Macron Secures €5B Investment to Boost French Tech Startups
wsj.com
wsj.com
Our business school culture is so prevalent, techies are always ignored. Engineers are poorly paid, if not at all. And the rare VCs have zero tech knowledge too, resulting in poor investment choices.
It's a cultural problem, and throwing money at it won't solve it.
Could you elaborate on that? How true is the statement above?
Still, most startups rely on armies of unpaid interns as a workaround.
The issue in France is that you basically have tons of small companies that can have exemptions on things like that, taxes, etc. and a few very large companies that can deal with that, but almost nothing in between. Running a 500-employee company in France is basically hell, you get crap from everywhere.
I generally in favor of the French model (over, say, the American one) but I do think that in this case it's probably a bit overprotective for certain more privileged jobs. A software developer these days shouldn't have too much trouble finding a new job if they get fired, I wouldn't mind trading some of that social security for higher pay for instance.
You can't fire someone at will like in the US, you need to justify the decision. Which takes some time and paperwork. Also, it used to be risky as the fired employee could sue and ask for damage, with no legal cap. The later has changed. So you can fire people, I've seen it done a few times, if you have a competent HR it's perfectly doable. You will need to document why and have some justification, and be ready to present your case if challenged.
Also, it's possible to let someone go my mutual agreement, with the employee keeping their unemployment benefit (there are limits to prevent abuse). It also eases things when both sides agree there's a mismatch, which often happen.
So it's definitely not as fluid as in the US, but not stuck as some people would let you know. You tend to be more cautious about the hiring for sure.
You go work for a smaller company because they will hire you (and it will probably be more technical and less politics than the main companies)
All the main companies are headquartered in Paris (region) with some exceptions.
BTS/DUT are short higher education degrees that focus on practical and professional skills, with selective admission (but not as selective as actual engineering schools). Basically in France you have: Grandes Ecoles ("great schools"), elite engineering schools that operate outside of the university system; you also have selective 2 or 3-year degrees inside high schools and universities (BTS, DUT, etc.) and then you have the universities. Where post-graduate degrees can sometimes be decent but undergraduate tends to be crap, and its pretty much a zoo or a jungle outside of STEM (fortunately, French universities tend to separate STEM campus from other disciplines filled with political activists).
A technicien is supposed to be on top of ones field techniques, and know how to apply them. A techicien supérieur is the same but for more advanced and complex fields. An ingénieur is not only supposed to understand the "what" and "how", but also the "why" and be able to evolve things, of design from scratch when needed. That, of course, is the theory: there are plenty of techs with an ingénieur mindset (good), and unfortunately plenty of people with an ingénieur degree who couldn't innovate out of a paper bag.
Some of those copy/pasted companies (Criteo, Blabla car, Vente Privée...) actually managed to be quite successful.
As somebody who prefers to work at a lower level my main problem is that we've lost (or are rapidly losing) most of our savoir faire when it comes to the hardware side of things. Could we even make a competitive CPU from scratch in Europe anymore or are we doomed to integrate American and Chinese IPs and ICs? What are the security risks if we just run "black box" foreign-made chips? Can we really trust Intel and AMD all the way for our critical infrastructures?
There's a culture of risk aversion in France, and it pushes a lot of people toward big corps as they're seen as safer. But they can also be a trap: be comfortable costing for most of your career, safely ticked inside the borg. But if you go through a big restructuring past your 50s you'll be toast, and have a real hard time recovering (if you can). Personally I prefer environment that force you to keep in shape and fit. I fear I would let me cost in a big company...
For the copy/paste business school driven start-ups, I'm sure there are a lot of them (not in my field, but it's hard core tech and capital intensive, not a good match for "pipo" people) but the issue there maybe the relative lack of start-ups founded by techies?
my brain dies on copy pasting
but you cannot always land a position where you actually think
For poorly paid engineers, it's true that French engineers salaries are far from the Silicon Valley standard --- which is true for a great part of the US too. Here too grumbling won't help much. To get salaries to increase we need more local demand for techies, and not from inflexible big corporations that will prefer to stall rather than change their salary tables.
