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March 14th, 2017

La French Tech: How The Startup Ecosystem In France Finally Got Its Act Together

Factors fueling the new spirit of entrepreneurialism in France.

The mobilization of entrepreneurial enclaves has accelerated across the globe in the last decade.

The formula: accessibility of technology + opportunity to digitize + sagging global economies + shifting generational behaviors + regional/governmental hunger for new revenue models = rise of entrepreneurism.

Almost every city, state or country I have visited over the last decade has claimed to have a large and growing startup ecosystem. Sometimes, this has been true (Dublin). Other times, not so much (Miami). Everybody is chasing the models seen in top tier American tech cities like San Francisco, Boston and New York.

France came late to this party, but the French have come with a vengeance.

“There is a new-found confidence across the French tech ecosystem, specifically among French entrepreneurs,” said Sophie Hue de la Colombe of La French Tech in an email interview with ARC. “Whether they have started companies abroad or in France, this new breed of business leader knows there is much to learn from other successful tech ecosystems, but doesn’t necessarily feel inferior or behind them.”

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The Push For A Robust French Tech Ecosystem

Like so many things in France, the push came from the state. In late 2013 several French agencies created the French Tech Initiative, a funding and promotional arm led by state departments like Caisse des Dépôts, Bpifrance and the French Ministry of Economy and Finance and Business France (among others). The initial investment was €200 million for startup accelerators and €15 million to promote international attractiveness of France as a startup destination.

See also: The Common Problems That Stunt Growth For European Startups

The most visible result of this investment is La French Tech, a marketing and accreditation program that promotes French startups in France and around the world. If you have been to a tech conference in the last four years, you have likely run into La French Tech, recognizable by its iconic logo of a pink origami cockerel.

A snapshot of the global French Tech ecosystem.

Hue de la Colombe explains the positive results for the French tech ecosystem over the last five years:

Investors are paying attention, with a record number of deals and funds invested in France. CB Insights reported that in 2016, French Tech deal activity was at a five-year high, growing 115% over 2015 with 486 deals totaling more than $2 billion. Innovative programs, a supportive infrastructure, a forward-thinking government, a world class education system—these are the factors fueling the new spirit of entrepreneurialism in France. Success breeds success and we’re starting to see that momentum build as more French companies scale up to become unicorns and enjoy high profile exits—this is inspiring more waves of innovation and entrepreneurs.

The next step for the French startup ecosystem is a project called “Station F,” a startup campus that will claim to be the biggest in the world. Slated to open in Paris in April 2017, Station F is backed by French entrepreneur Xavier Niel and will, “house more than 1,000 startups, 3,000 desks in the startup zone, 10 international startup programs, eight event spaces and a retail zone for the public that will include four kitchens and a bar open 24 hours a day,” according to Hue de la Colombe.

Station F 3D virtual reality model.

“The overall goal of Station F is to foster innovation within the French ecosystem by surrounding France’s entrepreneurial minds with the resources to innovate,” said Hue de la Colombe. “Facebook is one of its many starting corporate partners and will be setting up the ‘Facebook Startup Garage’ which will work with 10 to 15 startups every six months to help them achieve success.”

And yet, France has always had an inside-out mindset that produces a peculiar and unique type of neuroticism. You can see it reflected in culture, economics and government policy. The French, at once, have a high degree of bluster and confidence and a fatalistic sense of insecurity about their relationship to global affairs.

A clear example of this is the response from the French startup community to a critical piece in TechCrunch after a government-sponsored tour of the Paris tech ecosystem in June 2016. Chris O’Brien from VentureBeat sums up the mindset:

Of course, all it takes is one negative story for the French to engage in their favorite activity: Self-flagellation. Nobody likes to criticize the French or the French government as much as the French themselves.

And, naturally, the criticisms have not actually been directed at Evans, or his take. Nobody here is saying, “Hey, I beg to differ, and here’s why.” Because when an outsider says France is terrible at something, all too often the instinct here is to say, “Yeah, they’re right. We’re terrible.”

Did you know? Applause helps hundreds of European companies and brands assure high quality digital experiences. See how Applause can help French startups build great companies here

The Dueling Mindsets Of The French

Nationalism, in its most pure form, was born in France. The French Revolution and ensuing Napoleonic Wars ushered in an era of global nationalism that has come to define the modern era of nation state economics, policies, identity and culture.

