Ep. 16 - French Tech's Remarkable Transformation: From Paris to London and Back Again

You know, if you want to actually create a startup, you have to do one single thing, one simple, very simple thing. Just grab a ticket for the Eurostar and go to London. That was what you guys could hear in the French ecosystem only 7 years ago.

And from, from French perspective, it was not good news.

And obviously, from a Napoleon perspective, that was clearly not good news. And today I hear quite the opposite. So I think that's quite fascinating to see this revenge on history where London used to be the gateway into the European tech ecosystem. And since 2016, obviously, this is still a little bit the case, but clearly this is totally shifting. And you just see the amounts of investment that are poured into, uh, Paris as a gateway to, uh, continental Europe. And I think that's the very important point, is that you're in Paris, don't think of Paris, stop thinking of Paris as the capital of France. This is turning increasingly into the capital of the European tech scene.

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So I think the idea is to, to cover a little bit of the evolution of the French ecosystem today. We were discussing some data points really from our perspective as an outsider, as an entity that has been tracking different ecosystems around the world in terms of number of scale-ups and amount of funding also that has been raised. Maybe I think to start would be great to have your input of how you've seen the ecosystem of France in the world of innovation and startups progressing over, over the few years, because you have been one of the main actors for that.

Well, when I first got into the French startup ecosystem, which was not so long ago, only 7 years ago, the first thing I could hear was, you know, if you want to actually create a startup, you have to do one single thing, one simple, very simple thing. Just grab a ticket for the Eurostar and go to London. That was what you guys could hear in the French ecosystem only 7 years ago.

And from a French perspective, it was not good news.

And obviously, from a Napoleon perspective, that was clearly not good news. And today I hear quite the opposite. I see some of the English folks actually crossing the channel and getting incubated, obviously at Eura Technologies, which is the largest incubator in Europe, but also at my friends at Station F and in some great places here in the French ecosystem. So I think that's quite fascinating to see this revenge on history where London used to be the gateway into the European tech ecosystem. And since 2016, obviously, this is still a little bit the case, but clearly this is totally shifting. And you just see the amounts of investment that are poured into Paris as a gateway to continental Europe. And I think that's the very important point is that you're in Paris, don't think of Paris, stop thinking of Paris as the capital of France. France. This is turning increasingly into the capital of the European tech scene, and that's, that's absolutely fascinating.

Also because if my head— yes, there was this movement from continental Europe to UK, but that was an intermediate step because the next stop was US. And so again, also nobody was really, really smiling. Now the point is how we can bring and make Europe not just a sort of, um, uh, Starting, taking off platform was also landing platform. And I think that's something that is happening. And France is probably, uh, one of the laboratory of moving from the startup phase to the scale-up phase. I think the TB initiative that's been launched by President Macron as one of the, the first time, probably most of the world of politics decided to put the scale-up the center of the scene, not just the startup.

No, it's totally true. I mean, we, we are still in a catch-up, uh, I cannot say that, uh, clearly the amounts of unicorns on the amounts of VC money that are poured into the French ecosystem are, uh, totally matching, uh, the numbers, uh, in London. But clearly, I mean, we, we are outranking Germany, uh, so which clearly was not the case only 5 to go. So it's— I think it's very important. And you know how it is, what's the difference between a startup and a digital SME? VC is the VC money. So you have to follow the money, and the money used to come into Continental Europe through London. Now it's getting increasingly into Continental Europe through Paris, also a little bit Berlin and Amsterdam. And let's, uh, I hope you guys will be having summits over there because it's really, really interesting. But Obviously, uh, follow the money, and the money is flowing increasingly into continental Europe through Paris. Uh, you, you've seen that with the deals of, uh, that were made by South Bank, um, only a few, a few weeks ago. They went on a shopping spree here, uh, in the, in the French ecosystem. Clearly, that wouldn't have been the case only, uh, 4 to 5 years ago. Uh, they would have come through London, they wouldn't have come straight, uh, into Paris. So coming back to your question, because, you know, I'm a Frenchman, so sometimes our Italian neighbors are quite good at this too, but we tend to elaborate a little bit too much. So I'm going to be strict to your question. Um, yeah, there is politics, obviously. There is a strong political will by President Macron to say, hey, um, we might be, uh, as Frenchmen, an industrial, uh, a nation of industries, but still The future is digital. And that's funny because clearly you look at the German governments, they haven't done this move at all. And I could see on LinkedIn even today some German founders, and I'm not going to name them because I don't want them to put into trouble, but you were saying, hey, look at the brilliant numbers on the Berlin scene. Just imagine how it would be if we had a government like France. And I think that's the only time in my life where I actually hear a German say, hey, look at France, it's fantastic.

Yeah, definitely wouldn't happen in football for sure. On that note, I think today one of the things that we've been seeing is that there is definitely a race of all the different regions. We're talking now about Europe, but we can make it much wider, right around the world of, I tried to position the throughput of a regional specific region as the top in a subset of, uh, of, uh, industries, but the top in the world of startups or in the world of innovation. And again, that's something that we've been tracking through data and it's something that's probably also accelerated through, um, through the pandemic. The fact that the world is much more open. There's the digital nomads are becoming front and center. So the, this race of attracting talent has become more and more of a pure necessity if you want to be relevant, even economically speaking. My question there is, um, how important are, uh, government policies that comes from top, uh, to, to draw a trajectory that is not going to change in one year. But maybe just to make it very practical, what have been, to your view, the major stepstones that happened in France that you would suggest other governments to follow?