Well for the VCs, you're the tech expert not them. And if they invest in duds, not your problem right? The issue would be if a good tech idea couldn't find funding, and in the current context I don't think it's the main issue anywhere ;)
As for the cultural problem: yes! Having been in SV and in France, I agree that France issue is primarily cultural. Too many people looking for safety first before opportunity. Lots of grumbling but much less moving. And not even getting safety in the end, as big corps are not very nice for old engineer and not the best environment to learn IMHO. There is a lack of luck there: close to the end of the first Internet bubble a lot of engineers, after a delay, had left heir big corps to joint start-ups. Just in time for the big Internet crash... A bad experience that made some very cautious during the next wave. Hopefully this memory will fade. Having a sustainable start-up ecosystem lasting over time, with motivating successes, will help. This requires funding over time.
https://techcrunch.com/2015/06/30/vivendi-buys-80-of-frances...
They blocked it because of a misplaced sense of isolationist protectionism. That's arguably very wrong in a global economy but it's not 'just because they could'.
https://techcrunch.com/2009/10/22/dailymotion-raises-another...
Anybody that wants to argue that the Dailymotion is a strategic asset to France or the EU is welcome to do so but I fear that it will be a stretch.
> On 25 January 2011, Orange acquired a 49% stake in Dailymotion for €62 million, valuing the company at €120 million. On 10 January 2013 Orange bought the remaining 51% for €61 million. (source: Wikipedia)
So, the Dailymotion founders, investors and (hopefully) employees got a $123 million exit. (edited to fix the sum)
That said, in my experience government-based funds and grants usually do contain clauses that limit what you can do for a set period of years, in attempts to be able to reap the fruits of the investments (not neccessarily profits, but also employment, more activity and visibility to local IT sector, etc).
As with all funding, there are always at least some strings attached.
The SIF invested in 2009, they could have blocked any kind of exit involving a foreign (likely American) party after that point.
> As with all funding, there are always at least some strings attached.
Yes, but usually those are to make sure that minority shareholders also play ball if/when the bulk of the shares can be sold, not to stop a deal from going through based on Nationalistic grounds.
For example, in the Netherlands, there's many "provincial development funds" (eg BOM, OostNL, InnovationQuarter), who generally have a pretty good, though somewhat slowish/bureaucreatic, reputation. But in the end they're all government owned one way or another.
If you stifle the ability for such deals to be consummated you remove the oxygen from a lot of the lower levels as well.
That being said, in general, the state is a passive investor. What happened with Dailymotion is way different.
First, the issue came from Arnaud Montebourg, a powerful Minister of the Economy with statist views in the former Socialist government. The current government is very different. (By the way, Montebourg was replaced by Emmanuel Macron, the current President of France, as Minister of the Economy under Hollande.)
Second and most important, by the time this happened Dailymotion had already been sold. It was a wholly owned subsidiary of France Télécom, the largest telecommunications operator in France (commercially known as Orange). That operator was state-owned until 2004, and even today the State is its largest shareholder.
In other words, the State prevented a former public company it basically still controlled from selling a wholly-owned subsidiary which happened to be a startup it bought before. I disagreed with the decision then, and I still disagree today, but it didn't prevent an exit. Rather, the actual exit of Dailymotion was to a company owned in part by the State...
EDITS:
- Looks like I was too slow to post and senko beat me to it.
- The "FSI" articles linked by others talk about, which invested in Dailymotion, is now part of the "BPI" I mentioned (it was merged with other vehicles that invested at different stages).
- Some French people regret Montebourg style, for instance a journalist recently tweeted his disagreement about the governmental OK to the sale of Photonis, a night vision company, to a foreign group (https://twitter.com/VincentLamigeon/status/11742379454543708...).
