Startup Ecosystems in Europe: France Gearing up as Global Innovation Powerhouse
Startup Ecosystems in Europe
On the one hand, one thinks red tape, high levels of taxation and burdensome labour laws. On the other hand, a country such as France is the self-proclaimed “start-up” nation, fueled by the growing success of thousands of fresh, ground-breaking high tech companies, the internationally renowned French Tech label and such flagship incubators as Station F, the world’s largest start-up campus. Indeed, there are legions of start-uppers in France. While those we talked to tend to believe large corporations and institutions could somehow do more and better to boost innovation and foster open innovation through cooperation, they are resolutely optimistic, and not afraid to look ahead and set their sights on Europe and beyond.
The title says it all: “Yes, France is a Paradise for Entrepreneurs” (1). The author is a professor of Leadership and Entrepreneurship at ESSEC Business School – and former entrepreneur - Fabrice Cavaretta. “France provides one of the best opportunity ecosystems in the world,” he writes. “Entrepreneurs have a broad choice of clusters to work within, those industries with the critical mass to reach excellence, such as fashion, food, high-tech, energy, and so forth. They also benefit from exceptional success factors such as a rich heritage, outstanding human capital and a world-recognised brand. Its drawbacks, e.g., a bureaucratic administration, labour laws, and costs or the tax system, are comparatively less penalising than expected and definitively not an obstacle for ambitious entrepreneurs.”
Strong Support from Public Authorities
Does it mean starting and growing a company in France is a walk in the park? Certainly not, but at least, it implies the country is not the anti-business hellhole some used to depict. In truth, though it has always been a free-market economy, France seems to have only truly jumped on the innovation bandwagon in the last ten years or so.
As a matter of act, the so-called “clusters of competitiveness” (pôles de compétitivité) were created in 2004 (2). In 2014, more than 70 such clusters were officially recognised. As for the R&D tax credit (credit impôt recherche), it was first voted in 1983, but only became a permanent fixture of French fiscal law in 2004. Now covering 30% of all R&D expenses up to EUR 100M, it benefitted over 16,000 companies of all sizes and industries in 2013.
In 2013, a specific innovation tax credit came to complement the pre-existing R&D tax credit. Aimed at SMEs exclusively – under 250 people and up to EUR 50M in turnovers-, it covers investment for prototyping and pilot installations of new products. Also, a special status has been created for innovative start-ups, which can benefit from a reduction in social security contributions and partial tax exemption.
On top of all these regulation mechanisms, a series of players are also there to help boost innovation. First on the list is Bpifrance, a public investment bank created in 2012 with three well-defined goals: to support businesses and help them grow, to prepare for tomorrow’s competitiveness and to develop an ecosystem that favours entrepreneurship. With 42 regional branches throughout the country, Bpifrance funded 74,000 businesses in 2016 and offered EUR 930M in innovation grants.
Along with the Caisse des Dépôts – a venerable institution created in 1816 to serve as the “investment arm” of the State – and Business France, Bpifrance is also one of the major partners of La French Tech, a public initiative aimed at helping start-ups, through funding and the support of an internationally recognized brand. At the 2016 Consumer Electronics Show, in Las Vegas, La French Tech sponsored over 190 French start-ups.
Regional and local authorities also see innovation as a key driver for development and local economic growth. As a consequence, many of them have implemented specific initiatives to support innovative start-ups, from seed investment to guarantees.
The Ambition to Become a Global Leader
When it comes to innovation, the country is indeed putting its money where its mouth is. In many interviews he has given to numerous media since he became President in May 2017, Emmanuel Macron reiterated his determination to make France an international leader for innovation. In June 2017, he said he wanted France to become the “leader for hyper-innovation.” “Something is going on in France,” he said, “There is a momentum. Everywhere, there are men and women who want to act and win on a global scale“. As recently as 31st March 2018, in an interview with Wired, he expressed his ambition to spend EUR 1.5 Bn over the next five years to support research in the field of artificial intelligence, with a specific focus on healthcare and mobility.
Primarily a matter of mindset
Looking at France today, it seems the “momentum” Mr. Macron talks about is no creation of the mind. Incubators and fab-labs are multiplying, and Paris now hosts the world’s largest start-up campus. In 2017 only, 197,000 new businesses were created in France, which represents a 4.8% growth compared to 2016.
“Start-up may have become something of a buzzword,” says Florence Vasilescu, the founder and CEO of Firm Funding, a Mazars-incubated start-up that specialises in helping SMEs meet investors willing to fund their development (2). Vasilescu adds: “I believe it is a positive trend. There are lots of young graduates who now want to work in start-ups. Start-ups help people unleash their energy and potential for creativity, more than large corporations do.”
