France Urgently Needs To Overcome The Divide Between Innovation And Power

Everything is politics in France. And this week is no exception. People have been talking about France’s new government for days. In particular, there has been a controversial move — Arnaud Montebourg, the person who blocked the Dailymotion acquisition by Yahoo, is now the minister in charge of the digital economy.

Before that, Fleur Pellerin was the minister in charge of the digital economy and innovation. After a rough start, she did a pretty good job. She created the French Tech initiative, she wrote a new law allowing AngelList-style syndicates. More importantly, she understood how startups worked.

But now, in addition to being the minister of the economy, Montebourg will take over Pellerin’s functions. While it’s still not official, rumor has it that Pellerin will become secretary of state for foreign trade. She won’t be working with startups anymore.

“The problem is that when we have a new minister, we have to start from scratch all over again,” Cookening co-founder and CEO Cédric Giorgi told me back in January. Then-minister Pellerin was about to unveil the French Tech in front of a large crowd of tech people.

That’s why many entrepreneurs, investors and key ecosystem players took to Twitter to lobby to save Pellerin’s job. They created a hashtag, #keepfleur — pretty quickly, it became a trending topic in France. “The digital economy needs a great minister, don’t change anything, we found her,”Meetic founder Marc Simoncini tweeted.

But Pellerin is now out. Startups already know Montebourg quite well. In April 2013, TechCrunch revealed that Montebourg was the person who killed the deal between Yahoo and Dailymotion. That day, the government sent a bad signal to VC firms and business angels. How would you invest in a French startup if it can’t find an exit?

Once again, this week’s reshuffle is representative of an ongoing divide between innovation and power in France. A young generation of scrappy entrepreneurs is trying to disrupt existing industries, slow publicly traded companies and short-sighted mindsets.

On the opposite side, you can find the men and women in politics, the CEOs of France’s largest companies and the people in charge of the public administrations. Most of them come from the same schools, and in particular the ENA.

These two powerful groups don’t talk to each other. Yet, politics still plays an influential part in the French economy — that’s what makes this country fascinating. So you can’t just ignore this confrontation.

But the opposition needs to stop.

Avoiding Another Pigeon Movement

In October 2012, the so-called pigeon movement won an important ideological fight against the government (in French, a pigeon is a sucker). France wanted to up the current capital gains tax to 60 percent. It would have greatly endangered the acquisition market.

Many entrepreneurs were up in arms on Twitter, Facebook, in French newspapers and more. The government had no choice but to back down.

The government absolutely wants to avoid fostering another pigeon movement. It would send the wrong message as the government wants to take a business-friendly turn to improve the French economy.

I don’t know if they just want to avoid a second pigeon movement or if they are taking us seriously.

A few weeks ago, some key people of the French tech ecosystem were invited for lunch at the Élysée Palace (France’s White House) — lunch meetings generally mean serious business in France. French president François Hollande joined the group.

You can see a picture of this group at the top of this article. You will be able to recognize familiar faces of the French tech ecosystem: entrepreneurs, investors, successful founders turned business angels, accelerator managers, etc.

“It was an informal discussion on what could be improved to help French startups: tax breaks, investment, foreigners, stock options,” a person at the lunch who wished to remain anonymous told me afterwards. “But I don’t know if they just want to avoid a second pigeon movement or if they are taking us seriously.”

Startup people are still very suspicious when the state makes a gesture in favor of French startups. We saw with Montebourg’s nomination that it’s a fragile discussion — at any time, startup people are ready to be up in arms.

Following Montebourg’s appointment, some people loudly complained. How can you forgive the person who told Yahoo that it couldn’t acquire Dailymotion? But many others are waiting to see.

“This nomination is not that important. [Montebourg] acted like an idiot in the past, but because he didn’t realize what he was doing,” a VC told me.

A fundraiser, who asked not to be named, shared the same sentiment. “People can change. 18 months ago, Fleur Pellerin was speaking ill of the pigeons, but she changed,” he told me.

There is one thing for sure, a well-known politician is now in charge of the digital economy. This alone is a good sign. It could mean that innovation is now an important matter for the government. But he has a lot of things to learn.

That’s why both Montebourg and startup-savvy people need to overcome the confrontation between innovation and power. We all have a lot to learn from each other.

Disrupting The Status Quo

While Montebourg didn’t go to the ENA, the school is crystallizing a lot of criticisms from startup people. Arguably, the school is still pretty representative of France’s power class. It’s an elite graduate school to access the top functions of the state. Less than 100 people get in to the ENA every year.

For the past 50 years, three presidents, seven prime ministers and a significant portion of CAC 40 CEOs attended the ENA.

The ENA is the disease of our country.

In France, education is one of the most important identifying traits. When you are 50, people still ask you what university or school you attended. You will be judged by your diploma for your entire life.

When you graduate from the ENA, you are part of a small club of influential people who know how to speak with the other members of this club. It is really powerful, but is it legitimate?

“They should get rid of the ENA,” a key person in the French startup ecosystem who asked not to be named recently told me.

For French entrepreneurs, the ENA goes against common sense. Every day, they read about their heroes. Many of them are dropouts, such Mark Zuckerberg, Steve Jobs or Bill Gates. When you are building a company, only one thing matters — your company. It doesn’t matter where you come from or if you failed multiple times in the past. Your work speaks for itself.

“The ENA is the disease of our country,” TheFamily partner Jean de La Rochebrochard told me. “It’s a conditioned non-deserving elite.”

How does it apply to the economy? The government tends to favor existing companies and established industries against young startups. They are against disruption in some way.

For example, taxi unions complained against Uber, Chauffeur-Privé, LeCab and others. The government passed a law in December to compensate. Uber drivers had to wait 15 minutes between the time a customer hails them and they let them in the car. The council of state recently suspended the law because it created a competitive imbalance.

Similarly, it’s hard to find a B2B tech company that works with the state. Signing a contract with a public administration is nearly impossible for a startup.

Improving The Discussion Between Innovation And Power

A new government was the perfect opportunity to finally get an autonomous digital minister — someone who could talk with startups, build a better network infrastructure, promote startup visas and more. Sadly, it’s not going to happen this time.

So we should make the most of it. We live in a country where politics is prominent. Instead of attacking our politicians, we should educate them. We should be smart enough to lobby the government like big companies do.

18 months ago, the French tech scene got together to protest against the capital gains tax law. It was a first. Everybody realized that tech-savvy people were incredibly powerful. We know how to harness Twitter and Facebook, how to create a viral campaign, how to be loud.

The best stance is now probably to let Montebourg do his job. Let’s not expect anything at all from him — he also has to handle the ministry of the economy and the industry after all. If he makes another mistake, I’m confident that the French tech scene will be its most vocal opponent.

As I always say, an ecosystem is a four-sided network — you need entrepreneurs, VC firms, schools, and journalists. We also need a lot of time and hard work. But we don’t need anything else to create great companies.