their companies abroad from the start?

Because it's easier to move a company to the US once it is funded and starts getting traction than to start it there.

Also, technical talent is much cheaper in France than in the US, so building the product in France makes sense. A lot of French tech companies that "move to the US" actually keep a subsidiary with their development team in France. And we see tech companies such as Facebook and Google open offices in France to benefit from the talent pool.

Young develpers are also probably more willing to try working at a startup instead of going for the safety of a big company because they do not have student loans to pay back...

France has been good with seed-stage startups for years now (incubators, accelerators, seed VC / angels, tax cuts & subsidies...) The problem is the growth stage and beyond. The French market is too large to force companies to think global from the start and too small to scale for most. VC is much harder to find beyond series A, and moves like the French government preventing exits to foreign buyers scares foreign capital.

But I am optimistic: France figured out the early stage just a few years ago, it will figure out later stages in time.

brohee3• 11 years ago

In that case, why don't they start their companies abroad from the start?

Well, possibly because they are leeches.

It's pretty easy in France to work on your startup while collecting unemployement benefits (and no need to get fired to collect unemployement, there is a special case of voluntary quitting that permits you to collect benefits).

The French state is a very good angel investor, the trouble starts when you need VC...

joshguthrie• 11 years ago

You should look up http://techcrunch.com/2015/09/07/save-secures-16-7-million-t...

300 hires in a year is no small feat, isn't it?

pofjer4• 11 years ago

Not exactly big either.

bsaul7• 11 years ago

Well, can you provide me with another similar example in the last 5 years ? Maybe Save will be the next blablacar. We got one of them every 10 years, so who knows. It's insignificant when analysing the economy of the country, though it makes people hope things aren't as bad as they are.

If you manage to find a great business, you can accomodate with cumbersome legislation. Either because you're making huge margins, or because you can afford to hire people that will find loopholes and do the paperwork.

aout• 11 years ago

Then meet me. I can also give you a list of french entrepreneurs that love Paris, France and hire a lot of people. Just look at Save, BlaBlaCar and Criteo. Also, remember that our social system is the biggest VC in Europe, allowing thousand of entrepreneurs to keep their "old job salaries" while working on their own companies.

It seems to me you are just the typical example of "French Bashing" : always complaining and seeing the bad side of things.

chrisseaton• 11 years ago

So why aren't there any major new international tech players coming out of France? I've heard of BlaBlaCar, but none of the three listed are exactly heavyweights.

I'm not anti-France and I'd ask the same question of my own country, the United Kingdom.

If the social security allows you to start your own company, and if people are cheaper, and cost of living is lower, then why can't Europe produce a Google, Facebook, Apple, Oracle, Microsoft?

pofjer4• 11 years ago

Please make it "European bashing". In my experience, it's the same almost everywhere on our continent and everyone thinks it's only in their country of origin.

bsaul7• 11 years ago

There are three big french IT companies that "made it" in the last decade : dailymotion, criteo and blablacar ( with dailymotion now close to death). Criteo is making tons of money thanks to the huge ad business. But let me tell you a story about blablacar :

I was on a train to nantes last year, and heard two local politicians ( from green parties) talking together about environmental issues. As time passed on, i started talking to them, and we ended up talking about new transport systems. Well, one of them started mentionning blablacar, a site he used sometimes, and how it became a marketplace rather than a service company, and became philosophical about it, only to end to the conclusion that : the state should start regulating their activity.

I was dumbfounded. I had to tell him that users would go elsewhere if prices would start to go up too much, and basically explain to him the benefit of a free market.

This is not anecdotical. This is a cultural issue. Politicians are clueless about the basis of a sane economy.

anonymousDan• 11 years ago

That's interesting about keeping the old job salaries while bootstrapping. How long do you have to work at a company for that to be the case? I always thought that one of the main benefits of something like a basic income system is that it would make it easier for many people to take a risk on a startup. I guess this shows you can have that support without a basic income. Are there many downsides to the French system in practice do you think?

marklgr2• 11 years ago

It seems to me you are just the typical example of "French Bashing" : always complaining and seeing the bad side of things.

I think it is partly brought on by the strong political turn that any discussion takes over here. Any topic becomes a Left vs Right debate, and since the country is still mostly divided between the two (or at least used to be till recently), you got highly polarized opinions, like, "we suck because of the other guys".

steeve• 11 years ago

Actually, the majority of the ones I know (myself included at the time) are not thinking about leaving the country at all and/or don't care about contract issues.

These kinds of anecdotal arguments won't get us nowhere.

Hanging around at TheFamily's diners (for instance), you'll find the only reason they'd leave is because they want to raise with SV investors and/or penetrate the US market (which is hard to do from abroad).

bsaul7• 11 years ago

Most start ups in thefamily incubators aren't big enough to think about full time hiring issues and legislation. The problem isn't for companies that are only composed of founders, or by companies that struck a gold mine. It's for the huge chunk that sits in between.

realusername• 11 years ago

On my case I don't know (I'm French), I currently work in the UK but I will definitely found a small company in a few years time with some online services, that's something I always wanted to do. Will I do it in France or in the UK ? The thing is, at least in the UK, if I buy a book, I can understand how the system works, in France I'm not sure even with the help of my parents I would be able to...

It's just not only about taxes, I don't want to spend all my time filling some massive amount of paperwork nonsense.

I still hope it's going to improve in the future but it seems it's just worse every year... :(

bengalister• 11 years ago

I am French leaving in France and totally agree and the culture being rotten.

However I don't think all the blame should be put on politicians, unions are also their share of responsibility for the status-quo. Just a few days ago, all (employee) unions rejected the idea of having a more flexible employment contract. The worst part is that they just represent a tiny fraction of the French workers. To me it is the main reason why unemployment is so high in France, it is to hard to get rid of people. It can protect the employer sometimes. For instance, I have been approached by foreign companies but when I say that I have a 3-month notice (like many French employees), usually they are not interested anymore. As an entrepreneur, I'd also be scared to hire in France, to much of a hassle to fire someone.

elcapitan• 11 years ago

Bottom line of the discussion in this thread is that a combination of those 2 worlds would be ideal: having a strong social system that allows people to tinker for a while without living in fear, plus a not completely overregulated venture capital market for the stuff that works out. Right?

ThomPete• 11 years ago

France problem is Europes problem.

One of the big issues in Europe is that it has no culture for letting civil society handle it's issues. Instead it tries to mostly solve it through EU regulation.

Further more as the EU moves to standarize regulation across the countries it's in effect disrupting startups by changing the underlying legal reality they exist on.

Of course it's possible to build companies in Europe but mostly they will be "better mousetrap" companies rather than actual disrupters.

Furthermore because of the way income taxation works in most of Europe the amount of money that someone can make from a startup they worked for making it big is relatively limited. In effect instead of spending some of the money they have made on investing in other startups they end up maybe buying a house or something like that because it's simply rarely that much they will make.

This is not a sustainable model.

You can't both take away initiative from the startups, while making your labour laws so strict that it's hard to pay with equity, while eating most of the spoils in taxes and at the same time expect European startups to stand a chance.

France’s Economy Minister on French Startups

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