8 ms·

France’s Economy Minister on French Startups

55 points by trueduke 11y ago

bobby_9x 11y ago
The problem is that it's very difficult to go from startup phase to mid-sized company phase in a system with as many regulations and taxes as France. It means that your only shot is to get bought out by a larger conglomerate at some point.
- germainb 11y ago
  France does have regulation, but so does the US - industrial nations are generally over-regulated today. France also does not have a legal system that is as costly as the US, so litigation risk is less important. Taxes don't really play on this --> many startups don't make a profit ;-) . Social Security might, but a talented engineer in France still costs less overall than the same one in the Bay Area and employee loyalty is higher. One issue is uncertainty over government intervention, there is a bad history of the French government weighing-in on M&A activity. But the real issue is raising funds - while Seed rounds are generally covered by, among other things, government loans/subsidies, the ecosystem is lacking funds financing Series A and B. Here the government tries to provide incentives but pension funds are not the right level of financing for these rounds...the VC ecosystem needs to grow and that is a challenge because of a risk-averse culture. If I were a VC in the US, I would see France as an opportunity.
  - avz 11y ago
    > France does have regulation, but so does the US It isn't about the presence of some regulation. It is about the burdens and costs associated with it. French regulations are very cumbersome and costly, especially when it comes to labour market. For example, every company with 50 or more employees needs to establish a works council (Comité d’Entreprise). This costs money and time. It is also one of many examples of regulation that brings about the culture of hostility between employees and employers.
    - Signez 11y ago
      > For example, every company with 50 or more employees needs to establish a works council (Comité d’Entreprise). This costs money and time. Actually, not that much. You have one year to install it, and it mainly consists of an election you have to organize. If you can't organize that kind of stuff once every two year or so, I don't understand how you can face other business challenges. > It is also one of many examples of regulation that brings about the culture of hostility between employees and employers. In most of the companies, it only consists of giving money to employees and managers picked charities and giving perks like theaters tickets. All of this is really manageable for startups with more than 50 employees, and most of the time, it is already done by them to attract employees.
    - motdiem 11y ago
      It is more burdenful than costly though - compared to the costs of hiring and keeping employees in the US, I think the costs are competitive.
    - pofjer 11y ago
      It actually brings them closer together. I don't see how it fosters hostility. Care to elaborate on that point?
    - spacecowboy_lon 11y ago
      How does this bring about a culture of hostility? Industrial relations in the USA is far more violent than in the EU. I remember one organizer saying that a good matured dispute in the USA was one with no gunfire and that they had to carry for self protection.
    - sberder 11y ago
      This is essentially equivalent to what every startup does in the US with perks and team building. I don't see how this creates more trouble for a French company.
  - tonyedgecombe 11y ago
    "industrial nations are generally over-regulated today" That very much depends on your political ideology.
    - germainb 11y ago
      no, it doesn't. i'm not saying we should do away with the essence of regulation...i'm saying we have too much regulation. Think NASA vs Space X. If Switzerland Labor laws hold in a 100 page book, why do France's take volumes ? Surely we can trim them and still maintain their principles. If you keep all the same principles (essential protection of people, equality, freedom of expression, redistribution...) and start from scratch...how many pages of law could you save and achieve the same result?
  - bobby_9x 11y ago
    "Taxes don't really play on this --> many startups don't make a profit ;-) " I don't know how you can say taxes don't play into this. I started my company 5 years ago and if I had to pay 50%+ in tax back then, I would have failed. Instead, I used that money to grow the company. "If I were a VC in the US, I would see France as an opportunity." Why? More of your money will go toward taxes and the regulations will restrict your ability to grow your money. VC want a return on investment (as do most investors). Firing someone in a company over 10 people is a court case. There have been many cases where the company loses the court case and a person that should have been fired just sits and does nothing and is forced, by law, to be paid by the company. This has become such a problem that many companies in France don't want to hire students..because it's too much of a risk. France has had 10%+ unemployment for over a decade. You would think they would have changed something by now.
    - germainb 11y ago
      I'm not saying taxes don't play, I'm saying startups don't pay taxes because they make losses...so the tax rate doesn't affect startups. 50% tax ? Corporate tax rate in USA = 36% in France = 33.33% VC question = lower valuations in France; when investment markets become inflated (US) the key to making a return is buying low (France). Return is also about opportunity cost. Firing someone : I fired 7 people, some paper work, no court cases. Yes there are/can be court cases, but they mostly end in some small (1 month salary) arbitrage. If you're not a jerk about it, things usually work out. Also, remember French legal system is MUCH less costly than the US's. "You would think they would have changed something by now." -- This I can only agree with but I think it also applies to the US.
- motdiem 11y ago
  That's a valid problem. If you look beyond startups, the french economy is mostly benemoth (think Total, Bouygues, etc) and small shops (your local boulangerie). There aren't that many mid-size successful companies - even less so in the software space where a big part of the enterprise market is dominated by services led companies. I personally think it has less to do with regulation, and more with the way credit and the banking system works for these kinds of companies - once you're no longer interesting for VCs, the ability to get investments or loan goes down. It may also have to do with the size of the french market overall.
  - pofjer 11y ago
