The Pigeon Movement – A rallying cry for French startups

Oct 1, 2012
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This article was originally posted on The Rude Baguette Weekly Digest - to receive the digest each week, sign up on the right hand side of the screen.

A dip in approval ratings – a Rise in Taxes.

From July to September, Hollande has seen his approval rating drop from 56% to 43% – there are only two other presidents who’ve had such a sharp drop in approval ratings in France: Charles de Gaulle after he signed the Evian Accords, ending the Algerian war, and Jacques Chirac, after the Treaty for the Constitution for the European Union was voted down by French voters. To put the number 43% into context – this is lower than former U.S. President George W. Bush’s average poll rating during his 8 years in office. It’s bad. Real bad. This past week, Hollande presented his tax reform plans for 2013, which included his infamous 75% tax of household incomes over €1 Million.

Throughout all this, in spite of articles declaring France a dead zone for startups, French entrepreneurs & investors have worked together to try to cut what could be cut while saving what must be saved. France Digitale – I can’t say enough about this association, composed of entrepreneurs & investors in order to affect change in government –  submitted just 4 proposals to the French government for how France could help support the French ecosystem. Our resident VC Mark Bivens wrote about them here, but in short, they are:

  1. Refine and reinforce the ‘young innovative entreprise’ status.
  2. Channel assurance-vie monies toward innovative SMEs by forcing them to invest in VC.
  3. Improve the R&D tax credit to strengthen links between large companies and innovative SMEs.
  4. Maintain the tax incentives that preserve the retail VC model.

Jean-David Chamboredon, GM of ISAI, wrote in La Tribune[FR] last Friday – If you have a beginner-level amount of French, I suggest you assign yourself of the homework of reading through this article. In it, he says “forget about the 75%” – you’re either going to go into tax exile or you aren’t – here are JDC’s own words (translated from the original article by JDC):

Jean-David Chambordeon“…I would prefer to speak now about the proposed changes to the capital gain tax scheme supposed to be aligned with ordinary income tax. For example, an entrepreneur who sells his company, after 10 years of work, 10 years of uncertainty, of ups and downs, of 70-hour work-weeks… would have to pay 45% (income tax rate) +  15.5% of Social Contributions in total i.e over 60%. We can only read from that proposal  an anti-capitalist & anti-economic mindset that destroys entrepreneurial dreams with an almost sadistic approach…”

60% Capital Gains tax – the real innovation killer

Forget taxing the wealthy, forget big government, the French government is eliminating the one tangible reward for building new companies, creating innovation, and providing the French government with a few hundred new employees. This come at a time where France’s big companies are beginning to show their anti-global competitiveness roots - Peugeot is laying off thousands, Bouygues is laying off thousands, and this is just the beginning. For the record, the current Capital Gains tax is set at 32.5%, an 84.6% tax hike.

No one loves tax hikes – times are tough, and they may get tougher. Short term adjustments need to be made, but this cannot be one of them. JDC went on to explain that, in France, capital gains will be taxed heavier than art transactions, real estate investments, and public stock purchase.

The proposed LF2013 will be debated in the French parliament houses (the National Assembly and the Senate); however, since both are dominated by the Socialist party, “we need to make the debate happen also outside of the parliament.” says JDC.

French entrepreneur Olivier Bernasson re-opened his blog just to share his feelings in an article entitled “Mr. Representative, tell Francois Hollande…,” in which he confesses, among other things, to have voted for Hollande, stating:

“Who will be rich enough and crazy enough to invest a penny in a French company like this?

Who will be rich enough and crazy enough to give startups the means to bring their dreams to life?”

 

The Pigeon Movement – France’s Last Hope for Startups.

In the wake of all this built up tension & disappointment from the startup community, a group of entrepreneurs put together a group called “Les Pigeons.” The group grew to over 3,800 members during the weekend alone - a gathering is scheduled to be held Sunday October 7th at 3:00PM in front of the National Assembly, and French startupers across the web have been changing their profile pictures to the pigeon seen to the right in order to spread the word.

According to Ruben Nataf, CM for Whoozer and allegedly the CM for @DefensePigeons, the group was started by Bluekiwi(Acquired by Atos | 04/12 for €20M) & Kwarter founder Carlos Diaz (currently based in SF), along with Whoozer CEO Fabien Cohen.

In French, the term “pigeon” is used to call someone a sucker – and it seems fitting here. Hollande has gone back on his promise to lower taxes paid by SMEs so that they will be less than big companies after tax breaks.

Despite France’s long history of innovation, financing, and technological prowess, the business world has turned a blind eye to France and pre-emptively declared it dead, without ever checking its pulse. I have felt the pulse in the French startup scene, and it is beating faster than a hummingbird, and stronger than an ox. It can barely be heard from a distance, silenced by government fat cats and the muscle of big business, but it is beating hard. There have been more multi-million dollar investments in the last two weeks – Work4Labs, Capitane Train, VoitureLib, Criteo, Melty – than I’ve ever seen in France, and I know there are so many more to come.