France’s Economy Minister on French Startups
techcrunch.com
techcrunch.com
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.
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.
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.
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...
300 hires in a year is no small feat, isn't it?
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.
It seems to me you are just the typical example of "French Bashing" : always complaining and seeing the bad side of things.
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?
So you have to accelerate to massive scale across Europe, and then conquer the US market before a US company conquers the US and spreads across Europe. It's clearly a far more difficult proposition for the European company. The only alternative I can think of that might work, is for European companies to start with targeting the US market first (a challenging concept in its own right - to target a foreign market first).
Market size, for one. Europe is not a country, and startups begin on a small national market, or at least national-scale funding.
I wonder how much it has do to with education and research. The US have been ahead of Europe in the computer sector. For instance, when Google was founded, were there competitive research teams in Europe working on this type of technologies?
Actually, I graduated around that time in a high-ranked French engineering school, and I think our CS classes were pretty weak (at the master level).
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.
Not close to death, it's just not a unicorn. They can IPO whenever they want as long as they claim a correct valuation.
"This is a cultural issue. Politicians are clueless about the basis of a sane economy." on the very thread about the minister of economy going to the CES and talking about the need of VC money
Much more symptomatic was the scandal about the minister of work not knowing the conditions for a short term work contract when asked on TV, just two days after the reform of the work laws have been announced publicaly to be in the work.
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".
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).
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... :(
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.
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.
It means that your only shot is to get bought out by a larger conglomerate at some point.
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.
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.
Actually, not that much. You have one year to install it, and it mainly consists of an election you have to organize. If you can't organize that kind of stuff once every two year or so, I don't understand how you can face other business challenges.
> It is also one of many examples of regulation that brings about the culture of hostility between employees and employers.
In most of the companies, it only consists of giving money to employees and managers picked charities and giving perks like theaters tickets.
All of this is really manageable for startups with more than 50 employees, and most of the time, it is already done by them to attract employees.
I remember one organizer saying that a good matured dispute in the USA was one with no gunfire and that they had to carry for self protection.
That very much depends on your political ideology.
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.
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.
This implies that efficiency is actually something governments (specifically the French one) care about.
I'm not sure whether I'd agree with that.
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.
This is ridiculously wrong, see https://media.apce.com/file/59/9/france-entiere_fs_2013.7059...