    The main problem is the size of the French market alone, and the reluctance of French entrepreneurs to engage directly in the European market, not the banking sector. BTW this applies to all EU/EEA countries just as equally.
    - germainb 11y ago
      having access to a market of 355 million (US+Canada) who speak the same language helps immensely. you need legal council in each country if you really want to expand (even without setting up there)
gizi 11y ago
The startup scene consists of say 100 individuals or small groups who will try something. One will succeed and 99 will fail. This is normal. What is not normal, is that countries like France will persecute the 99 other ones, and even put them in prison, because they are unable to keep paying taxes and contributions now that their project has failed. Since none of the 100 starters knew if they would be the lucky one, they feel it is too risky to try. They are right, and the risk that they are trying to avoid, is created by the government. There is a reason why governments prefer large companies, don't like small companies, and discourage starting one. If a large company employs 1000 persons, they only need to speak to 1 person to collect taxes on all 1000. It would be a problem, if they had to collect them from each individual person one by one, from all 1000. Large companies make life easier to them. So, they discourage people from being self-employed or create small companies. One way to do that, is to punish them harshly if they fail. The biggest problem that the government has, is that their policy is actually working. Nobody wants to start a new company. With old companies gradually becoming outdated and disappearing, that is not such a good thing. So, now they want to encourage people to do something that they also discourage them from doing.
- dmichulke 11y ago
  There is a reason why governments prefer large companies [...] If a large company employs 1000 persons, they only need to speak to 1 person to collect taxes on all 1000. This implies that efficiency is actually something governments (specifically the French one) care about. I'm not sure whether I'd agree with that.
- GrumpyBen 11y ago
  > will persecute the 99 other ones, and even put them in prison No, you won't go to prison if your company fails, unless you've done something illegal, like using company money for personal benefits. > So, they discourage people from being self-employed No, they actually encourage self-employment. The new "auto-entrepreneur" status makes it very easy, you just need to register online. > Nobody wants to start a new company. False again. The number of new companies created in France have been at an all time high for the last 5 years.
bsaul 11y ago
I don't know a single french entrepeneur that doesn't think about leaving the country if its start up starts to become successful. And those who are successful all tell me either to not hire anyone ( work with contractors instead), or leave the country. Our culture is rotten to its core. Emmanuel macron is trying to change that, but he has no power at all, and every single president is scared to death of the risks he would take by going too far on the liberal side ( liberal candidate never make more than 10% ). French like big, safe, and conservative structures. They complain a lot about it, and then vote for the candidates that promise to maintain the status quo.
- yodsanklai 11y ago
  > I don't know a single french entrepeneur that doesn't think about leaving the country if its start up starts to become successful. In that case, why don't they start their companies abroad from the start? basically, they want to enjoy the security offered by their country in case of failure, but they don't want to pay their share in case of success. > French like big, safe, and conservative structures What's wrong with that? many elite graduates (not only in France) choose to work for big corporations that provide great benefits and little risk. It seems to be a rationale choice.
  - catwell 11y ago
    > why don't they start their companies abroad from the start? Because it's easier to move a company to the US once it is funded and starts getting traction than to start it there. Also, technical talent is much cheaper in France than in the US, so building the product in France makes sense. A lot of French tech companies that "move to the US" actually keep a subsidiary with their development team in France. And we see tech companies such as Facebook and Google open offices in France to benefit from the talent pool. Young develpers are also probably more willing to try working at a startup instead of going for the safety of a big company because they do not have student loans to pay back... France has been good with seed-stage startups for years now (incubators, accelerators, seed VC / angels, tax cuts & subsidies...) The problem is the growth stage and beyond. The French market is too large to force companies to think global from the start and too small to scale for most. VC is much harder to find beyond series A, and moves like the French government preventing exits to foreign buyers scares foreign capital. But I am optimistic: France figured out the early stage just a few years ago, it will figure out later stages in time.
elcapitan 11y ago
Bottom line of the discussion in this thread is that a combination of those 2 worlds would be ideal: having a strong social system that allows people to tinker for a while without living in fear, plus a not completely overregulated venture capital market for the stuff that works out. Right?
ThomPete 11y ago
France problem is Europes problem. One of the big issues in Europe is that it has no culture for letting civil society handle it's issues. Instead it tries to mostly solve it through EU regulation. Further more as the EU moves to standarize regulation across the countries it's in effect disrupting startups by changing the underlying legal reality they exist on. Of course it's possible to build companies in Europe but mostly they will be "better mousetrap" companies rather than actual disrupters. Furthermore because of the way income taxation works in most of Europe the amount of money that someone can make from a startup they worked for making it big is relatively limited. In effect instead of spending some of the money they have made on investing in other startups they end up maybe buying a house or something like that because it's simply rarely that much they will make. This is not a sustainable model. You can't both take away initiative from the startups, while making your labour laws so strict that it's hard to pay with equity, while eating most of the spoils in taxes and at the same time expect European startups to stand a chance.

