France’s Economy Minister Emmanuel Macron On French Startups

Last week, 190 French startups came to Las Vegas for CES. Everywhere around Vegas, people were talking in French, as if French entrepreneurs were trying to take over the city. And France’s Minister of Economy, Industry and Digital Affairs Emmanuel Macron was also there, trying to make a point about French startups.

There are many reasons why so many French startups attended CES this year — I explained them in a separate article. France has some of the best engineering schools in the world, some French hardware companies have been thriving for the past few years and many entrepreneurs have realized that it’s possible to build a global company by keeping the engineering team in France.

But what about the support from the French Government? I got the chance to interview Emmanuel Macron about his vision and policies when it comes to startups. This interview was translated from French and slightly edited for clarity.

TechCrunch: You’re coming all the way from France, what’s the goal? Are you going to be a salesman for the French startups attending CES?

Emmanuel Macron: First, my goal is to showcase French startups, rally entrepreneurs and showing that French startups are coming en masse.

Second, it’s important to show a strong commitment from the Government. Why? Because the ecosystem knows very well that the Government is important in France. It’s Big Government. And these startups [pointing finger to French entrepreneurs living in the U.S.] are always wondering what’s going to happen when they work with French startups: “what is the Government thinking? What are they going to do? Are they going to change the rules?” So it’s very important to show that the Government is committed when it comes to startups.

And third, we want to attract big companies and investors when it comes to investing in the French tech ecosystem.

TC: Who are you targeting first? Foreign VCs, people working in the French tech ecosystem and looking from afar?

EM: It’s a multi-faceted audience. We are talking to French startups and the French tech ecosystem indeed. I think it’s important to highlight the specificities of this ecosystem — taking risks is important when you are an entrepreneur for example.

We need to show that France is currently changing thanks to entrepreneurship and that the world is also moving rapidly. For me, coming here is also about educating French decision makers to show that, yes, the world is changing rapidly, and French people are taking part in that change. And we need to help them — it’s critical.

The second type of audience is big American companies and American investors, indeed. We want to encourage them to work more with our startups in order to create late-stage startups targeting new markets. And we want them to invest in these startups and in France in general.

TC: How is it possible to be the “Minister of startups” and the “Minister of big companies” at the same time? They often have diverging goals, and there are sometimes violent clashes…

EM: I think that’s how the economy is structured, and we won’t succeed in transforming the economy by choosing between startups and big companies — it wouldn’t make any sense. I believe that we need a clear path, and that innovation is key when it comes to GDP growth and the success of our country.

Today, this innovation is much more disruptive, global and fast. Innovation is also coming more from startups and less from big companies. And that’s why it’s not startups versus big companies. It’s more important to upgrade the economy, private investment and innovation.

To this end, we need to explain that startups are a key element and that big companies should open themselves to startups and foster relationships, work, cooperation on multiple levels — industrial, research and development, investments and acquisitions. And we’ve talked about that a lot this morning, you can see how important it is. This is key to our startups’ success, it is also key for big companies that need to pivot.

All the big French companies in many industries have old business models — energy, transportation, tourism and more. There is a revolution going on. If they’re not part of the digital revolution — health is another industry as well — they will lose this battle. That’s why working with startups is key to their strategy. And at the same time, that’s also how we build tomorrow’s big companies.

TC: What are you really trying to say to big companies? Should they acquire startups, invest in them?

EM: They should work more with startups. Startups should win commercial and R&D contracts. Big companies should also invest in startups thanks to the recent policies when it comes to venture capital. You get generous tax exemptions when you’re a big company and you invest in a startup.

You get generous tax exemptions when you’re a big company and you invest in a startup Emmanuel Macron

And when it makes sense, big companies should acquire startups. M&A is an exit strategy for startups. Investors also need an exit, and seeing this possible exit makes it easier if you want to invest in startups.