In many ways, nationalism never left France. Despite numerous regime changes over the past 228 years, there remains a quintessential—yet somewhat hard to define and hypocritical—notion of what it means to be French. The French are intensely protective of their culture and language, reputation and institutions. To many French, the center of the universe is France … and all who disagree be damned.

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The anecdote I tell to describe this mindset stems from public signage in Europe. When you are in Barcelona, signs are in Castilian Spanish, Catalan and English. In Italy, signs are often in Italian and English. In the Netherlands, signs are in Dutch and English.

In France, signs are in French and …

In the modern era, France adopted globalization as a means of self preservation. After being conquered by Germany—twice—and the lingering decades of the Cold War, France adopted and promoted global institutions like the United Nations, NATO, the European Union and European Commission, International Monetary Fund and others in order to tie its allies so close to it that a violent disruption would be as harmful to the aggressors as it is to France. (To be fair, France is not the only country with this mindset. Germany, the United Kingdom, the United States etc. have all willfully created this post war global order to maintain peace and prosperity in the Western Hemisphere.)

And yet, France has always somewhat chafed under the era of globalization. With sustained peace and prosperity came the byproducts of cultural and economic globalization … dominated by American media and technology. As any American tourist that does not speak perfect French can tell you, the French have a chip on their collective shoulders about their perceived superiority of French culture and business. And they will tell you so (while listening to American music in the background).

These dueling mindsets are now playing out in real time in the coming French presidential election. On one side there is the nationalistic populism of Marie Le Pen (who promises to hold a referendum to take France out of the E.U.) and offers a vision of a closed France. On the other side is Emmanuel Macron, a liberal who promises innovation and globalization for a more open France.

The Louvre pyramid in Paris at night.

French economic policy has straddled both sides of this tricky mindset over the last decade. Certain reactionary regulations have made it difficult for certain types of companies (especially foreign companies) to grow and prosper in France. On the other hand there is the French Tech Initiative and La French Tech that promote entrepreneurism and actively assist and inspire French companies to build global brands.

The Objective To Build Global French Companies

One thing that Americans do not understand about the European tech scene is the general difference in mindset between the two regions. American startups, especially those out of the San Francisco/Silicon Valley region, tend to think global from day one and push into new territories and markets, irrespective of regional laws, behaviors or practices (see: Uber or Airbnb). American companies are more prone to ask for forgiveness than permission.

See also: Digital Single Market: The Biggest Problem For European Startups

European startups often need to be reminded that they have the potential to build global brands. The fragmented nature of Europe (different languages, country-specific regulations and tax systems etc.) and the lack of a real Digital Single Market often leads to European startups trying to build businesses in their local markets, which then leads to difficulties when it comes time to expand to other countries in Europe or the world.

The perception is that European companies have problems when scaling. This is both true and not true. Over the last decade several companies out of Europe created global brands. Spotify (Sweden), SoundCloud (Berlin but founded by Swedes) are two big examples. French companies like Sigfox, Criteo, Devialet and BlaBlaCar have found success in European and global markets.

Hue de la Colombe sees the barriers of localization, language, cross-border policy fragmentation and postal delivery issues as second-tier challenges in the information economy. For French and European startups, the biggest challenge is the acquisition and retention of talent, especially people with experience in scale and global brand building.

Old Port, Marseille

“What matters most is access to talent and capital and France is making great strides in developing, nurturing and attracting world class tech talent and investment,” said Hue de la Colombe.

To achieve this end, French Tech has two new policies to attract capital and talent. Hue de la Colombe explains:

France recently created the “CPI,” a new tax credit starting in 2017 for business angels who invest in French startups and scale-ups. As long as they keep fueling money in the French innovation ecosystem, investors won’t pay taxes on their capital gains.

La French Tech has addressed the issue of attracting talent by creating the French Tech Visa. This program aims to give a strong advantage to the French Tech ecosystem by fast-tracking visas for entrepreneurs, engineers and investors who are likely to boost French startup growth with their knowledge, capital and creativity. The visas are valid for four years on a renewable basis, grant the spouse of the main applicant residency and automatic labor market access and bypass the need for a work permit.

On aggregate, the French have made significant advances in building an entrepreneurial spirit and system of startup enclaves over the last five years. La French Tech states that companies do not need to apply to be part of the program. The only requirements are to be French and to be in tech. Companies that do are automatically under the La French Tech umbrella. That goes for French companies outside of France. La French Tech promotes French companies in New York City, Montreal, London, Tokyo and Hong Kong.

Many cities, states and countries say they are building real startup communities. But few have created real, robust and tangible programs such as La French Tech.