In five years, France has fortunately been able to keep up with the global innovation landscape. Symbol of this economic recovery, there are now more than twenty French “unicorns”, “French Tech” start-ups valued at more than one billion dollars, against just three in 2017. To allow our start-ups to grow and take decisive step of scale-up (the stage after the start-up and before the unicorn), the public power must continue to open the financing circuit and train the talents of tomorrow.
This effort must be made by both the French state and the European Union, to bring in European digital giants that have nothing to envy their American and Chinese competitors.
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In France, an entrepreneurial ecosystem to be completed
As a result of the reforms carried out by successive governments, from both the right and the left, the freedom to undertake comes back to light after decades of suffocation, lost in the Franco-French administrative jungle. Even though improvements are always possible, it has never been easier to do business in our country. But, faced with the need for growth of our start-ups, two problems must be resolved quickly: the persistent difficulty in obtaining financing and the risk of a shortage of skilled labor in essentially new areas.
Funding for start-ups has skyrocketed: start-ups raised no less than 5.4 billion euros in 2020, against 1.8 billion in 2015, according to an Ernst&Young study carried out in 2021. raised by German start-ups (5.2 billion euros). That said, most of this funding now comes from national investors with a more restrained profile than their foreign counterparts. Venture capitalists, especially Americans, are more used to the risk culture and are investing larger amounts, while it is still difficult for French tech players to get funding rounds of more than 100 million euros.
Three solutions seem to remedy this lukewarmness. Firstly, French investors, and especially institutional investors, must have more confidence in our talents and grant them higher amounts more quickly. It is then up to the State to continue its approach to attracting foreign investors, reinforcing its “Choose France” initiative and taking more advantage of the unexpected effect created by Brexit and the development of France. Kingdom can still boast in 2020 that it has raised nearly £13 billion for its start-ups.
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The second pitfall concerns the ability of start-ups to grow into scale-ups by employing the talent they absolutely need. From this point of view, it should be noted from the outset that it is, by definition, difficult to train future workers for activities that are constantly changing. However, “difficult” does not mean “impossible”!
For this, we need to continue the transformation of higher education, which is made up of islands that sometimes lack bridges to connect them. An important player in R&D, the academic world is still very reclusive in itself when it deserves to be fully integrated into the economic world. The Paris-Saclay cluster, a true French-style Silicon Valley that encompasses prestigious research establishments and companies open to the world, carries this ambition that now needs to be affirmed throughout the territory. Mainly because in addition to the exclusive search for innovation, “Saclay” also benefits from the local dynamism, whether in Essonne or in Yvelines, giving rise to an entire entrepreneurial ecosystem in the place.
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Finally, more generally, France should bet (low risk) on democratizing the teaching of digital technology to its young talents, and at the forefront of matters related to artificial intelligence. Let us remember here that start-ups already employ around 170,000 workers, at a time when the State wants to find full employment!
In addition to the economic issue, this is about technological sovereignty and, therefore, sovereignty in general. We can understand the recently renewed concerns of the French when the unicorn Doctolib announces that it stores its personal data on Amazon servers and not on a local host, while the American authorities can legally and very easily access this sensitive data. We bet that if such a service existed with us, Doctolib would choose it! This question of sovereignty, shared by all the States of the continent vis-a-vis the superpowers that are the United States and China, thus finds its full place among the tasks that the European Union must carry out.
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From “start-up nation” to “growing union”
Aware of the need for its intervention, the European Commission launched the “Start-up Europe” initiative in 2020, with the aim of connecting innovation players on a continental scale. This program could today take a more successful form, focusing primarily on promoting economically viable start-ups in order to make them scalable with a European, if not global, dimension. “Start-up Europe” could otherwise be accompanied by a new initiative “Scale-up Europe”, entirely dedicated to this objective.
In both cases, we would have everything to gain from the Commission acting quickly, through its current European Commissioner for the Internal Market, Thierry Breton, a talented French and European businessman. Harmonization of company financing rules, European strategy to promote continental flagships, constitution of statutes for European start-ups and scale-ups, incentives for partnerships between start-ups from different Member States… action are countless!
Among them, the European authorities should prioritize the fight against “killerquisitions”, the acquisitions of promising start-ups by companies that dominate their market and intend to maintain their position. There is no expansion if there are no more start-ups! In this sense, the Commission already has a powerful tool, Article 22 of the European Merger Regulation (EU Merger Regulation), which allows it to block certain acquisition operations that disrupt the game of the market and the march of progress. The European executive further tightened this control in March 2021, adopting a position on the Illumina/Grail case now encouraging national supervisory authorities to submit these procurement projects for their approval.
It remains, therefore, to anticipate the creation of a European business ecosystem and to arm ourselves against the certainty that it will be attacked by American and Asian monopolists. Europe will therefore have to quickly understand that the preservation of free competition will require the systematic blocking of mergers and acquisitions when they are carried out with the aim of stifling our comparative advantages and undermining our economic and technological sovereignty. On the contrary, it will have to accept any merger project between innovative companies as soon as the new entity reaches critical European size in an attempt to reverse the American and Chinese paradigms, such as the merger project of French Alstom and German Siemens, whose blockade by the Commission in 2019 provoked strong reactions from Paris and Berlin.
The “start-up nation” is not a myth, but a reality. The conversion of these French start-ups into scale-ups will be possible if the two main levels of governance, the French State and the European Union, work together to provide our young people with abundant funding and newly formed human capital. The transition from the “start-up nation” to the “scale-up Union” will allow us to dare to believe in the advent of a world of innovation with three poles, with Europe having nothing to envy to the United States and Asia.
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