5 Reasons Why France Is Hot For Startups
Major Advantages Attract Foreign Start-Ups
Updated February 2, 2018
Author: Yves de Beauregard
France is famous around the globe as a haven – not just a tax haven – also one for startups. But do we mean, “new innovation growing rapidly in France,” targeting international expansion, or foreign startups coming into France?
Both. In France, start-ups have access to a number of subsidies and different forms of help, courtesy of either the government or private investors. Significant tax advantages such as a temporary tax exemption on profit can be life saving for a young business that is willing to expand. Few countries in the world go through such efforts to help their own start-ups, and this may explain the success that France is now realizing. In this article we’ll outline the top 5 reasons why France is so attractive for start-ups.
Back in the 1970s, the saying, “In France, we don’t have oil but we have ideas” became popular. It encapsulates the country’s great intellectual potential providing a real capacity to innovate. It’s for this reason that from 2012 to 2015, the number of French startups increased by 30%. “The Hexagon,” as French often refer to metropolitan France, has also accumulated good grades for investments in R&D, quality of infrastructures for telecommunications and overall access to capital.
In general, Europe is fertile ground for the start-ups. On one hand, France is integrated in a 740M consumers market with a high GDP per capita. On the other, Europe can be used as a growth accelerator before considering more important and risky markets such as Asia or North America, for example.
Optimal Conditions for Startup Success
In order for startups to gain traction however, certain conditions must be met:
- To have a recognized turnover in your own country (be it France or abroad)
- To have proved the concept as viable and obtained real customers’ feedback to improve products and services
- To have raised capital aimed specifically at internationalization (funding partners appreciate when the money is clearly allocated), e.g., opening 3 countries in 2018 with 1M€ payback in 6 months.
- To have localized products and services in the targeted languages with the appropriate legal terms and conditions and multilingual support
There are 5 main reasons why France provides strong opportunities for start-ups to achieve these conditions for success and growth.
The 5 Ways France Succeeds In Hosting And Developing Startups
- France Today: Resources & Economic Conditions – Currently, France has the 6th overall world economy. Their geographic position allows for quick access to the rest of Europe, the Middle East, Africa and Asia. French is the 5th most spoken language in the world, with 274 million speakers. It is also the 3rd largest language for business and the 4th on the Internet.
There are 740M potential consumers in the European Union, including 67M in France. As of 2016, the GDP per capita in France is approximately 31.000€. In 2016, more than 447,000 people work in the computing service sector. In France, negotiation is about the price and the good bargain, together with a strong and long-term relationship between the salesperson and the decision-maker. The concept of payback and ROI are more Anglo-Saxon and the premium quality is more Germanic. The bureaucracy and paperwork are frequent – calls for tender and consultations – because 57% of the GDP depends upon the public sector. Therefore, effective RFI writing becomes a more important factor to success.
- France is fertile ground for startups in general – About 50% of the French population between the ages of 25-34 has graduated with a higher education. In 2015, 33,500 new engineers graduated, and as of 2017, there are 1 million Engineers in France. France ranks 6th in the world when it comes to financing R&D and is in 1st position for offering tax advantage on these investments.
Their investment in developed and efficient transportation infrastructures has resulted in the 3rd largest railway network in Europe, 1st aerial network and international harbours. The telecommunications infrastructure is similar, with at least 90% of the country covered by 4G and the optical fibre is expanding.
According to a study from the European Digital City Index 2016, Paris ranks 2nd in access to capital for the start-ups, which confirms this international attraction. Finally, knowledge spill over is very well developed in France. This refers to the permeability between Public and University Research and its diversification in Marketed Innovations in the Private Sector. In fact, it ranks 1st in all of Europe.
- On-going tax and social improvements – Beginning this year ad through 2022, the corporate tax rate will decrease gradually from 33% to 25%. While that is still a high rate, it is the price for quality and potential. For the start-ups with the Young Innovate Companies certification label, a total exemption from income tax for 1 year is possible. For 7 years, a partial exemption from social charges of people who are devoted to R&D is also offered.
- Available help for innovators – In France, there is help available especially for innovators and entrepreneurs. According to the Ministry of Research, the following types of assistance are available:
- Help for the Creation of Innovative Enterprises: i-Lab competition, Assistance for the Maturation of Innovative Projects
- From the Government: the Innovation Tax Credit
- From the BPI: (Banque Publique d’Investissement): Participatory Seeding Loans, Aid for the Development of Innovation
- From Initiative France & Réseau Entreprendre: Honorary loan
- Favourable export base for startups, welcoming foreign startups – France is ranked 7th in the world for Foreign Direct Investments (3rd in Europe), signifying a token of trust from foreign investors. France is a country with a stable currency, and safeguards the intellectual property at local and European levels. For these reasons and others, as of 2015, more than 20,000 start-ups and 200 scale-ups exist in France. That number is only expected to continue growing rapidly. One way this growth will continue is through a program called the French Tech Ticket, designed to attract some of the brightest individuals from around the world to develop and set-up their start-up in France. Those chosen receive comprehensive support for their journey for a period of one year. To date, the French Tech Ticket has helped 230 foreign entrepreneurs establish themselves in France. The challenge for 2018 is right around the corner, sure to bring a new batch of the brightest innovators to the already thriving French start-up economy.
France has all the right assets in place to attract, develop and grow startup and scale-up businesses, whether originating from or landing in the country. The government, investors and the general ecosystem all align to offer these businesses the optimal conditions for their international success. Thanks to the reasons outlined here, the sky’s the limit for those enterprising and innovative enough to invest in their own future in France.