This is a guest post by serial entrepreneur Nathalie Gaveau.
As we get closer to the first round of Presidential elections in France on April 22nd and everyone is focusing on the French economy, it seems like a perfect time to talk about supporting and promoting entrepreneurs and entrepreneurship in France. Yes, we invented the word. But sometimes in the past it’s felt a little like we didn’t have it in our vocabulary, as President Bush, in a moment of clarity, once pointed out.
Despite the criticisms, the government has clearly been more entrepreneur-friendly in recent years. The set-up of the Agence pour la création d’entreprises (APCE) in the late 1990s and the special fiscal treatment of independent or “auto-entrepreneurs” has led to a dramatic increase in the number of startups. Moreover, France offers generous tax incentives to young SMEs, companies pursuing R&D even wealthy individuals investing in a startup (known as ISF).
From my own experience as an entrepreneur previously in France and now in the UK, I can say that there are clear advantages of working in both countries. France, for example, offers incredible technical talent – often for a more affordable price than in the UK – and phenomenal infrastructure (broadband). And regardless of what people say, productivity in France (at least in my experience) has been high.
But there are still areas in which France can definitely improve. Naturally the UK has an advantage because of its linguistic and cultural proximity to both Europe and the US. This would be tremendously difficult for France to replicate. However, France can strive to match the UK’s flexible employment laws, low corporate tax and easy access to funding.
Now, as we head into the final weeks before the Presidential elections and the candidates will begin to clearly define their economic reforms, it would be particularly smart for them to focus on entrepreneurs and SMEs. Why? Because entrepreneurs and SMEs have been at the heart of job creation in France, producing 2.3 million of the 2.8 million of the jobs created in France over the last 20 years. In order to win over the entrepreneurs, here are 3 core areas the candidates should focus on:
1. Education: mandatory technology training and the development of entrepreneurship programs
Hiring and retaining skilled people is an on-going challenge and we need to build a strong pipeline of talent to remain competitive. Young people – and their teachers – need a greater awareness of the job prospects in entrepreneurship and new technology. Our education system urgently needs to tackle 2 domains:
2. Administrative red tape: let’s make it light and simple.
Administrative red tape and complex filing rules pose a huge obstacle to setting-up and operating a business. Entrepreneurs need time to focus on developing their business, yet many often spend far more time dealing with administrative complexities. When time is of the essence, making forms simple and accessible online is very important.
In the UK – where my current company, Shopcade, is based – people can start a company online within a matter of hours. The amount of paperwork involved later while running the business is fairly straightforward, and most importantly key tasks can be entirely performed online. In addition, user friendly e-learning guides are available online to teach new starters how to deal with corporate tax.
3. Easier access to capital
If there is one area that the UK often seems well ahead of France, it is probably in terms of access to capital. Young companies in France need to have easier access to business angels and venture capitalists.
Private investors in France get some wealth tax or “ISF” reductions for investing in small and medium companies, yet it is quite limited and was even reduced in 2011 to 50% of the investment and/or € 45,000. In comparison, the equivalent UK scheme is more appealing, as it goes up to £1 million per investor, and allows investors to potentially offset losses against capital gains in the year of disposal. With incentives like these, it’s no coincidence that the UK has 2.5 times more business angels than France (18K vs 7K), investing nearly 10 times more capital.
Despite the difference in incentives, France has recently seen a lot of growth in the amount of early stage capital. Funds like Kima Ventures, ISAI, Jaina, 360 Capital Partners, Alven, Ventech and more have been particularly active in supporting early stage companies – and have clearly made a difference. Finding ways to encourage the growth of these types of funds as well as business angels is crucial to developing and maintaining a strong startup ecosystem.
France does offer some attractive fiscal incentives, like the “Jeune Entreprise Innovante” status started in 2004, which offers a tax credit to startups investing a minimum of 15% in R&D. More than 2,300 companies were part of this scheme in 2009. The scheme was partially revoked in 2010 with a new proposal to be presented in June 2012, which will hopefully resume support to innovative entrepreneurs.
It may seem like a lot of work still needs to be done to make France a leading hub for entrepreneurs – but it can be done. France can be a leader in new technologies and entrepreneurship, just like it is in other industries. But the administration has to recognize that the global economy is becoming increasingly focused on digital innovation. Hopefully the candidates will realize this and be quick to act upon it as the election date approaches.