55 points by trueduke 11y ago

The problem is that it's very difficult to go from startup phase to mid-sized company phase in a system with as many regulations and taxes as France. It means that your only shot is to get bought out by a larger conglomerate at some point.

germainb 11y ago
France does have regulation, but so does the US - industrial nations are generally over-regulated today. France also does not have a legal system that is as costly as the US, so litigation risk is less important. Taxes don't really play on this --> many startups don't make a profit ;-) . Social Security might, but a talented engineer in France still costs less overall than the same one in the Bay Area and employee loyalty is higher. One issue is uncertainty over government intervention, there is a bad history of the French government weighing-in on M&A activity. But the real issue is raising funds - while Seed rounds are generally covered by, among other things, government loans/subsidies, the ecosystem is lacking funds financing Series A and B. Here the government tries to provide incentives but pension funds are not the right level of financing for these rounds...the VC ecosystem needs to grow and that is a challenge because of a risk-averse culture. If I were a VC in the US, I would see France as an opportunity.
- avz 11y ago
  > France does have regulation, but so does the US It isn't about the presence of some regulation. It is about the burdens and costs associated with it. French regulations are very cumbersome and costly, especially when it comes to labour market. For example, every company with 50 or more employees needs to establish a works council (Comité d’Entreprise). This costs money and time. It is also one of many examples of regulation that brings about the culture of hostility between employees and employers.
  - Signez 11y ago
    > For example, every company with 50 or more employees needs to establish a works council (Comité d’Entreprise). This costs money and time. Actually, not that much. You have one year to install it, and it mainly consists of an election you have to organize. If you can't organize that kind of stuff once every two year or so, I don't understand how you can face other business challenges. > It is also one of many examples of regulation that brings about the culture of hostility between employees and employers. In most of the companies, it only consists of giving money to employees and managers picked charities and giving perks like theaters tickets. All of this is really manageable for startups with more than 50 employees, and most of the time, it is already done by them to attract employees.
  - motdiem 11y ago
    It is more burdenful than costly though - compared to the costs of hiring and keeping employees in the US, I think the costs are competitive.
  - pofjer 11y ago
    It actually brings them closer together. I don't see how it fosters hostility. Care to elaborate on that point?
  - spacecowboy_lon 11y ago
    How does this bring about a culture of hostility? Industrial relations in the USA is far more violent than in the EU. I remember one organizer saying that a good matured dispute in the USA was one with no gunfire and that they had to carry for self protection.
  - sberder 11y ago
    This is essentially equivalent to what every startup does in the US with perks and team building. I don't see how this creates more trouble for a French company.
- tonyedgecombe 11y ago
  "industrial nations are generally over-regulated today" That very much depends on your political ideology.
  - germainb 11y ago
    no, it doesn't. i'm not saying we should do away with the essence of regulation...i'm saying we have too much regulation. Think NASA vs Space X. If Switzerland Labor laws hold in a 100 page book, why do France's take volumes ? Surely we can trim them and still maintain their principles. If you keep all the same principles (essential protection of people, equality, freedom of expression, redistribution...) and start from scratch...how many pages of law could you save and achieve the same result?
- bobby_9x 11y ago
