France: How many startup [ ]'s is too many?

France: How many startup [     ]'s is too many?
Events

Last week, my baguette-ed counterpart wrote about the staggering ratio of accelerators to actual startups in France and Europe – my personal opinion on the subject is that when resources are scarce, they need to be conserved. An accelerator’s resources are startups, mentors, and sponsorship/funding – these are the metrics that drive their ability to produce great startups. The more accelerators, the more you share your mentors, the more you split your sponsors, and the less your able to provide the startups that are looking for guidance. As I spent the weekend thinking about this topic, I thought what else there was ‘too much of’ in the Paris startup ecosystem, and really in every startup ecosystem. Last week, I read  an old post in TechCrunch France from Cedric Giorgi, entitled “an open letter to the French startup ecosystem.” In it he talks about the 10 ingredients he feels are needed to bake the perfect ecosystem. One of those ingredients was incubators/accelerators, but since Roxanne covered that pretty well last week, I thought I’d hit the other six:
1. Wannabe Entrepreneurs –  Cedric refers to ‘wannabe entrepreneurs’ as entrepreneurs with wannabe startups and suggests that entrepreneurs need to produce high quality startups. I agree, but I think that before France can start judging the quality of a startup, we need to make sure that we get rid of all the unhealthy people, all the weeds in our garden.
[This article has been edited from its original version]
France as spent enough time telling people how could entrepreneurship is and blanketly encouraging anyone who’s idea doesn’t include a CDI until they retire – the day will come when we will have to start qualifying that statement, as not all people are cut out for entrepreneurship. I think that day has come. There are TOO MANY entrepreneurs in Paris, for what the ecosystem is today.
2. Innovation in Education – for a country that puts out some of the best developers & mathematicians in the world, and arguable is the home of the ‘creation of the internet,’ it has had some of the worst adoption of the internet of all the major western countries within its education system. This is a huge problem, but its only part of the education problem in
France. Adding up preparatory school, undergrad, and the almost standard masters,
students spend the last 5-7 years of education separated by subject matter – biz guys socialize with biz guys, and developers socialize with developers. Without the fluid stream of communication that you get in an American university’s general education and dormitory system, there’s a lot less chance that a Social Network -like connection will be made with college students staying up later pursuing life-changing ideas.
While the answer is not to rip apart the entire education system, the most crucial entrepreneurial efforts that need to be made for students is to get the lines of communications open between the different specialties.
3. Serial entrepreneurs and Mentors – This is one of the ingredients to an ecosystem that you can never have enough of! In fact, it’s more like the batter than an ingredient itself. The problem here is that France is so desperate to have mentors and success stories, that we are willing to take anyone in who fits the smallest of prerequisites – and sometimes we don’t even check their credentials. In hoping to recreate what we see in the Silicon Valley, we often ignore some great success stories and serial entrepreneurs – the very people I try to write about here on the Rude Baguette.
This idea goes hand-in-hand with Cedric’s 5th point, which is help from big companies, which you can also never have too much of. We need successful companies to turn around and support the very ecosystem that allowed them to succeed. It is the equivalent of alumni from Universities donating money to their school. France has so many successful companies: Orange, LaPoste, L’Oreal, Louis Vuitton – this may sound crazy to imagine Louis Vuitton buying a social media solution from a startup, but, hell, Wal-Mart did it.
4. Funding from Government, VCs and Angels – I hope in future weeks to get someone with a more educated on this matter to discuss about the fundamental problems with the flow of money into innovation in France, as I am but a student in the matter, but a few fundamental flaws stand out. Let me start off by saying that you can indeed have a problem of too much money, although that’s not so much a problem in France as it was in the US both 2 years ago and 15. The problem is not too much or too little, but how it is used. Arguably our smartest VC firm, ISAI, has only made seven investments since its opening in 2009. While it can be argued that they have only come across seven startups they liked, I bet that if they have $400 million instead of just $40 million, they’d feel comfortable making more investments.
Meanwhile, the local French government pumps money into anything that will fill the quota of how much money they have to invest in small businesses. If a project fails, there is no backlash, and therefore no incentive for the government’s spending arms to change their habits. So we end up with our smartest startup investors gathering their local resources and holding onto it as long as they can, anticipating the upcoming difficulties in raising new VC rounds, and government bodies host a mound of events, organisations and incubators that ultimately are not innovation-driven.
France needs to do what a lot of entrepreneurs living off of unemployment need to do – cut itself off. Whether its getting rid of the laws that make investments tax deductible, ultimately nullifying any incentive to choose one company over another,or whether its appointing more qualified individuals to use the large amount of money that Paris, Ile-De-France and France itself have allotted to innovation – there is too much money in the wrong places and not enough in the right, and no one’s benefiting from that.
5. Media presence / bloggers: I won’t go into this long, because, well, I’m media. This is why we started the Rude Baguette – because media drives an ecosystem. We found that France liked global exposure in English, even though most French startupers are proficient enough to read TechCrunch and another startup sites in English. The global media exposure, no matter how big or small, makes a city attractive to the global community.
6. Social/Business Events – I’ve wrote a few weeks ago about how I thought that Start In Paris, arguably Paris’ best startup event, could improve. In France, the number of events is no longer at a problem. Every week there are get together’s to learn how to be an entrpreneurs, how to register to be an Auto-Entrepreneur – we need to go to phase two: “So you’re an entrepreneur: what problems are you having now?”
Ultimately, it’s not so much a question of Too Much or Too Little, but Right or Wrong. France has the resources to create each one of these ingredients: it’s just a matter of using them responsibly. The fine tuning of these different ingredients will take five to ten years, according to Brad Feld, and it will require commitment not just to financial gain but to the building of a community by many different leaders in different areas; however, there is something you can all do wherever you are to make your startup scene just a little better each day: tell someone what you really think of their startup. Tell them their idea sucks, or that it’s the next big thing, or that you don’t think it’s fundable. Tell them they’re wasting their time, or that they’re so close to something great. In short, be Rude.
 

