OPINION | Despite all the means put in place by the French government to support national entrepreneurs, the United States remains, for them, the holy grail. And for good reason, the amounts of fundraising are greater, VCs take real risks, administrative burdens are less and debts are tolerated.
Support offers for companies and innovative start-ups abound in France. Research tax credit, innovation tax credit, start-up and innovation loan, regional aid for the development of innovation or the 2030 recovery plan, the panoply of financial tools is vast to support entrepreneurs. However, how many French unicorns still have their headquarters in France? How many entrepreneurs have not yielded to the sirens of American investors and crossed the Atlantic? Why does the magic of Silicon Valley continue to operate?
More generous investors in the United States than in France
There are several reasons for this crossing of the Atlantic. The first: the amounts invested. Not only is the number of investors much larger in the US than in France, but also the amounts invested are much larger. Where the American VCs do not hesitate to put several tens of millions of euros on the table in series A, in France the amounts range from a few thousand to 5 million Euros at most. According to a study by Eurostat for Europe and Business Employment Dynamics for the United States, in France, capital is mainly national for amounts under $50 million, European for fundraising between $50 million and $250 M$ and US and Chinese for higher amounts. With an investment amount of $6.5 billion in 2020 (an increasing amount), France remains far behind the US ($145 billion) and China ($57 billion).
In the United States, the debt does not scare
Second: debt. There, two philosophies take shape. Across the Atlantic generating debt is not a subject. Uber, Facebook, Amazon, Tesla and many others have, for years, racked up abysmal losses without being let go by their VCs. What investors look at above all are the development prospects and the potential market of a company. They want disruption, innovation, audacity, even if it means losing their stake. They prefer to value the debt rather than risk missing out on a company that can revolutionize a market.
On the other hand, in France, investors are more cautious. Not only do they want to see a finalized product and/or service before investing, but they also expect immediate business results. However, developing a product or service cannot be done without R&D, marketing and business development. So many phases that require time, people and money. But, the French entrepreneur, supported by national funds, is required to report regularly via a battery of KPIs and to fill out a mountain of administrative documents to hope to raise a few thousand euros.
Finally, in France, the right to failure does not exist. However, isn’t a company the result of resolute failures, of regular adjustments to adapt to market developments or of radical change when necessary? Twitter, Paypal, Groupon or Flikr are excellent examples.
A larger pool of talent in the United States
A large country, the United States benefits from a much larger market than that of France. Not to mention their possible extension to all English-speaking countries without bothering to decline their offers in another language. In France, the very limited market forces entrepreneurs to translate their solutions into English and adapt them to different European countries in order to benefit from a wider commercial scope. These developments, both technical and also marketing and commercial, once again require time and significant financial investment.
As for recruitment, here again the balance leans on the side of the US, the candidates being more numerous there. And for good reason, not only does the market have a larger workforce due to its size, but it also includes foreigners and in particular French researchers and engineers attracted by salaries higher than those in their country.
In such a context, it is not surprising that France cannot compete with a country offering such attractive conditions. However, there is no question of throwing stones at those who have chosen to take off. But the consequences are serious since France loses its startups, its talents and finds itself invaded by American companies. However, we salute the efforts made by the public authorities which, for several years, have been putting in place the conditions to retain entrepreneurs. However, we must go further by putting much larger amounts on the table and by relaxing the financing conditions. In France, the money exists. You just have to give it to good companies, young people, VSEs and SMEs, those who do R&D, who do not practice tax evasion and create jobs in France and in Europe.
Tribune written by Richard Bessis, CEO of MyPRM
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