  "Taxes don't really play on this --> many startups don't make a profit ;-) " I don't know how you can say taxes don't play into this. I started my company 5 years ago and if I had to pay 50%+ in tax back then, I would have failed. Instead, I used that money to grow the company. "If I were a VC in the US, I would see France as an opportunity." Why? More of your money will go toward taxes and the regulations will restrict your ability to grow your money. VC want a return on investment (as do most investors). Firing someone in a company over 10 people is a court case. There have been many cases where the company loses the court case and a person that should have been fired just sits and does nothing and is forced, by law, to be paid by the company. This has become such a problem that many companies in France don't want to hire students..because it's too much of a risk. France has had 10%+ unemployment for over a decade. You would think they would have changed something by now.
  - germainb 11y ago
    I'm not saying taxes don't play, I'm saying startups don't pay taxes because they make losses...so the tax rate doesn't affect startups. 50% tax ? Corporate tax rate in USA = 36% in France = 33.33% VC question = lower valuations in France; when investment markets become inflated (US) the key to making a return is buying low (France). Return is also about opportunity cost. Firing someone : I fired 7 people, some paper work, no court cases. Yes there are/can be court cases, but they mostly end in some small (1 month salary) arbitrage. If you're not a jerk about it, things usually work out. Also, remember French legal system is MUCH less costly than the US's. "You would think they would have changed something by now." -- This I can only agree with but I think it also applies to the US.
motdiem 11y ago
That's a valid problem. If you look beyond startups, the french economy is mostly benemoth (think Total, Bouygues, etc) and small shops (your local boulangerie). There aren't that many mid-size successful companies - even less so in the software space where a big part of the enterprise market is dominated by services led companies. I personally think it has less to do with regulation, and more with the way credit and the banking system works for these kinds of companies - once you're no longer interesting for VCs, the ability to get investments or loan goes down. It may also have to do with the size of the french market overall.
- pofjer 11y ago
  The main problem is the size of the French market alone, and the reluctance of French entrepreneurs to engage directly in the European market, not the banking sector. BTW this applies to all EU/EEA countries just as equally.
  - germainb 11y ago
    having access to a market of 355 million (US+Canada) who speak the same language helps immensely. you need legal council in each country if you really want to expand (even without setting up there)

gizi 11y ago

The startup scene consists of say 100 individuals or small groups who will try something. One will succeed and 99 will fail. This is normal. What is not normal, is that countries like France will persecute the 99 other ones, and even put them in prison, because they are unable to keep paying taxes and contributions now that their project has failed. Since none of the 100 starters knew if they would be the lucky one, they feel it is too risky to try. They are right, and the risk that they are trying to avoid, is created by the government. There is a reason why governments prefer large companies, don't like small companies, and discourage starting one. If a large company employs 1000 persons, they only need to speak to 1 person to collect taxes on all 1000. It would be a problem, if they had to collect them from each individual person one by one, from all 1000. Large companies make life easier to them. So, they discourage people from being self-employed or create small companies. One way to do that, is to punish them harshly if they fail. The biggest problem that the government has, is that their policy is actually working. Nobody wants to start a new company. With old companies gradually becoming outdated and disappearing, that is not such a good thing. So, now they want to encourage people to do something that they also discourage them from doing.