And then, we need to embrace a sort of startup culture, an innovation friendly culture. That’s what we saw this morning — we need to adapt corporate culture, make big companies pay invoices more quickly. This is an example of the relationship between startups and big companies.

Startups are global and often lose money. We shouldn’t let big companies suffocate startups with late payments.

TC: Talking about the structure of the French economy, many people often criticize the labor code, especially when it comes to hiring and firing. Are you going to tackle this issue in your upcoming piece of legislation Noé [“New Economic Opportunities”]? Or is it going to be part of another law, later?

EM: For this issue, for both the digital industry and the rest of the economy, I think that we need to make many important changes.

With these changes, you can create sole-proprietor companies more easily, and you can grow as a company more easily. There are too many legal or fiscal restrictions for startups but also small French companies.

We started tackling this issue by capping compensations when you are laid off Emmanuel Macron

And then, I was talking about this yesterday, we should let you fail without ruining you. We started tackling this issue by capping compensations when you are laid off. And this is very important because it makes it much easier to size down. It fosters investment, it makes hiring easier and this is key to startups.

So there will be new policies going in that direction and I offered some suggestions to the President and Prime Minister. It should make innovation easier compared to the current regulatory framework, with a significant open data strategy as well.

We’re going to make it easier to innovate with multiple fiscal policies. We’re going to use France’s savings to finance innovation with new French pension funds. Becoming an entrepreneur in France will become easier, smoother and more flexible.

TC: More precisely, how are you going to redirect France’s savings and create French pension funds? [Pension funds don’t exist in France as the State manages pensions. Pension funds have been important limited partners in the U.S., investing billions of dollars into U.S.-based VC firms.]

EM: There are multiple policies. We’ve created free limited partnership companies with the law “Growth and Activity” from August 6, 2015 [the so-called “Macron law”]. It lets you invest in venture capital more easily.

Now, we need to leverage savings with life insurance products. This money could be used for capital investments, and in particular innovation investments. That policy will finance our economy to face disruption.

This could potentially create pension funds of €130 billion in total. Billions would be invested in venture capital and private equity. Emmanuel Macron

In order to do that, I suggested that we should change the solvency status of State pension funds — moving from level 2 to level 1. The Government has the authority to change that and I’m going to suggest we do that. This could potentially create pension funds of €130 billion in total. Billions would be invested in venture capital and private equity.

And finally, I think we still need to improve our tax code.

TC: What are your favorite startups right now?

EM: There are many startups obviously. Some of them are well-known and there are small startups as well.

According to me, there’s one critical industry, and it’s the Internet of things. It’s a key market, it affects multiple industries and transforms things.

And we need champions that can capture that market. And that’s why I think companies like Withings and Netatmo, among others, are important. The latter has successfully raised money last year and it’s great. [Netatmo raised $32 million in November 2015.]

There’s one critical industry, and it’s the Internet of things Emmanuel Macron

In the same category, a company like Sigfox is a critical one because they create an infrastructure for the Internet of things [Sigfox is building a low cost, alternative cellular network for connected objects]. It is the French unicorn in this industry — we have 5 unicorns overall, and this one is key and has a lot of strategic potential. [BlaBlaCar, Criteo, Sigfox and Vente-Privee. It’s unclear who is the fifth one.]

There are many use case innovations and technical innovations in the Internet of things. Many different examples show France’s know-how with these innovations and not only tech achievements. That’s a key point for me.

Another key is also developing sharing economy startups. BlaBlaCar is a significant example in this industry.

As for young startups, there were some with us earlier today. For example, the 360 camera startup is growing rapidly [he is probably referring to Giroptic]. Their 2015 revenue was 8x compared to 2014 revenue. Among the 190 French startups here, two thirds are coming from regions other than Paris.

And at the same time, we have actors defining the startup landscape, such as Parrot or Withings. They have been around for years, have been growing nicely and are now incredible partners. That’s the French Tech, this mixed landscape of startups that shows that we are both growing and already significant on the startup scene.