8 Responses

  1. Avatar
    Pierre Chapuis

    > “There are TOO MANY entrepreneurs in Paris, for what the ecosystem is today.”
    Yes. And angels / VCs / accelerators and everybody else has to learn how to differentiate a good founder / team from two fresh [insert random business school name here] students who went to a Startup Weekend and found it fun.
    > “students spend the last 5-7 years of education separated by subject matter”
    That may be a problem. However it is starting to change as art, business and engineering schools start to partner for some classes.
    > “there is too much money in the wrong places and not enough in the right”
    Yes. The government does not and should not know how to invest like a VC.
    Moreover they should understand that the Unemployed and the Young are *not* the populations that are most likely to create successful businesses and hence jobs. So they should stop their positive discrimination:
      * no limit for who can get the full ACRE (currently you have to be below 26 or unemployed);
      * give unemployment money to people who *quit* to create a business (that will stop everybody from doing stupid things to get fired…).
    > “Media presence / bloggers”
    Not sure we don’t have enough. Le Web is helping a lot internationally on that front.
    I would add one last thing: most of this is in Paris. This is not a good thing. Did anybody notice that Silicon Valley is not in Washington or New York? France is a very centralized country, but the startup scene could benefit from an epicenter in another city. Rents (for businesses and employees) would be an obvious advantage, and being away from a culture of investment bankers and such would be another.

    • Avatar
      Liam Boogar

      Good to have you back, Cat.
      I think you touch on a lot of good points, so i’ll just touch on the decentralization point:
      We don’t get to choose which city a startup hub is born in – it is determined by the natural environment around it. Trying to argue that Lille is a better choice for a startup hub because it’s close to London, Brussels, Germany, and Paris is null, because if that were really the case and important to startups, then startups would be growing there. The Silicon Valley cropped up because of one point, which led to another: 1st) Atherton, California was a vacation town for the east coast aristocracy in the beginning of the 20th century, and those people ultimately pooled their resources into VC firms in Menlo Park. 2nd) as we understand better now, startups naturally headquarter themselves close to their financial investors, which is why if there are no VC firms in Lyon, then there will be less startups cropping up there.
      The reason Paris is a good candidate has nothing to do with it’s population or its cost of living: all of the money is here, all of the best schools in all departments are here, and it has an international appeal that brings not just French talent, but global talent.

    • Avatar
      Grégoire

      Pierre, you can actually quit your job and get money from the unemployment insurance, using the “Rupture conventionnelle” protocol. 

    • Avatar
      Pierre Chapuis

      I know, but only if your boss agrees, which is sometimes not the case (I have actual examples in mind).  But yes “rupture conventionnelle” is best if you can get it.

  2. Avatar
    Keyvan Nilforoushan

    I totally second your #4. 
    The 25% tax rebate (and not tax deductibility BTW) had shown itself to be quite sustainable, spanning 1997 – 2008, and being a fair offset of the increased risk of investing in a start-up. As soon as it became a 75 % rebate, and no longer limited to tech companies, the whole VC ecosystem was shaken up in a very bad way.
    Today the rebate has been reduced, but a lot of long-lasting damage has been done : a lot of new investors emerged, not because they were good at investing, but just because they were good at fund-raising. 
    And I believe that this might also explain why some funds do not invest more often : for some deals, the availability of cheap money has driven valuations through the roof and the wise thing is often just to pass.
    I had written about this phenomenon for Variances here : 
    http://sic-transit.com/2011/11/30/liberer-le-capital-risque-francais/

  3. Avatar
    Zsalloum

    Maybe you can enlighten us on the importance of Sacley. A “fonctionnaire” once told me it is the French Silicon Valley?!

  4. Avatar
    Lucas Bonan

    “Whether its getting rid of the laws that make investments tax deductible, ultimately nullifying any incentive to choose one company over another”. I think you touched down there Liam, great article! 🙂

  5. Avatar
    myfrenchstartup

    If you need more information about French innovation and french startups, myfrenchstartup.com will be soon be launched and let all the innovation actors access to the data base of the french startups

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