dmichulke 11y ago
There is a reason why governments prefer large companies [...] If a large company employs 1000 persons, they only need to speak to 1 person to collect taxes on all 1000. This implies that efficiency is actually something governments (specifically the French one) care about. I'm not sure whether I'd agree with that.
GrumpyBen 11y ago
> will persecute the 99 other ones, and even put them in prison No, you won't go to prison if your company fails, unless you've done something illegal, like using company money for personal benefits. > So, they discourage people from being self-employed No, they actually encourage self-employment. The new "auto-entrepreneur" status makes it very easy, you just need to register online. > Nobody wants to start a new company. False again. The number of new companies created in France have been at an all time high for the last 5 years.

bsaul 11y ago

I don't know a single french entrepeneur that doesn't think about leaving the country if its start up starts to become successful. And those who are successful all tell me either to not hire anyone ( work with contractors instead), or leave the country. Our culture is rotten to its core. Emmanuel macron is trying to change that, but he has no power at all, and every single president is scared to death of the risks he would take by going too far on the liberal side ( liberal candidate never make more than 10% ). French like big, safe, and conservative structures. They complain a lot about it, and then vote for the candidates that promise to maintain the status quo.

yodsanklai 11y ago
> I don't know a single french entrepeneur that doesn't think about leaving the country if its start up starts to become successful. In that case, why don't they start their companies abroad from the start? basically, they want to enjoy the security offered by their country in case of failure, but they don't want to pay their share in case of success. > French like big, safe, and conservative structures What's wrong with that? many elite graduates (not only in France) choose to work for big corporations that provide great benefits and little risk. It seems to be a rationale choice.
- catwell 11y ago
  > why don't they start their companies abroad from the start? Because it's easier to move a company to the US once it is funded and starts getting traction than to start it there. Also, technical talent is much cheaper in France than in the US, so building the product in France makes sense. A lot of French tech companies that "move to the US" actually keep a subsidiary with their development team in France. And we see tech companies such as Facebook and Google open offices in France to benefit from the talent pool. Young develpers are also probably more willing to try working at a startup instead of going for the safety of a big company because they do not have student loans to pay back... France has been good with seed-stage startups for years now (incubators, accelerators, seed VC / angels, tax cuts & subsidies...) The problem is the growth stage and beyond. The French market is too large to force companies to think global from the start and too small to scale for most. VC is much harder to find beyond series A, and moves like the French government preventing exits to foreign buyers scares foreign capital. But I am optimistic: France figured out the early stage just a few years ago, it will figure out later stages in time.

elcapitan 11y ago

Bottom line of the discussion in this thread is that a combination of those 2 worlds would be ideal: having a strong social system that allows people to tinker for a while without living in fear, plus a not completely overregulated venture capital market for the stuff that works out. Right?

ThomPete 11y ago

France problem is Europes problem. One of the big issues in Europe is that it has no culture for letting civil society handle it's issues. Instead it tries to mostly solve it through EU regulation. Further more as the EU moves to standarize regulation across the countries it's in effect disrupting startups by changing the underlying legal reality they exist on. Of course it's possible to build companies in Europe but mostly they will be "better mousetrap" companies rather than actual disrupters. Furthermore because of the way income taxation works in most of Europe the amount of money that someone can make from a startup they worked for making it big is relatively limited. In effect instead of spending some of the money they have made on investing in other startups they end up maybe buying a house or something like that because it's simply rarely that much they will make. This is not a sustainable model. You can't both take away initiative from the startups, while making your labour laws so strict that it's hard to pay with equity, while eating most of the spoils in taxes and at the same time expect European startups to stand a chance.