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

Innovation

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.

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31 Responses

  1. Avatar
  2. Avatar
    Mathieu Ruellan

    French teacher explaining what entrepreneurship is. Hilarious!

    • Avatar
      mutex

      Good point, teachers in France go straight from university back to school. So they have almost no knowledge of what is a company or entrepreneurship. Plus french scholars have a tradition of considering businesses as evil.

    • Avatar
      Sylvain

      He said entrepreneurs would visit schools and promote entrepreneurship.

    • Avatar
      N

      Especially since education nationals has been destroying those famous “amazing French engineers” all along in a massive collapse of level…

  3. Avatar
    Chris

    “I dare you to tell me where there are smarter engineers than France.”
    It all depends how you define “smart”. If you have a look at the number of technology start-ups per capita in a given country, France is definitely not in the top!

    • Avatar
      Elie

      I don’t believe the number of tech startups in a country reflects how smart engineers are ^^

    • Avatar
      mangecoeur

      Well no but that’s the whole point of these measures – france has some incredible talent and some of the best engineering schools in the world, i mean they’re home to the ITER Fusion project, that’s no small fry. But it’s been a struggle to turn that into jobs and innovation. You have all these talented young people sitting around jobless, the question is how to help them employ themselves.

    • Avatar
      123

      There’s no questions France has good engineers, but northern europe has traditionally been very civil engineering focused (cars, trains, airplanes, energy, construction, medical, robots etc.) But I guess it could be considered smarter to have your color-picking app aquired by facebook.

  4. Avatar
    mangecoeur

    If they can manage to boost innovation without eroding the social benefits that make french quality of life so high that will be impressive! It would be great to see Paris return to being a centre of creativity, science, and innovation as it was at the turn of the 20th century.
    So… who do i ask about getting started 😛 (Actually, in all seriousness making that info clear and easy to find would already go a long way to help young people get going)

  5. Avatar
    Zor

    “I dare you to tell me where there are smarter engineers than France”
    Pretentious and full mouth, but the smartest ? No, I don’t think so.

    • Avatar
    • Avatar
      R.H. Omea

      I dare… go to the Netherlands. Go to Boston. Go to Palo Alto. Go to Germany. The idea that the French emphasis on mathematics in their education (of men, women are still held way behind way too often) generates any greater talent than its peers is an illusion.
      Old but well-founded joke in engineering circles: “Bob from HQ meets with his French counterpart Francis to review the shovel-ready plans for a new Metro station in la Defense. After reviewing the plans, Francis says to Bob:
      “Mais oui, zeez looks very good een practees, mais what about in theory?” 😉

  6. Avatar
    Guillaume Balaine

    The problem is that the current French political class rejects everything that made Paris a centre of science and innovation become possible. The notions of excellence and the spirit that favoured creativity above all are shunned and hated by the socialist party. How can we entrust them with doing anything in favor of this ?
    Do you really think economic measures alone are going to solve this problem ? The problem is more societal and psychological than economical.

  7. Avatar
    Brad Arner (@bradfordarner)

    This is phenomenal news for France! After having married a French woman, lived in France and subsequently we moved back to the U.S., I realized how far behind France was in the entrepreneurial game when compared to the States. Yet, there are really brilliant people in France! These measures are definitely a step forward. I will be interested to see if they speak about it on Le Grand Journal this evening. Once we have children, we have thought about moving back to France because the education system is so good but, we have been very pessimistic about doing so because entrepreneurship is so looked down upon.

    Unfortunately, I don’t think Hollande’s efforts are going to have too great an effect long-term. My experience has indicated that the French system is set up in such a way as to reward people who don’t take any risks. It is not simply the banking system or taxes that is to blame. There is a cultural stigma against taking risks that does not exist in the States. The education system is at least 100x better than the best schools in America, yet good test score count for very little when it comes to the hustle required in entrepreneurship, much less web based entrepreneurship where everyone is brilliant and hard working. There is simply not the same commitment to innovation. I often felt that I had made a faux pas when I lived in France and spoke about different business ideas at dinner or a party.

