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2017-02-24 08:06:30
The capital now leads Europe for the number of venture-capital funding rounds
EUROPE will never create a hub of tech firms and investors to rival Silicon
Valley, many experts on entrepreneurship concur. Its markets are still
fragmented along national lines, flows of capital into the region are limited
and because of lingering, conservative attitudes to risk, few startups grow to
rival American champions. Europe is toxic , argues Oussama Ammar, an outspoken
founder of an incubator in Paris. Life that should happen, does not happen ,
he says.
But some digital life does flourish, spread among cities rather than fixing in
one spot. Fintech firms cluster in London. Gamers and music-sharing sites do
well in the Nordic countries. Berlin has a crop of companies that go beyond the
kind of me-too consumer sites incubated by Rocket Internet, a notorious startup
factory: new companies with expertise in the internet of things , for example.
Milan, with strong medical universities, has flourishing biotech startups.
The most striking case of fresh growth is in Paris. Mention of France has long
elicited sighs from venture capitalists. Its rigid labour laws and hefty taxes
on wealth and on stock options have meant that Silicon Valley has more than its
fair share of entrepreneurial French immigrants. Efforts by the government to
help startups with tax relief for research have mostly taught founders to
complete forms rather than win clients, say observers. Genuine local successes
such as BlaBlaCar, a ride-sharing service, or Criteo, which serves targeted ads
online looked like exceptions, not evidence of wider success.
Yet recently, Nicolas Brusson, a co-founder of BlaBlaCar, says he has witnessed
an upsurge in entrepreneurial ambition in France. A venture-capital investor
says there has been a huge shift in mindset among founders of firms: they are
now expert not only as inventors but as designers of business plans. Henning
Piezunka at INSEAD, a business school near the capital, says that a new vibe
and a more global attitude are also evident in the widening use of English.
Venture capital is beginning to gush. Last year France saw 590 rounds of
capital raising, more than any country in Europe, according to Dealroom, which
watches tech-industry trends. Although slightly more capital went to startups
in Britain ( 3.2bn) than in France ( 2.7bn), the rate of increase in France was
dramatic (see chart).
One reason for the French gains is that earlier investments in infrastructure
for startups are starting to pay off. Established business figures, such as Mr
Ammar and Xavier Niel, who started Iliad, France s fourth-largest mobile
operator, which owns the brand Free, have set up training facilities and
incubator firms that are now producing entrepreneurs. Four years ago Mr Niel
(pictured) co-founded 42, a computer-programming school with a capacity of
2,500 students that charges no tuition fees. It trains programmers even from
unexpected corners such as the capital s troubled housing projects, and has
opened a sister campus in Fremont, California, near Silicon Valley, encouraging
ties.
Mr Niel s next step, in April, will be to open what he says will be the world s
largest incubator, called Station F, in central Paris. It will have over 3,000
workstations. Last month Facebook s Sheryl Sandberg said her firm will take
spaces in Station F, lauding French talent. She said the country now has some
of the most innovative technology companies in the world .
The main factor behind all the new activity is a change in graduates
aspirations. A member of the board of one engineering school near the capital
says that there is clearly new entrepreneurial ambition among students,
especially those who do an internship with a startup abroad. He estimates that
a fifth of graduates from his school now try launching their own firms, a big
increase on five years ago.
Graduates are particularly keen on startups in the so-called deep tech sector
involving, among other things, artificial intelligence (AI), machine learning
and big data. Philippe Botteri of Accel, a venture-capital fund, who oversees
investments in Europe, says 80% of his firm s activity these days is in deep
tech, an area in which Europeans, often in possession of specialised and
further degrees in engineering and maths, have advantages. France has emerged
fastest in the last few years as a top destination for capital, he says,
largely because its graduates have particular strength in these fields.
Julien Lemoine, for example, co-founded Algolia, a startup with funds from
Accel that provides customised search services using AI. From an office with
glass walls in central Paris (and from a sister office that opened in San
Francisco in 2015) his firm serves 2,300 paying clients globally two-thirds of
revenues come from America. Algolia will employ 200 people by the end of the
year, up from 60-plus now. His staff only speak English. From the start Algolia
sought clients globally, while tapping a local pool of recruits. Those hired in
France, notes Mr Lemoine, are far more loyal than job-hopping staff in Silicon
Valley.
It is a similar story at Shift Technology, a Paris-based firm founded by three
maths graduates. It uses AI to detect fraudulent insurance claims on behalf of
big insurers. Jeremy Jawish, one of the firm s co-founders, says Paris is a
suitable space to grow simply because it is the next AI centre . When he was
in university, the dream was to be a banker in London but now everyone is
excited about AI startups , he says. Cisco and Facebook have both set up AI
operations in Paris to attract local talent, he notes.
The old problems have not vanished, of course. Stiff labour laws still make
firing permanent staff difficult, a particular headache for young, fragile
firms. But here, too, change may be in the air. At least one candidate
competing in the upcoming presidential election is well-disposed towards the
technology sector. Emmanuel Macron championed digital growth when he was
economy minister; this week in London he urged French expats to come home to
innovate . France might have been slow to get started, but it is catching up
fast.
This article appeared in the Business section of the print edition under the
headline "Less mis rable"