French President announces 10 pro-business measures to redefine French business as we know it

Apr 30, 2013
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Francois Hollande Assise de l'entrepreneuriat

Yesterday, at the closing of the Assises de L’entrepreneuriat, François Hollande gave a closing speech that wrapped up a series of 9 talks (“Les Assises”) which discussed entrepreneurship in France – its problems, its potential, etc. During the closing words, Hollande gave a look into the future for the entrepreneurs, the “pigeons” who attended the event – a look at a France that is pro-business, pro-startup, and professional.

While he’s certainly no Barack Obama, François Hollande seemed much more loose and jovial in his speech, (clips viewable in French courtesy of FranceTVinfo.fr) and perhaps he had cause. He openly denounced the “misunderstanding” that became the Pigeon movement, a movement which pushed Hollande’s anti-business reputation over the edge. As if to put the previous 12 months behind him, François Hollande announced a suite of Pro-startup, pro-investment, pro-business measures that may very well be the change that France so badly needs to change its reputation, change its ability to innovate, and get people back to work (unemployment is at a record high this month).

Eliminating risk aversion from the books

Hollande also announced that the indicator “040,” used by banks to indicate an entrepreneur who has closed his company (i.e: failed) before, will no longer be used, in order to make it easier for entrepreneurs to bounce back. This is a hard change to the French culture (reflected across much of Europe’s banking industry) which will certainly see a roll out of changes to how banks treat entrepreneurs.

Along the same lines, Hollande also announced reforms in the banks that will allow banks to invest up to 75K€ in SMEs.

Reinforcing the JEI Status to remove social charges

The JEI (“Young innovative company”) Status has long been a symbol for high-growth startups – its reduction of taxes paid on salaries of developer and other R&D employees. Hollande announced a reinforcement of this status, which has been pushed for in the past by France Digitale. This will allow more startups to receive more tax breaks just for being innovative, with the same status they already have.

Specifically, some have suggested that this will allow startups to get tax breaks on marketing and other personnel, similar to the advantages given to engineers.

Encouraging Public Companies to invest in Startups

Hollande announced a new tax incentive that will encourage public companies to invest into startups. While there already exist tax rebates for public companies who invest in “innovation” – company incubators, sponsoring innovative events, etc. – this new tax incentive seems to be related directly to investment, and may encourage companies to take the same route as Orange.

The BPI – France’s Public investment fund

Combining OSEO, Scientipole, and other initiatives that have existed for quite sometime to provide research grants and venture loans, the BPI, run by the former #2 of CapGemini Nicolas Dufourcq, offers great potential to concentrate France’s long tradition of R&D investment into one organization.

Enfin. A Startup Visa in France

Hollande announced a startup visa – a VISA dedicated to highly educated, highly talented talent who wish to come to France. This is great news for startups having trouble hiring in France (*cough* Product Marketing *cough*) who are looking outside Europe for the best talent. After all, who wouldn’t want to live under the Eiffel Tower and work at a startup run by the smartest engineers in the world (I dare you to tell me where there are smarter engineers than France).

It seems, for now, that this VISA will be specifically focused on entrepreneurs who want to create their company in France, and not hiring great talent to come work for startups; however, the hastened VISA will lay the groundwork towards getting great talent into France, and I’m sure VCs and entrepreneurs will find a way to make this VISA work for them.

Crowdfunding. It’s coming to France

Making it easier to do crowdfunding in France. It’s been a big topic for some time in Europe, and it’s good to see Hollande addressing it.

Digital Entrepreneur Pass & Student Entrepreneur benefits

Recognizing the unique issues that come with running a tech startup, whether a student or not, Hollande proposed special advantages for said entrepreneurs, like maintaining student benefits (like subsidized housing, which all students get in France) while running one’s company. This is particularly important, as Hollande is enabling students to start companies WHILE in school, instead of waiting to graduate, which is the tendency in France, according to a study put out by LeCamping earlier this year.

Encouraging innovation during education is a great way to lower the barrier to entry for entrepreneurs; popular VCs like Peter Thiel have been encouraging this for the past few years by offering to fund students that drop out of college to start their company, for example.

Learning about Entrepreneurship as early as secondary school

Hollande announced education reforms that will see younger students (let’s say 6th-8th grade for US readers, ages 10-12) being introduced to entrepreneurship, to business, and to the idea that they too can start their own company. This, for me, is part of a bigger initiative that Hollande made mention to, that of demystifying the entrepreneur, and differentiating an Executive from an Entrepreneur.

Getting rid of the negative sentiments towards ‘bosses’ in France will be a long effort, but a necessary one to get France to be a pro-business country.

Make it simple, make it understandable

Citing France’s habit of taking a general rule and creating exceptions for every possible case, François Hollande discussed the 40 different tax brackets that exist for Capital Gains (“Plus values“) tax in France, and said there will soon only be one. He tried to maintain his previous position that capital gains tax will be aligned with tax on revenue, but noted as well that any capital gains that come 2 years after creation (or purchase) of a company will receive 50% cut in tax, and 65% after 8 years (or up to 85% tax break in the case of capital gains as a result of retirement). He mentioned a special tax break for companies that are less than 10 years old (i.e. of which many will of course be startups), though no specifics were mentioned.

A few last ideas, like removing the obligation for private companies to publicly declare their revenue/cash flow, which may help keep competitors from keeping tabs on their French competition, but it may help raise the valuation of French startups as well. According to JDN, Hollande also intends to open French incubators abroad to allow rapidly expanding startups to have incubated office space abroad for up to one year – the first of these will open in the US and Asia.

Conclusion: Forget everything you thought you knew about French Business

Some of these changes are already underway, according to Hollande; however, some still need to be defined clearly. Nonetheless, the thing to point out is that, in one speech, Hollande managed to touch on every problem in a startup ecosystem – education, support by big business, investment, capital gains, talent, etc. – and that is a big deal. What has long held France back has been its stance on work, and with unemployment at a record high this month, it may just be that the socialist president that everyone wrote off as a five-year dud may just be the guy who convinces the socialist left to ease up on employee benefits in favor of a more favorable business environment.