I mean, this country has always been at the vanguard when it comes to actually producing fields medals. We've always had a tradition of excellence in mathematics, in physics, in chemistry, and so on and so forth. So I'm not surprised to see so many strong AI and data scientist people speaking French. We have a tradition of excellence in mathematics. So it's no surprise. And it's actually, we did that a few years ago when I was still CEO at France Digital. We conducted a mapping of who are the directors of the AI centers of big tech in Silicon Valley, and especially where are they from. And it was fascinating. You could see the French flags pretty much everywhere, Indian flags also pretty much everywhere. And it was fascinating to see such a tiny country, because France is a tiny country, 60 million inhabitants, to be so overrepresented in AI centers in Silicon Valley. So I think that's clearly something that is not going to change over the next years. The current government has invested a lot with a very strong AI strategy. They have invested a lot in research. They have invested a lot in training. So this strong tradition of excellence in AI is going to stay. For sure.

So that's one element that is part of, I think one of the key ones is mostly for the long-term, that is education. So really building centers of excellence that, uh, that a country can be representative of. How about the rest of the ecosystem? We talked about matching funds. We talked about the power of capital. Uh, and one of the activities that we have run not too long ago was a similar summit, but in South Korea. South Korea is very well known for two things. One, the government in the last few generations have put the number of unicorns as one of the KPI of government policies, for government, not tech. Uh, and number two is to go to follow that KPI, the investments that followed that, you know, that objective is significant. So for us being in Silicon Valley, we see South Korean programs being overrepresented compared to any other, any other geographies. What kind of government, what would be your suggestions to other regions, right? If you were, if you had a, you know, point blank and full freedom to define policies that can be successful for a specific region to get to that level of success.

I have many hats, including being chairman of the European Startup Network. So I kind of see across Europe what is working, what is, I would say, less working. And what I find fascinating is that first is follow the money and fully follow the pre-seed money. We have massive amounts of VC money in Series A, Series B, gross capital. You have all the American funds. So I wouldn't say that there is a problem in terms of access to capital on a global scale at the moment. We do have a loophole, and, and that's why government policies need to focus very much on this, is pre-seed money. Uh, just look at the, the average, uh, Series A, uh, in France 6 years ago. It used to be half a million euros. Average Series A, half a million euros. As of 2021, the average Series A is 11 million euros. Boom, x20 in 5 years. So clearly the pre-seed money is harder to get because we don't have this very strong network of business angels. And if you look at the very successful ecosystems in Europe, especially across the Channel, in the UK, they have this small enterprise investment scheme.

Want to share what that means?

Basically, they're offering tax rebates, massive tax rebates to business angels. You know, the Brits hate to say that, but they are heavily subsidizing the pre-seed funding and it's working extremely well. So if there is one policy that definitely people should look at is this pre-seed money thing. And I don't want to come back to our debate on education and training, but clearly this is the key. If you have the good engineers, the good people, the good tech people, money will follow. Entrepreneurship will follow. But it takes some time. For many years, France has been a great nation of engineers. It has been quite recent to turn these engineers into entrepreneurs, even though in English entrepreneur is a French word.

That's correct. And looking back again, you've been acting into the French scene since a while. And if I have to ask you, what are the 2-3 moments looking backwards, when you, you say, okay, we are really moving to the next level, what that could be for France? What it could be?

The, the stream moments, uh, over the past year. So first was the creation of the BPI, uh, the National Bank for Foreign Investment, the equivalent of KfW in Germany, um, which was extremely important because, um, we couldn't find the VC money for many years. And so we had to invent it from scratch, and we had to subsidize— yeah, have public intervention. The Brits are subsidizing pre-seed money. We had to subsidize Series A. So that's clearly a key moment. That's, I guess, that's the end of 2011 and the beginning of 2012. And that's very important to mention these dates because there was a president called Nicolas Sarkozy, and then there was another president called François Hollande. And there has been a continuity, a great continuity, a great national consensus around the, the very, uh, usefulness of this, of this instrument.

BPI is still acting and still has this key role.

Yeah, and it's still the same man chairing it. Uh, so there is a great, uh, great deal of continuity, and they're doing a great, great job. Clearly the creation of the BIP. Second date, the Villani strategy, what we call the Villani strategy with Cédric Villani is a very famous Fields Medal award winner, superstar mathematician. He's like the Lady Gaga of mathematics. So the president asked him to design a national AI strategy and he came up with something very solid. So we have probably one of the greatest national AI strategies. So it was really fantastic. And the last day—

Sorry, what is the key strategy that was so—

Basically, they have been bridging research and entrepreneurship. And when it comes to deep tech, it's so important to bridge research and entrepreneurship and to break the silos. Exactly. And when you look at the national AI strategies, many, they have you know, focus so much on entrepreneurship. Some of them have focused so much on fundamental research. There has been a very interesting balance in the, in the design strategy. And the last date, which was quite recent, we had this very large corporate— and we have some open innovation guys listening here, so it's, it's very important to mention that— Kering. Kering is, you know, is Gucci.

