In 2015, France saw an increased amount of money coming from overseas sources, as well as in the number of local companies attracting American investment.
A key element is the ready availability of seed capital from a range of sources. Entrepreneurs can now turn to a growing number of local funds and large corporate venture funds, as well as funds from ultra-high net worth individuals who are funneling money back into the ecosystem specifically to support early stage businesses. Legislative changes in 2014 also increased the amount of money that startups can solicit from crowd funding sources: €1 million, up from a previous ceiling of €100,000.
Growing awareness of startup activity within France, fueled in part by headlines generated by companies like cellular connectivity firm Sigfox and promotion from the government-sponsored La French Tech program, have also put French startups on the international radar. As a result, in 2015 we saw an increase of the amount of money coming from overseas sources, as well as in the number of local companies attracting American investment.
Where challenges remain is in the next stage of funding, within the $1-2 million range. Competition at this level is fierce and startups may struggle to reach this “second rung” on the ladder. Dedicated funds are now being created to address this challenge and I expect to see further growth in this area in coming years.
France has long been known for the high standards of our education system. However, this drive for excellence had an unexpected consequence that previously hindered early growth of entrepreneurialism: students learned through experience that there was no room for failure – especially not for those who wanted secure a good job or go on to an elite business school. The resulting risk-adverse mindset was largely incompatible with startup activity.
In recent years, this mindset has changed. Economic uncertainty taught that a stable job with a big company is no guarantee of stability, while risk-taking can lead to life-changing prospects and rewards. Changes in teaching methods, too, have encouraged students to view mistakes as learning opportunities and created a generation of young people eager to find new challenges, take risks and seek bigger rewards. Current numbers show that upwards of a third of French students now say that they want to create or join a startup.
France’s strong and evolving education system has also developed a culture of innovation, present in French companies of all sizes. In fact, France has long been known as a leader in R&D activities, especially in technology, biotech and medical spaces, with a higher percentage of employees engaged in R&D activities as compared to the international average. This area of competency across multiple industry sectors is a strong driver for innovation and is interacting with the growing culture of entrepreneurship in exciting ways.
The French government has also made recent investments, looking to encourage home-grown entrepreneurs and boost innovation. Startups can avoid paying costly social taxes for up to eight years, as well as take advantage of tax incentives and exemptions on labor costs, R&D activities and more. But government support is far deeper than just tax incentives. In 2015 alone, the French government invested €200 million in accelerators and incubators, as well as providing a range of grants designed to help new entrepreneurs get startup businesses off the ground.
With these and other factors at play, becoming an entrepreneur is an increasingly appealing option for creative individuals looking for a challenge. If current trends continue, we will see greater growth and prominence of French startups on an international level, especially within health, biotechnology and the “internet of things.”
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As Head of Innovative Startups, François Bloch coordinates teams dedicated to supporting and financing innovative companies. François has assisted many innovative companies particularly in the areas of health, ICT and Green Tech, as well as many research institutes and foundations (transferring Projects licenses and creation of innovative startups). François was previously a member of the steering committee of the Chair EMLYON – Incubator – KPMG Start up & high growth, as well as the co-chairman of the life sciences jury of Tremplin in the Senate.
Quarterly global report on VC trends published jointly by KPMG International and CB Insights.