Not that I know of. The SIF didn't have any ownership of Dailymotion anymore. Their shares had been bought by Orange.
Montebourg just said publicly he wouldn't let Orange sell, and it killed the deal.
Only slightly related: why do French startups need to take State money? Because we have much less private investment, in part due to our social model. We don't have many pension funds because most of the retirement system is state-owned, we have few private universities because the best part of the higher education is state-owned... So basically we have no LPs.
Ah, I did not know that, the way I heard it told - behind the scenes - was that their minority stake had that clause in it which gave them the legal power to stop the deal. I'm not sure on what legal grounds the French government would be able to stop this deal otherwise, if not through their control over Orange, which would seem to be a rather blunt instrument.
> Because we have much less private investment, in part due to our social model.
> We don't have many pension funds because most of the retirement system is state-owned, we have few private universities because the best part of the higher education is state-owned... So basically we have no LPs.
The LPs in most Western European VCs and PE parties are rarely pension funds. More often than not they are successful business people flush from selling earlier ventures. It is the lack of those that causes the dearth of capital in France, coupled with the rather difficult employment climate.
From my point of view it was just a crappier Youtube clone that managed to remain mildly successful because it tolerated NSFW and pirated content. I saw nothing particularly innovative about it.
The entrepreneurial French all leave for London or Berlin.
That entrepreneur leave France is almost a meme, and I know it happens and have some friends among them, but not everyone leave either. I have the chance to regularly meet French entrepreneurs staying in France. It's certainly harder than in the US but definitely possible. The thing is, most are not in areas that can massively scale. It can be very high tech, with international exposure, but it will never become a Google or Amazon. It tends to be specialized tech that can sustain a small to mid company, but not a massive one. And as a result, it tend to stay under the radar when discussing start-ups and everyone having the GAFA in mind.
First off - and I hate doing this - there is the definition game at play here. I sincerely loathe how the start-up community has decided to redefine the word start-up to mean 'business with very large scaling potential' or something to that effect. This removes a lot of the companies that one would normally consider to be start-ups from the equation and also from many discussions.
Of course if your start-up does not have the potential to become a billion dollar company that does not help. So for the moment let's assume those are all still 'in'.
Then, of those companies that you refer to: high tech with international exposure that can sustain a mid-to small company is precisely the sweet spot, SME (small-to-medium sized enterprises), it is the backbone of the economy in many places.
But hardly any of those will be names that people recognize. In Europe we had several of those, and Dailymotion was one of them.
There are quite a few EU based brands that have global recognition: Nokia, Airbus, TomTom, TeamViewer, Skype, HelloFresh, N26, WeTransfer, Revolut, Deliveroo and so on all - maybe except for the first two - at some point in time could claim 'startup' status according to the HN/YC definition of the term.
But for every one of those there are 1000's that do just fine in their local eco-system. The important point is that France is quite underrepresented in that segment, and that is something worrying. More capital isn't necessarily going to solve it, for France to thrive in this sense it would have to change a lot more than just to hold out a bag of money.
Him mentioning "unicorns" is just silly in a country where almost no one cares about the stock market. It would be more sensible to focus on SMEs and catch up with Germany and Italy, that have a more robust network of middle-sized industrial companies.
I see lots of them (50+) every year.
This is one of the reasons why I am worried that GitLab will end up selling to a US based company. Time will tell if they hold strong, if they do I'll be sure to buy stock in their eventual IPO just as a reward for showing that a US exit is not the only avenue available.
The differences between France and the US, in terms of Culture, wealth distribution, financial and fiscal environment, country size (& heterogeneity of the European market) are really important factors, much more than “the American always shoot first”.
And your comment shows that you probably missed that the conversation had shifted away from France in particular. GitLab is Dutch for example.