Entrepreneurship is also now an integral part of a growing number of graduate or post-graduate degrees. For Fabrice Cavaretta, it is as much about debunking a few myths as it is about actually teaching how to start and grow a business. “All those talks about a brain drain or France being business-unfriendly are unfounded. Looking at all the international rankings, we are among the most competitive markets in the world for entrepreneurship and innovation. More specifically, I do not believe in the so-called logical chain of having a brilliant idea, designing a business plan, raising a lot of money, producing your product or service and marketing it. I actually think that can be toxic”, he says. “What I try to teach is what we call ‘effectuation,’ which is a theoretical framework for entrepreneurship. Effectuation is about starting small, relying on what one can actually do, prototyping and not thinking about fundraising. If you turn out to have the right product or service, money will come to you.” “Is it fundamental for people to really know who they are and what they can do,” says Sandy Melamed, who works for Switch Collectif, a start-up specialising in helping people find the career path that best fits their abilities and desires. “This is how they will acquire a growth mindset, dare, prototype, try and not be afraid of failure.”
“I am not sure I believe in entrepreneurship courses and trainings”, says Mathieu Maloux, founder of Pukka, a solution that engages staff in content creation. “But I think in countries such as Denmark, and as early as junior high-school, kids are taught about project management and its business applications. It seems to me something like that would be a good idea to develop the taste for entrepreneurship in France.” (2) “What I see in my generation” Maloux continues, “is that people tend to want to have an impact. They want to do something meaningful, to bring value beyond what is required for the job they have been hired to do.”
The Need for a Cultural Change
This is where things get a little complicated. “A few year ago, after my first experience as a start-upper, I had a series of job interviews,” Maloux explains. “And clearly potential recruiters seemed a little scared by my background and profile. They thought: “He is going to get bored pretty fast. He is going to try to push out the walls and think outside the box. Ultimately, he will leave soon.” Indeed, the risk does exist, but isn’t it up to large companies to adapt?”
“Intrapreneurship is not something corporations are completely comfortable with,” says Vladimir Nguekam, founder of MisterDoe, a Mazars-incubated start-up that uses big data to help insurance companies comply with their legal and financial requirements. “There is usually no fitting environment for such profiles. They do how to treat them, where they would fit or how much money to allocate to them. Intrapreneurship is not yet part of the French corporate culture. Moreover, without a significant cultural change, I think a lot of bright young people will leave big companies and start their own businesses.” (2)
“I actually believe large companies are eager to become more flexible, to encourage their own people to take risks and innovate, to become intrapreneurs,” says Thibaud Martin, founder of Jubiwee, a start-up that uses data to improve the employee experience. “The problem is they do not know how to do it. They do not know how to rethink and change their processes.” (2)
Banking on Collective Intelligence: Mazars’ Aims at Fostering Open Innovation
Whether internal or outsourced, innovation is an absolute must. So today more than yesterday, but less than tomorrow, it has to happen fast. “You have to keep in mind that innovation cycles are getting shorter,” says Léopold Albert, an independent consultant working with start-ups. (2) “Innovation is basically being able to disrupt your own products and services. You can no longer say “as long as I do not see anything coming, I am good.” On the contrary, you have to think about how to constantly innovate before someone does and puts you in a dangerous situation. Taking all this into account, it is somehow safer for companies to get out of their comfort zone and “be their own barbarian” because if they do not, others will. The latter might not even have been there two years ago, but that can now become deadly threats. Shorter cycles, stronger disruptive trends, low barriers to entry: all that adds up to increasing uncertainties and making innovation occur in unexpected shapes and forms.
So how to avoid being the next victim? It seems collective intelligence would be a fitting answer. Alix Marie works for Never Eat Alone, an app which helps employees meet one another, especially over lunch. About a year ago, she attended the first Mazars Shake, a Mazars-held hackathon aimed at fostering ideas for tomorrow’s consulting. “Events such as the Mazars Shake are very good ideas,” she says (2). “Bringing together people who did not know each other and creating teams turned out to be very productive. It can both help foster new ideas for Mazars and get people to step out of their daily jobs. I think it is a very effective innovation booster.” “When people are given the opportunity to express their ideas, and when they know their ideas can be turned into actual projects, that is a major step towards the creation of an innovation culture,” Mathieu Maloux adds.
Getting Out of One’s Comfort Zone
Will initiatives taken by big corporates efficiently contribute to making France the innovation leader Mr. Macron wants the country to be? “Fostering open innovation is first and foremost giving people the opportunity to get out of their daily routine,” says Nicolas Enderlé, founder of La Suite, a start-up that devises and runs workshops aimed at helping people and teams work together to foster the production of innovative ideas and solutions. “We are hosted by Schoolab, a start-up accelerator which also hosts teams from big corporations such as BNP Paribas, EDF or la Poste. We talk to and work with these people daily, to develop common projects, in an environment that favours collective thinking. They quickly realise what matters is not what you are wearing – no suits and ties here – but what all of us together are able to produce.” (2)
“To innovate, you need to get out of our comfort zone,” Florence Vasilescu concludes. “It is both very difficult and very gratifying. Mark Twain said ‘They did not know it was impossible, so they did it.’ I think innovation is akin to that.”
1 – “Oui, la France est un paradis pour les entrepreneurs” – Fabrice Cavaretta. 2016, Plon.
2 – Interviews conducted between May and October 2017.