Startup Wars Episode 5: France Strikes Back

Jan 6, 2014
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You may not even have bothered reading the Newsweek article which ran last Friday, entitled “The Fall of France.” Indeed, you wouldn’t have seen anything different in the article, which borrows its name from a phrase coined during World War II for France’s surrender to Nazis six weeks after invasion, that you haven’t already read in countless other articles: the taxes are too high (BBC), unemployment is rising (WSJ), and job creators are fleeing (BBC).

“France Bashing” has become quite popular in past 18 months; whether it’s the Economist’s “time-bomb baguette” cover story, CNN claiming France is in free fall, or just Kanye West’s complaints about fresh croissants and service – so what would be so different about Newsweek’s article?

A fact-checking blog hosted by French newspaper Le Monde counted no less than 9 factual errors in the article, ranging from “a great many pay in excess of 70% [in taxes]” to “there has been a frantic bolt for the border by the very people who create economic growth” (a report from the Government showed only a 1.1% increase from 2012 to 2013 in those who have legally exited France).

A reaction from Le HuffPo‘s Editor in Chief Anne Sinclair went so far as to profile Newsweek’s writer:

“She is miserable; an American journalist who left one posh London neighborhood 10 years ago and set up in the Paris Apartment across the street from the Luxembourg gardens. she tells the story of how her neighborhood  became one of the most expensive, real-estate wise, in Paris, & how she has problems at her son’s middle school (one of the most elite in the nation)”

But, just as the French will do, you will likely forget this Newsweek article, written for an audience that wants its pre-conceived notions affirmed by someone ‘like them’ living on the ground floor of a disaster. The writer is neither ‘like you’ nor is she living in the middle of any world familiar to the French.

What you definitely won’t notice is that France isn’t taking this hands down. They are responding. Editorials in almost every paper don’t just write off the article as a mistaken American outlook on a society that doesn’t operate under American norms (which they would be justified in doing), but they are pointing out that income & capital gains tax brackets in France are lower or equal to the UK & United States for most of the population (under 200K€, perhaps higher) – the French do count social taxes apart from income tax, but given that the US lacks the dominant national healthcare that France has, I think the tax paid to the government in France equals out with the amount that Americans pay to private healthcare facilities & insurance companies.

I recently wrote that French VCs needs to grow a pair – I was subsequently chewed out by IDInvest partner Guillaume LauTour – IDInvest backed Criteo, Pretty Simple Games, Deezer & many more successes in France.

I was hoping to see France stand up for itself in 2014, and Newsweek gave the perfect opportunity for France to fight back. There are few – like The New York Times’ Paul Krugman – who have taken to writing the articles that people don’t like to read, like “The Plot against France” and “More Notes On France-Bashing,” or like FT’s Hugh Carnegy, who wrote “France Dreams of a start-up renaissance.”

Writing articles that appeal to your audience’s preconceived notions about a certain topic is easy: I could write about iOS vs Android, or I could tell you Facebook isn’t cool to kids, or that Yahoo still has a long way to go to turn itself around – or, instead of using my personal opinion (informed from a few bloggers’ opinions) and projecting it as researched fact, I could sit down, look at a country like France, and ask myself: “If everything is really so bad in France, then how can things be so good?”

  • If the Elite are fleeing from France, how is it that 3 of the top 6 MBA schools for Global* Fortune 500 CEOs are French?
  • If it’s so hard to employ people in France, how is it that Criteo employs well north of 600 people in their gargantuous Paris HQ?
  • If it is such a terrible place to start a company, then why did Dailymotion, Criteo, Deezer, Neolane, Vente Privée launch and grow in France?
  • If France is such a terrible place for taxes, then why are the 9th & 10th wealthiest families in the World French?
  • Why does serial entrepeneur & investor Xaviel Niel continue to fund nearly 1000 startups inside & outside of France if the Capital Gains tax is unbearable?

*I have corrected the above statement to distinguish between the Fortune 500 and the Global Fortune 500 companies, a mistake on my part in not distinguishing the two may have caused a bit of confusion.

When the sentiment and the numbers don’t line up, one of them must be wrong. Have you looked at France’s economic numbers recently? It’s not explosive growth, but France has handled the crisis in its own way, well. There is work to be done, but I bet you it’ll be easier for France to get out of this crisis than it will be to get universal health care in the United States (or, god forbid, responsible gun control).

France isn’t going anywhere, and the French are realizing that.