Startup Wars Episode 5: France Strikes Back

Startup Wars Episode 5: France Strikes Back
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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.

3 Responses

  1. Avatar
    sybariter
  2. Avatar
    R.H. Omea

    This is some interesting propaganda from a source that can hardly be considered unbiased, with a vested interest in promoting the misbegotten idea that France is fertile ground for tech start-ups in the Silicon Valley mold. It is as extreme in its fallacious logic and singular examples as those Americans who would unfairly bash France (i.e. Newsweek) for its foibles while ignoring their own.

    The truth is that the two FR billionaires referred to are both VERY old-school purveyors of goods with – in Arnault’s case – 100s of years of inherited legacy, and zero tech or start-up income. Likewise, on taxes, Mr Arnault was all but out the same door Depardieu, Mauresmo, Depp and other high-earners went through, but the intense political and social backlash proved so negative he recanted his heresy. And “not explosive growth’ is frankly a rather dodgy descriptive to use for an economy that has averaged circa 0.1% growth per quarter over the last 2 years with a recession in the middle.

    Also, one or two examples of successful French start-ups funded (often funded with family money) are not nearly enough to buck the painful truth that the area in and around London is booming with tech start-up activity at 5K or more p.a. In fact, I have two colleagues who moved their tech companies from PAR to LON in the last 12 months. Dailymotion is a successful example but a one-off now owned by Orange whose success owed nearly all to the fact that at its outset and for a few years, DM allowed uploading of videos that were a) infringing artists’ copyrights and b) contained highly sexual content, both of which were not being allowed on Youtube / Google Video. Otherwise, it would have remained a French local site with no USP. Yes, sex – and purloined free content – sells.

    All that said, there is a place in France for the well-funded start-up that will be able to overcome such barriers as high costs / social charges, overdone redtape and reporting responsibilities for companies with zero income, hidden fees and taxes that do not apply to your venture (i.e. apprentissage, TV, habitacion taxes et al) – and such subtle issues as absurd banking costs, lack of a functional SBA Loan program and having to report to your banker regularly instead of vice versa. Having owned and run a start-up in Paris only to see it waste enormous time (and a lot of my money) dealing in redtape, taxes, fees, etc; I can testify to the fact that these things kill entrepreneurial activity in ways that don’t factor in so heavily in American (British or Dutch) tech centers in which I’ve created businesses.

    In order to survive, never mind succeed, a French start-up founder had better either be wealthy to start out, or have some connections to the “Grand Ecole Class” in Paris as that is about the only way to get into the stratum that has the dosh to adequately fund the circa 40% higher start-up/operating costs here (relative to NL or US) in starting up a tech firm with 20+ employees. There is a change in the wind in France, but that wind has been blowing for a long time with little to show. There will have to be a mindset change from the top down in order to make France a hotbed for technology start-ups but that has not occurred yet – perhaps a new Paris mayor could help, but I think it will take more fundamental alterations in employment law, tax regimes, bureaucracy, etc. before France has its own little Silicon Valley.

    Till then, bon chance et bon courage!

  3. Avatar
    Patrick Moglia

    I applaud and respect your writing this article. As an American who earned my master’s degree in France I’m happy to see that there is finally some backlash directed towards larger, more detached, less culturally savvy media outlets. I believe that many stereotypes about the French are only exacerbated when older individuals who are set in their ways, with their own cultural norms decide take exception with, instead of understand the environment in-which they live (or write about).

    France is not easy. There are stark cultural and social differences that separate Anglophones from the French. Getting used to them is challenging, especially in a business environment. You know what, either grow up and learn to appreciate what others offer, as well as what you give them, or move to a place that is more culturally suitable. As a millennial, whether in Paris or Palo Alto, I’m surrounding myself with young, hungry, motivated individuals that are passionate about making an impact regardless of cultural, economic or social constraints.

    The French, just as Americans and the English, live within a social fabric that is not perfect and has its own unique set of challenges and barriers. Bureaucracy and taxes, regulations regarding hiring/firing and the ability to obtain financing from a culturally risk averse and at times irrationally nationalistic market head up the list of complaints when considering conducting business in France. Yeah, these are problems, many of them fundamentally adverse to pure entrepreneurship. But nothing will be done if we all keep listening to the same sad “woe-is-me” story. By focusing on the wealthiest, or listening to outgoing generation, we are not doing the current young, strong, collaborative, millennial workforce any favors.

    This is why I’m happy that someone ‘grew a pair’ and started a site showing that things are getting done. There are young entrepreneurs fighting against heavy odds to build careers and become successful in France. Though these may just seem like green sprouts, there is opportunity. Social change cannot occur without an outlet for others to see that something different is possible. France, in general is making that effort. Success will depend on the ability its future leaders to push for and accept responsibility for making it happen.

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