Presented by La French Tech
If you ask a passerby about France, you are likely to get bombarded with clichés — you’ll get the wine, the cheese and the baguette thrown back at you within 30 seconds. If you’re lucky, you may get something on Camus or Baudelaire (but then you have really lucked out, so do pinch yourself). French tech is probably the last thing that would come up in the conversation. This, though, has been quietly, and rapidly, changing — the tech scene in France is gaining massive traction.
Now, it would be untrue to say that this is a completely new trend and that tech investors have entirely neglected France. Many, like ourselves, have been a fixture at the (sadly defunct) LeWeb, invested in early French startups like Seesmic and Jolicloud, were avid readers of Rude Baguette (and its author’s subsequent thoughts and insights), and its predecessor Tech Baguette. After all, the first institutional round of Criteo was over 10 years ago.
What has really changed, though, is the rate of change. France is rapidly entering an acceleration. So watch your backs, Silicon Valley, Sentier is after you.
Have we seen a tipping point, a déclic? The indications are clear. France is now challenging the U.K. as an investment destination, having surpassed Germany for the first time in years. $2.7 billion was invested in France in 2016, up 63 percent on the previous year, versus $2.1 billion raised by German start-ups in the same period and $3.7 billion invested in the U.K. With €472 million already put to work across 169 rounds to date (according to Dealroom.co), 2017 is looking good.
I, for one, tend to think that although the pace of change is accelerating, conditions for it have been fertilizing the French soil for a number of years. Below are some of the reasons I think the time is now ripe for French entrepreneurs to take center stage.
Early-stage actors drive change in education and culture
- One of the underlying factors is the growing desire amongst young French people to engage in entrepreneurial activity. Students from France’s world-leading business schools are now choosing tech over other job options: 19 percent of graduates go into technology at INSEAD and likewise at HEC. One third of French students (according to KPMG data) now state that they would like to either found or join a startup. And an increasing number are also willing to do so on home turf (74 percent according to Atomico’s State of European Tech report), as start-up costs for business have fallen rapidly: infrastructure start-up costs alone have declined from ~$5 million in the 1990s to less than $100,000 today (and that’s without various deals and sweeteners offered by a majority of accelerators/incubators).
- This is where early stage actors have been instrumental. Prior to revealing the very grand (and inspirational) Station F that will host 1,000 start-ups as well as Facebook, Roxanne Varza worked on FailCon – a conference celebrating failure and its learnings. Oussama Ammar at The Family has claimed a number of times that “Europe is toxic”, while equally popularizing the idea that, despite that very fact, the show must go on — and then you can always join their Lion school for entrepreneurship should things not go right. And let’s not forget Niel’s 42 (free coding program) or Kima’s No MBA (you get paid to learn!), each of which is serving to democratize and open the ecosystem to new actors.
- The international angle here is also important. StationF’s selection committee unites continents thanks to Marwan’s efforts, The Family expanded to London and Berlin, 42 to San Francisco and Numa just held its first demo day in London, presenting start-ups from France, Russia, Italy, and Spain. Even U.K.’s Techstars is opening a French outfit in September. As early stage goes global, so do the ambitions of French entrepreneurs — and international capital has followed, with Benchmark, USV, Lightspeed, and Insight having all done at least one deal in France. Serena here does a great job of pointing out investors outside of France paying attention in every last round over €1 million.
- The early-stage movement is helping orchestrate a cultural shift: it is now ok to fail, it is cool to be a founder, and starting in Paris or Toulouse does not hamper global ambition. Little shifts in mentality have been yielding big results.
The French talent pool is deep
Paris has over 134,000 professional developers, the second highest in Europe behind London (300,000). 40 percent of these have at least six years of experience and 43 percent of these also possess an MSc in Computer Science.
- Academia is an important part of the equation, as France is also where tech meets hard sciences. For Paris, and France more broadly, AI and machine learning could be promising areas of specialism — after all, Facebook opened its AI research center in Paris in 2015 (its first outside of the U.S.), and back in 2013 hired French native Yann LeCun to lead its AI research. Rakuten and Google both also have research centers in Paris, and there’s a strong academic background in the field, with both education and research well represented through the likes of École Polytechnique, ENS, TelecomParisTech, UPMC, Centrale, CNRS, Inria, or Lims.
- Within France, there are now at least 180 AI startups, according to data compiled by ISAI. In keeping with that trend, I have also counted at least six early-stage exits to the big U.S. tech giants — Amazon, Apple, Alphabet, Microsoft, and Facebook.
