Can French startups innovate?

Sep 25, 2017
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Cover for the article "Can French Startups innovate?" with macarons and an Eiffel tower
An article by Claire Robinson

 

 

An innovative transport alternative will open to the public this September in Paris, as the city is stepping up its crackdown on choking pollution. SeaBubbles’ “flying water car” will travel on the Seine, offering a fast electric taxi service. Championed by the Mayor of Paris Anne Hidalgo and French President Emmanuel Macron, SeaBubbles is a promising invention of French yachtsman Alain Thebault, who is dreaming of tapping into city waterways around the world as a way of tackling air pollution with imaginative solutions.

A few hundred meters away from the river, a different type of startup recently set up shop. Station F, dubbed the biggest incubator and startup campus in the world, made headlines this summer for its unfettered ambition to capitalize on France’s growing VC market. The 34,000 m2 sprawling complex will accommodate more than 1,000 startups, all vying for the attention (and deep pockets) of angel investors.

Ever since Paris overtook Berlin as one of Europe’s top destinations for startup investment, French politicians and businessmen strive to get a piece of the action – with Emmanuel Macron even going so far as to call his own country a “startup nation”. But will French red tape and the country’s particular work culture allow these startups to flourish?

Indeed, for all the dynamism and potential, the entrepreneurial spirit in France is often stymied by the country’s intransigent work ethos – the so-called “franco-français” mentality that still sees France as the most influential mover and shaker in the world.

In practical terms, this franco-français mentality has made the country slow to adapt to the globalized world. As the World Economic Forum’s Global Competitiveness Report argues, it is not the lack of innovation readiness that is holding back startups in France, but rather the “burden of government regulation” – judging by France ranks 129 out of total 138 countries for ease of hiring and firing practices. And while the 35-hour workweek has become something of a running joke for those disparaging France, it is in fact the country’s rigid 3,400-page labor code that is most at odds with the risk-taking and workplace flexibility of startups.

Investors in the French market often run into headwinds when they try to streamline work practices and promote French ideas abroad. One of the earlier examples of France’s unfulfilled ambitions is the country’s greatest telecom innovation – Minitel. The world’s most successful pre-World Wide Web online service, Minitel made the French proud while other countries looked on in awe and admiration. But then the state-owned France Telecom failed to introduce the service to other countries. The company did not conduct proper market research and thus proved to be too inflexible to do things not à la française.

Similarly, Systran, a pioneer in machine translation services that works for the likes of Ford and Airbnb, is reportedly in the midst of chaotic personnel flux after changing hands. As its new South Korean owner attempted to globalize operations and expand beyond Systran’s “franco-français” cocoon, twelve out of fifty employees working in the crucial R&D department resigned. In the managing director’s words: they were unable to adapt to the changes. At the same time, Systran’s former president is arm-wrestling with the new shareholder and facing a lawsuit for allegedly damaging the company reputation.

But when the state gets involved in shepherding innovation, the results are even grimmer. Much like the Russians, the Chinese and the Saudis, the French wanted to establish “cyber sovereignty”, by creating a sovereign cloud services to rival Amazon, Google and Microsoft. Launched under the business-friendly presidency of Nicolas Sarkozy, the Andromeda project became a typical French fiasco, when the business partners proved to be unable to agree with each other. The government was forced to step in…and decided to fund instead two competing projects, each endowed with €225 million of public money: Orange and Thales with CloudWatt, on the one side, and Bull and SFR with Numergy, on the other side.

What happened next is outright comical. Not only did Orange’s CloudWatt joined forces with the Chinese Huawei in its effort to offer international services, but neither project grew big enough to actually be successful. For all its talk about “cyber sovereignty”, the French government has yet to decide whether to use these services at all.

That’s not to say that Station F or SeaBubbles are also doomed to fail, but that the road ahead will be hard and arduous. For now, ride-sharing company BlaBlaCar is France’s only private startup valued at more than $1 billion – at the same time, the UK counts 10 and the US has more than 100. French society, with its adulation of careers in the civil service, is still more risk averse and offers fewer startup opportunities than the US and UK.

It’s no small wonder then that Emmanuel Macron campaigned on promises of modernizing the labor market, streamlining rules, lowering taxes, and provided a general sense of ambition that France could become a country of unicorns. However, creating a friendlier environment for tech companies is easier said than done, and one can just look to the experience of past presidents who tried and failed to reform France. Macron’s popularity plummeted over the summer, and that was even before he announced a controversial overhaul of the labor law that is bound to bring spark massive protests from trade unions.

Last week, Macron admitted that France is not a “reformable country… because French men and women hate reform”. He tried to save face by adding that what the country needs now is “transformation”. The question is will Macron succumb to the “franco-français” attitude or will he follow the lead of his country’s entrepreneurs and soldier on?

 

by Claire Robinson