Drawing conclusions from the Yahoo-Dailymotion affair – what does it all mean?

May 6, 2013
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What a week. I thought most certainly that François Hollande’s announcement of 10 pro-business measures for France would have made international news, but of course, like the great ugly PR machine that France is, they managed to put the spotlight on something else during that very same week – Yahoo walking away from a possible $200M investment in Dailymotion due to one government official’s intervention. Many generalizations have been made by international and local media alike – and we’re probably no different here – but I thought I’d discuss a potential silver lining to everything.

First of all, I think we can all agree that Yahoo is not the most stable of companies right now (though there is great potential, don’t get me wrong), and neither is Dailymotion the most amazing startup in France right now – up until two weeks ago, most people in the startup community would have easily declared it dead and buried under the weight of Orange (perhaps they are right). The deal itself, while, yes, it would help Dailymotion grow, is not the most amazing deal in France’s history – it’s not even the most amazing fundraising in the last 3 years, but it would’ve been a good validation of French startups, sure.

The loss of this deal does not weaken any of France’s other amazing startups and the likely futures they will have: Criteo’s $1-2Billion IPO coming up soon, Blablacar’s inevitable conquering of Europe and the rest of the world, and the dozens of startups who received Seed A investment in 2012 and are quietly pumping along and growing under the radar. So, for analysts outside of France, let’s stop suggesting that the one startup in France has just been killed by the government – that profitable startup that you have been talking about is already a 100% subsidiary of a major telecom, so the exit has been made – and for those of us inside of France, let’s look at the real silver lining.

France is upset with this. And this is new. The people, other members of the government, and business owners (who now, more than ever, have a voice in France) are showing their discontent with this action, and in the years to come, government officials will hear “don’t go and Montebourg it up” when a government official discusses intervention in a private sector investment deal. Yes, we still need to hear the end of this discussion, but there are plenty of people having it, and it is only a matter of time.

This weekend, I got quite a kick out of Netvibes founder Tariq Krim’s blog post (sorry, it’s in French for once) concerning the fate of his startup (Netvibes was sold for pennies to Dassault Systèmes last year, years after Krim had left), which discusses his thoughts on the topic, as well as the comparison between Netvibes’ fate and that of Dailymotion – a comparison which doesn’t bode well for Dailymotion.

Krim draws some pretty interesting parallels between himself and Benjamin Bejbaum, which he says the two discusses in length after Bejbaum left the company in 2009. The two product-oriented founders both had early success in their respective domains, but, “due to their naivety ” as Krim puts it, they both found themselves surrounded with people who preferred to take their jobs instead of helping them grow.

“While I was able to recruit an amazing technical team, I was never able to bring together people around me who respected and understood my vision. I slowly watched Netvibes go from one of the most popular tools on the web to a Web 2.0 development firm (SSII), working with our few big media clients, and watched our sales team receive generous bonuses each quarter.”

-Tariq Krim, “A few thoughts on the Dailymotion affair

Krim recognizes that CEO Cedric Tournay is doing a great job with Dailymotion; however he is quick to point out that neither the media nor the public sector is comfortable with the topic of the digital economy: Krim cites the media’s blunders, like confusing Yahoo & Youtube, using terms like “new technologies” and making comparisons to previous unrelated incidents in trying to explain the situation, as evidence thereof.

“I’ve always thought that the absence of a coherent Digital Strategy in the public sector has cost France 1 Million jobs, especially among recent graduates…. our best engineers go to California”

Perhaps one of the most ballsy things Krim said in his post was the following assessment of France’s entrepreneurial ecosystem :

“France lacks disruptive startups because it lacks confidence in its entrepreneurs and their visions…. In order to be financed in France, you have to do something that has already worked elsewhere, use a well-defined business model, and come from a top school…. It’s important to have entrepreneurs who are willing to take on major players in unmovable markets, even if it upsets the biggest French players in the digital economy.”

The silver lining of the whole affair may be that the discussion has been started. If the government sitting down with entrepreneurs & investors can result in such great changes as Hollande announced last week after just 3 months of discussions after Les Assises de l’entrepreneuriat, imagine what could happen if the same was done for the Digital Economy. If France started to address the fact that it still has a protectionist philosophy around its current giants, that it still refuses to create a climate where young entrepreneurs can be given the tools to change the world, and that it still is a country where, for every Free Mobile that shakes up an industry, there is 18 months that follow of slander, threats, and accusations from competitors and the public sector that could dissuade anyone but Xavier Niel from continuing the good fight.