    Unfortunately, politics is not the only problem holding the many brilliant people in France back from innovating and changing the world. In France, it is not culturally acceptable to want to be like Elon Musk.

  8. Avatar
    Denny A

    a) It would be great if Hollande’s list of measures became law and were actually applied, but my experience here is that even if this were to happen, there will always be some nitty reason, explained calmly and patiently by some functionnaire who has never had a business in his/her life, that they don’t quite apply to You, the entrepreneur.

    b) France is not just Paris. Paris is not the most desirable place in France to live or start a business (Well, OK, no place in France is very good for starting a business, but I hope you get my meaning). All the commentors/cheerleaders here who fail to make that distinction are probably part of the problem, not of the solution.

  9. Avatar
    Alexander Kopriwa (@AlexKopriwa)

    France is suffering from its arrogant elites who have betrayed their country and the masses.

    The French “system” is too complex and lacks transparency. Fixing the French system is not on the agenda (only talk) – it is breaking up now by itself. Innovation alone will not fix the economic “crisis” issues – good organization does.

    Good governance starts with understanding where you can leverage human and capital assets best.

  10. Avatar
    R.H. Omea

    I love France, have worked and lived there, own a company in paris, and am a serial entrepreneur who has bootstrapped my own and helped others in tech companies in NL, UK and the US. I have taken my own, and helped others take companies public. This is a positive that Hollande even mentioned it but it is a VERY LONG WAY from his political mouth (and record low approval rating) to reality.

    Reality Check List:
    – heavy reliance on tax-breaks etc is a non-starter because what no one tells you till you try and get them is that getting / maintaining them is a F/T job for at least one person – which doesn’t work in a pure start-up. its all hands on deck for creation, not chasing tax breaks and filling out relentless streams of paper for banks and multiple gov’t agencies… there is NEVER just one admin path!!
    – French cultural resistance to change and the uphill implementation path these will face = 3-5 years minimum before all, if any, are fully implemented
    – BTW we have been hearing about several other changes like these in some degree for years already (i.e. Skills & Competency Visas) #repackaged
    – LOL @ the 040 designation! Bankers in FR crawl up yer arse as do comptables and the gov’t, so the idea that removing that little number will stop them from knowing you’ve had a bankruptcy is delusional. it won’t change the cultural stigma of it either and you can bet votre dernier centime that any FR VC/PE funding source will demand to know upfront. another cheap ploy
    – Banks are fairly useless funding sources for start-ups, really a last resort. Loans from banks, govt bodies etc are second to last and can’t replace VC/PE flexibility as every dime needs to go into the start-up, not repayments schedules from the getgo.
    – many others, but the point is made.

    So all in all, nice talking.
    I’ll believe it when I see the walking.

  11. Avatar
    Juan Diosdado

    Great news! I like this. Let’s see how it plays out.

  12. Avatar
    Denny A

    My dubiousness about this, that I posted about yesterday, has managed to increase at least a notch overnight, as we learn that Montebourg, minister of Redressement Industriel, has shown the realpolitik of enterprise in France putting the weight of Hollande’s administration into scuttling the Yahoo/Dailymotion deal. Same old, same old.

    • Avatar
      R.H. Omea

      Exactement ! la plus ça change…
      if you are a true entrepreneur, your vision is success and growth which means hiring lots of people. Do it in France and the gov’t has the power to scuttle any exit strategy. Not appealing to anyone except the politicians.

  13. Avatar
    Awa

    It’s a great idea but hold your horses… I do not think it is going to be put in place quite yet(as you all know between “les ponts, summer, la rentree, toussaint and noel”, it may take next year before the next first meeting :-). I think he is looking to get his numbers up and I do not blame him. Love to you France!

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  18. Avatar
    Weatherman

    Among the many things that people like Hollande do not understand, is that start-up businesses do not have a fulltime professional dedicated to navigating the system to maximise fiscal benefit. They think that is all business is about.

    Those “benefits” are in any case well overplayed here. You only have to look at what has happened since.

    You need to be certifiably insane to start a business in France.

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