- As ecosystem grows, its vibrancy is partially measured by talent’s interconnectivity and its equally vibrant social ecosystem. To that extent, Paris boasts one of the largest meetup groups in AI, the Paris Machine Learning Group, and some of the largest open source code libraries for AI, such as SciKit Learn.
Capital abundance fuels grander ambitions
- The number of new funds which raised chunky amounts in France is unprecedented, with Daphni (€150 million+) and Korelya (€100 million) being two notable examples.
- Those who have been around the block are also not far behind — Alven Capital closed €250 million while Partech Ventures and IdInvest have dedicated pockets of capital across stages, and Partech is hosting Techstars at Partech Shaker. Ventech has even raised a third China-focused fund, in line with global ambitions of the ecosystem. Many VC firms have funds of an older vintage, so one could expect additional new fund announcements in the near future. XAnge’s Bartosz has a few more interesting thoughts on this here.
- The corporates have also “awakened”, participating in 21 percent of French deals in Q3 2016, according to CB Insights. They are increasingly LPs in a number of VC funds but are also setting up dedicated funds — Orange, MAIF, AXA, Microsoft, Credit Agricole, Airbus, SNCF, and Renault Nissan are amongst a few. The involvement of French industrial giants is higher than in many European countries: there are more French corporates (13) with “innovation outposts” in Silicon Valley than from any other European country except Germany (15), and many more than the U.K. (5), according to MindTheBridge.
The state of the State
- The French tech scene is also seeing continued investment appetite and activity from public sources: BPI is one of the most active investors in France and in Europe overall, having completed 110 new investments in France in 2016, according to CB Insights.
- Created in 2013 and propelled by the government, ‘#FrenchTech’ is aiming to create a “snowball effect”, communicating around entrepreneurship in France and abroad, but also financing accelerators and local tech hubs with the help of BPI and Business France. French tech was the largest international community at CES in Vegas, a sign of new dynamism.
- Last but not least, France Digitale, the heart of French VCs and start-ups, continues to lobby on behalf of the ecosystem. It certainly saw the departure of a few members, so I am excited to see what the new ones have in store.
- There is still a lot of progress to be made, whether on admin or labour laws, but according to the World Bank, it has never been easier to set up a company in France: 4 days versus 4.5 in the U.K. and 10.5 in Germany. Small wins which could have big effects.
The virtuous cycle
Alexis Bonte, founder & CEO of eRepublik and Atomico XIR, in conversation with Skype, Kazaa, and Atomico co-founder Niklas Zennstrom
- The most inspiring entrepreneurs are those who have not only created great companies, but also those who support the new generation of entrepreneurs looking to do the same. And France has no shortage of these. There are, of course, the early leaders, including the inspirational names like Xavier Niel (Free), Fabrice Grinda (Aucland, Zingy), Pierre Kosciusko-Morizet ( PriceMinister.com), Oleg Tscheltzoff (Fotolia), Jacques Antoine Granjon (Vente Privé), Jean-David Blanc (AlloCine, Molotov TV), Thierry Petit (Showroom Privé) or Jean-Baptiste Rudelle (Criteo). There are also the ‘new kids on the block’: Frédéric Mazzella and Nicolas Brusson (BlaBlacar), or Daniel Marhely and Jonathan Benassaya (Deezer). French tech has been, in part, fueled by the inspiration of its many spokespeople — The Economist goes as far as to call it a “The Niel Effect.”
- Success breeds success. As the ecosystem becomes more developed, we’re seeing growth in ‘founder-funder’ activity, with founders who’ve enjoyed success increasingly reinvesting capital and efforts into the ecosystem in an angel capacity. For Europe as a whole, our research found 44 percent of experienced entrepreneurs that have achieved some success are already actively investing as angels into next generation. Others have formalized their efforts, joining or creating VC funds like Kima (Xavier Niel), ISAI (PKM), or Elaia (Marc Rougier).
With all the above in mind, we are certainly excited about #FrenchTech. I think it is unlikely that we will see the emergence of any single European city as the leader for “all things tech.” Far more likely is the emergence of ‘Centres of Excellence’ in Paris, London, Berlin, Stockholm, and others, each of them with unique strengths in particular fields. One thing is certain though: Paris is now firmly on the European tech map.
Evgenia Plotnikova is Senior Associate at Atomico, based in London. She focuses on sourcing and evaluating investment opportunities, as well as on supporting Atomico and its portfolio companies on operational projects and research. Follow her @evplot.
This is an abridged guest post version of a Medium post entitled, “A Handy Guide to the 15 Years of Hard Work Behind #FrenchTech’s Overnight Success.”
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