> The differences between France and the US, in terms of Culture, wealth distribution, financial and fiscal environment, country size (& heterogeneity of the European market) are really important factors
Yes they are. For one, French - very capable - possible entrepreneur will be the last to see themselves succeed independently, they will jump t the first opportunity to work for some crap salary for a large company who will then make lots of money over their life's worth in contributions. And if you're lucky you too will get a golden pen on your day of graduation: the day you get to collect your pension.
And as for Americans shooting first: for all the flak that the Samwer brothers get for copying American concepts in Europe, there are plenty of companies in the United States that came late to the table. Facebook isn't the first social network, it just executed better and with much more capital, and there are many other examples besides.
Also FYI, Sid is Dutch but we're registered in the US, although our entire company is remote :)
If you're thinking of SV as a source of tech then you are missing the point: SV is a source of capital.
If we taxed people sensibly and spread it around, then there would be a lot more capital available to the average person wishing to start a business.
For that you go to Softbank.
> If we taxed people sensibly and spread it around, then there would be a lot more capital available to the average person wishing to start a business.
I don't see how that would work over and beyond what we do today: have government secured funds with strings attached. Given the choice I'd take VC or PE based capital over a government backed fund.
You can't 'spread it around' without taxing more. VC/PE is cheap: it is money on which taxes have already been paid and if it does not work then it's their loss, not society's loss.
Besides that the average amount of capital required to start a company is very low these days, but still much higher than the amount at which these government funds typically kick in unless they are co-investing in a larger ticket.
Well let's tax more then.
> VC/PE is cheap: it is money on which taxes have already been paid and if it does not work then it's their loss, not society's loss.
Society has already lost that money when the income wasn't taxed as heavily as it could have been.
> Given the choice I'd take VC or PE based capital over a government backed fund.
If we spread money about through some kind of basic income then it wouldn't be government funds, it would be crowdfunding and community lending schemes.
But I wanted to highlight the key difference between European and American start-up ecosystem regarding funding.
I don't think it is quite that black. There are plenty of good companies and nice people that make bank from starting new companies. The hype and the bro-culture are not the only faces the start-up community has and if that all you see then you're missing a lot of the good that is happening: Female / minority participation in start-ups is substantially above country average for most countries in Western Europe, there are quite a few start-ups that are working hard to achieve something good for the world, but not in an 'Instagram' like manner kind of 'good for the world'.
SMEs are the backbone of private enterprise in Europe, they create more jobs and employ more people than all of the enterprises combined. They are the backbone of the economy and I'm more than happy to see a thriving eco-system around them.
Startups raise funds, try to build a big scale business as fast as possible and sometimes become profitable because they became big enough fast enough. Move fast, break things (first websites, now satellites and automated cars, YOLO) and become rich ASAP please.
That's what people are trying to tell each other but it's BS. For every start-up that made it there are 1000 SME's that didn't. Usually you only know that your company has the potential to succeed big quite a few years after you've started it.
The whole idea that world wide scale companies are the only ones that deserve the label 'start-up' should die, it's a SV born re-purposing of words to suit a particular agenda.
> Startups raise funds, try to build a big scale business as fast as possible and sometimes become profitable because they became big enough fast enough.
They can, but they don't have to.
There was a case of a prime minister announcing a similar initiative and his wife incidentally (and later, unofficially) being involved in founding a large "accelerator" and office rental startup.
> “We need to create our champions,” Mr. Macron said, adding that his goal was to have at least 25 French tech unicorns by 2025, referring to companies with valuations exceeding €1 billion.
I see this as a rather futile endeavour, and a little bit of a personal insecurity manifestation. Just like as when Xi Jinping vent to California, been dined with all those "smart startupers," and then it hit him "Americans have startups, lets make some too!"
Second to it, why such fixation on the most egregious forms of "tech craze?" France has strong position in materials, chemicals, which strike not less hard economically, and are not less "tech" than cat video websites valued at $1B+
It is a foregone conclusion to me that $1B+ webdev weekend projects have no true economic backing behind them, and they are just artefacts of speculative expectations runaway.