After his inauguration as president, Emmanuel Macron promised to make France a “start-up nation”. His government has already passed tax cuts, instituted subsidies, and streamlined the visa process for foreign workers to make France a more hospitable country for start-up growth. A persistent barrier to the sector’s growth, however, has been investment financing, as French firms seek to compete with those in Silicon Valley and elsewhere who have greater access to venture capital.
Until now, start-up financing has focused on getting small companies off the ground and has served as an effective incubation strategy. Once these firms reach a certain point, however, investment conditions have forced them to look elsewhere for funding to continue scaling up. Macron’s latest initiative in support of the French tech industry is a 5 billion euro development fund.
The new investment fund targets start-ups that have broken through initial stages of growth. It will devote 2 billion euros to firms that have established a market share for their idea and are approaching or have reached positive cash flow but have not yet made an initial public offering. The remaining 3 billion euros will support firms that have already been publicly listed.
The fund is set to be financed through a combination of public and private investment. French insurance firms AXA SA and CNP Assurances SA are among the contributors, as well as asset management firms Amundi SA and Natixis Investment Managers. Caisse des Depots, a state-backed lender, has pledged to contribute 100 million euros to small cap tech companies. In total, approximately one third of financing will come from state-owned firms, while two thirds will be private investment.
On September 17, the French government invited 40 international investors to Élysée Palace to meet with representatives of France’s top 40 start-ups, hoping to raise the international profile of France’s tech sector and boost funding from abroad. The next day, Euronext, a Europe-wide stock exchange, announced that it will create a new index for small tech firms to attract greater private investment. The index, called Euronext Tech Croissance, will comprise 150 tech firms valued between 25 million and 1 billion euros.
France’s tech sector has grown rapidly under Macron’s presidency. Total financing in 2018 reached 3.6 billion euros, up 41 per cent compared to 2017. Nevertheless, France still lags in comparison to its competitor countries. For example, there are 182 unicorns – tech companies valued at over 1 billion dollars – based in the US, 94 in China, and 25 in the UK. In contrast, France only has five, which include music streaming service Deezer; long-distance carpooling platform BlaBlaCar; healthcare scheduling platform DoctoLib; photographer marketplace Meero; and cloud computing firm OVH.
Macron has made start-ups and technology centrepieces of his economic development plans, and also sees the enlargement of a French tech sector as central to France’s sovereignty. “We need to build our own champions in new areas like artificial intelligence and digital technology”, he said. “If we do not build our own champions, we will be dictated [to] by others.”
The French President hopes that the country will be home to 25 unicorns by 2025, whether by way of companies originally conceived and developed in France or by attracting foreign organisations to move their operations there. This progressive new step shows that his government is serious about the financing it will take to reach this goal. “The capital battle is essential”, Macron said. “If we want to win this battle, we have to succeed at raising more capital, faster and stronger.”
