Just a few years ago, France wasn’t known for its government support for entrepreneurs. Times have clearly changed.
2015 was a very strong year for French startups and venture capital activity, including Sigfox’s record-breaking round of venture capital funding – the largest in French history. This increase is supported in no small part due to a number of government initiatives that are driving early startup activity.
Here are five ways that the French government is working to encourage startup growth:
- Tax incentives for new businesses. France is becoming a great place for entrepreneurs looking to get a new business off the ground. Not only are there a range of accessible options for early stage funding, but the tax burden on new businesses is low. New companies with JEI status don’t need to pay costly social taxes for their first eight years of operation. Startup tax incentives also assist, like the Jeune Entreprise Innovante (“young innovative company”) status, which provides tax exemptions on labour costs, or the R&D tax credit Crédit d’Impôt Recherche. While France’s favorable tax scheme is not new, what has changed in recent years is the stabilization of the tax code. Previous financial instability had led to regular tax code changes, making investors and would-be entrepreneurs wary. France’s increasing stability has led to big increases in both confidence and growth.
- Government and public sector funding. The French government’s support goes far beyond tax breaks and exemptions. In 2015 alone, the government invested nearly €200 million in business accelerators and incubators under the “La French Tech” umbrella, designed to support the growth of digital companies. Bpifrance, or “la BPI,” France’s public investment bank, is also a key player in the local investment scene, providing more than €1 billion annually in investment funding for a wide range of innovative companies. France also has a system of subsidies and grants available for early-stage ventures, designed to make it easier for entrepreneurs to get their first business off the ground.
- New crowd-funding legislation. In 2015, the French government introduced game-changing legislation surrounding the generation of capital through crowd-funding. Under the new rules, startups can raise up to €1 million ($1.4 million) per year through either Kickstarter-like crowd-funding campaigns or equity crowd-funding without having to notify the financial markets authority. This is a considerable increase from the previous limit of €100,000. The legislation also removed earlier restrictions around the type of companies that were able to raise such funds and eased administrative burdens surrounding crowd-funding initiatives.
- Centers of excellence. France’s pôles de compétitivité, or competitiveness clusters, represent a key government initiative to support the rise of French tech entrepreneurs. These clusters are a publicly funded business support system designed to help startups and foster collaboration. There are currently 71 competitiveness clusters, each grouped geographically to create an ecosystem around a niche initiative or shared theme. Each cluster contains both large and small firms, as well as relevant research bodies and educational institutions. These clusters present a number of key advantages, both for industry in general and startups in particular, most notably connecting startups with SMEs, other entrepreneurs and larger companies within the same space.
- French Tech Ticket. The French Minister of State for the digital economy recently announced the French Tech Ticket, a new visa package designed to encourage non-French entrepreneurs to launch tech startups in Paris. Through the package, foreign entrepreneurs are eligible for support including a work visa, renewable grant money, office space in a Parisian incubator, mentoring and the support of an English-speaking administrative advisor program. The initiative’s volume restrictions will likely keep it from having a big impact on the French tech sector as a whole; however, the French Tech Ticket is great publicity for the country’s growing culture of entrepreneurship and another positive sign of the government’s investment in further growth in the local tech sector.
While critics argue that further government changes to simplify tax regulation and administration are needed to improve startup activity, a look at the past year shows great progress. The French government’s support of our rising tech sector is strong and growing and promises great things in the years to come.
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