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Blog

Why France needs to become a “Scale-up Nation”.

France wants to be known as a “start-up nation.”

Indeed, lot has been done in order to change the image of a country where one could eat and drink well but where doing business was complicated. In a short time lapse appropriate policies have made of France the European country with the highest growth rate in IT.

This evolution has conquered some of the big players in the world. Last year Cisco invested 200 million dollars in the French start-up ecosystem, while Facebook opened its AI lab in Paris and Intel its 7th research lab in the country (in Aix-en-Provence).

In 2015, French start-ups mobilized 1,8 billion euros in VC against 897 millions in 2014. We are talking here about a 100% growth in only 12 months. Even if data are not accurate, French-Tech (the governmental agency in charge of supporting French Start-ups) estimates that approximately 8000 start-ups were currently actives in 2015 in the French territory. The current number of French unicorns is 3 (Ventes-Privées, Criteo and Bla bla car) and other 4 French Companies entered this year the Growth 50 ranking (Activity, Cedexis, Sigfox and Synthesio).

These are the good news.

The bad news is that actually few French start-ups attract the necessary investment that would allow them to get to the consolidation stage and grow.

While the early stage start-up scene is thriving – with plenty entrepreneurs, engineers, incubators and angel investors, there isn’t the tier one venture capital and knowhow that is required to build start-ups into scale-up companies.

From our experience working communication and branding with start-ups struggling to consolidate their activity, we have come to a conclusion: French funding landscape needs the most improvement.

Let’s do numbers again.

We said VC mobilized 1,8 billion euros in France last year. Having 8000 French active startups, what would this amount mean if it was equally divided between all the start-ups? approximately less than 250K VC capital invested per start-up? Just for comparison, during the same period, 4,3[1] billions where mobilized in Great Britain. Globally speaking from the total financial amount raised in Europe for start-ups 14% was raised in France compare to 33% in Great Britain.

French funding landscape needs to progress in all financing stages but specially in the initial ones (start and taking off) since these phases are key to allow start-ups achieving the critical size. Short-term profit funding culture need to be changed. From a public policy / government perspective it seems urgent (specially when elections approach) to understand that the competitive advantage, for a nation, lies not only in its business creation potential but in its capacity of allow businesses develop quickly so that they can make economy and employment grow.

A start up not always can create jobs. A “scale-up” does.

The challenge for France is to go beyond the “start-up nation” and becoming a true “scale-up nation”.

#Start-up, #Funding, #VC, #Scale-up

[1] EY Baromètre du capital risque en France : http://www. ey.com/FR/fr/Services/StrategicGrowth-Markets/EY-Barometre-ducapital-risque-France.