Yeah.

Uh, it's all these, uh, very luxurious brands. That's clearly not the company that you're expecting to do anything, uh, on innovation and, uh, and startup. They put €185 million on the table to acquire— not to start up— to acquire a stake in a startup called Vestiaire Collective, which became a unicorn all of a sudden. And to me, that's extremely interesting because finally we have large French corporates waking up and putting strong money on the table to acquire, to have these very strategic deals with startups. And, and that's clearly not a joke, because if you look— and you guys are in Silicon Valley— you look at the American corporates, they invest 6 times more in startups than they do acquire, uh, compared to, to Europe, their European counterparts. So clearly, Karim showed the way, uh, I think he sent a very strong signal Uh, yeah, so next time there you guys are inviting them because also we used to say no exit, no party.

I remember also another moment, at least for me as a foreign, and probably one of the first time we met has been at the Elysée when, uh, Hollande bring the, the startup community was the French tech inside their building also to show the importance of the ecosystem. That is something that other country has not done. Of them done years later. That for me was a sort of eye-opening event that France was really moving seriously also in terms of they put in the reputation from Hollande, the Élysée, on the status of the season.

This is important.

This is something that caught my eye.

That's why I'm not mentioning it as a significant date because we have been welcome at the Élysée Palace for like so many years now. It's quite fantastic to have this very strong link between, between the government and the tech innovation system. However, we do have something that we need to fix, uh, is public procurement. You know how it's so important in the US, you know how it's so important in South Korea and Israel. In France and in Germany and basically on the European continent, still broken public procurement. So if you need to, uh, invite some other open innovation guys, next time you invite the open innovation guys in the ministers, uh, in the administrations, and you whip them until they, they sign a contract with the startup.

Might take a while. We have time for one more question. Do you want to, uh, who was the— well, I have one maybe that is thinking about the future. What do you think is the best that can happen to an ecosystem like France? So maybe what is your hope that can happen being one of the major activist in that space?

Let's stop talking about valuation. Let's start talking about purpose. Like, I mean, I love when people are creating great scale-ups and great unicorns and so on and so forth, but what for? And I do believe that we have a very specific way of doing tech on the European continent compared to the Americans and the Chinese. And if you just look at the tech for good startups, the tech for good scale-ups, you find most of the tech for good unicorns, they're actually on the European continent. And I don't think that's, you know, a surprise because as Europeans, we are going to ask ourselves some questions that Chinese and Americans wouldn't even care about. For instance, if I look at one of the strongest French unicorns, it's called Back Market. It's a platform for refurbished iPhones and so on and so forth. In the US, who is going to refurbish an iPhone? You buy a new one and that's it. Uh, in Europe we care about the environment, and so we are going to produce, uh, I would say unicorn with a purpose. And I think that's the right way to do so. Yeah, it looks—

it pops to my mind Winted from Latvia.

Exactly.

Again, yes, that might be probably one of the ingredients that we Europeans can put in the startup cake, assuming they were able to make this cake a bit more larger and more relevant. So last question from me is, uh, looking at Europe, broader Europe, not just France, uh, what should be the potential European move for making the European ecosystem working as one, assuming that it might exist?

The European Commission, they put, uh, €750 billion on the table as a recovery plan, and you have basically 20% out of it that is clearly earmarked for the digital transformation. So that's €150 billion on the table. My question is, how much is going to end up in the pockets of startups? And I'm very afraid that this money is going to end up in the pockets of basically companies that are able to answer all these, you know, calls and personal shenanigans. One very, very, you know, key thing is can we get at least half of these $150 billion to end up in the coffers of our European startups. If we can do that, we're going to kickstart, uh, the French, uh, the German, the Italian, the Estonian, uh, startup ecosystem so hard. Uh, because, you know, it's not about fundraising. Uh, I like people when they make revenues too. Uh, and if we can get revenues from public procurement, that would be extremely helpful.

Yes, also because of looking at some of our latest statistics typically for an ecosystem, the amount of capital invested turn into revenue approximately in 3 to 5 years. So again, you— anything, any dollar or any euro that you put into, into a startup, in 3 to 5 years will be able to produce €1 of revenue. That is all money that will come back.

So let's, let's sell products. Let's sell products instead of just fundraising. I think that's, that's the key. And the, the Americans and the South Koreans and the Israelis, they have absolutely no problem with that. I mean, look at the money they're putting in innovative procurement, uh, in their own startups. Uh, it's, it's actually, it's not even a free market anymore.

No, but sometimes we are able to complicate our lives in a magnificent way.

So that's a shame.

Perfect.

I think we're out of time, but I think that was a perfect way to finish the afternoon. So thanks for your insights, and we look forward to, uh, witnessing what is next for the French ecosystem. So thanks again and thanks everybody.

See you next time.

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