September 19th | #43

This week in Europe: La French Tech

Earlier this week, Macron announced a €5.5 billion late-stage investment pledge from institutional investors to invest more heavily in late-stage VC funds and asset managers.
"We’ll have €2 billion that will go in so-called late-stage funds and €3 billion for funds managed by asset managers specialized in [publicly listed] tech companies" – Emmanuel Macron
This is another fantastic move by the French President, at least when it comes to technology and innovation.

A few weeks ago, the UK was branded "the world's hottest tech scene" mostly due to its late-stage capital growth (and Softabank). 

Late-stage investments and lack of liquidity events is one of Paris' (and Europe's, to be honest) biggest problems when it comes to innovation but this move is a step in the right direction.

Many startups raised their Series A (or B) in Europe, but then need to turn to the US or China for growth capital. For instance, just last week, Akeneo raised $46 million in a round led by a Boston-based VC firm.

So today we're going to revisit (and update) what I wrote in March about why Paris is, in my opinion, the most exciting tech scene in Europe.

A week in Paris

I’m sitting at a coffee shop on the 5ème Arrondisement right now. 

I spent the better part of this week having coffee with startup founders, employees and investors in the Paris ecosystem. Some were French, most of them weren’t.

After living for more than a year over here, and coming back this week, I think the stunning French city has morphed into a thriving start-up ecosystem. 

Great things are happening behind a façade of astounding medieval architecture and as a consequence, Paris is increasingly becoming a great place to do startup things.

But why?

It all starts at the top – government

The government of President Emmanuel Macron believes that technology and innovation should play a key role in the development of the French economy.

A few months ago, the president himself announced his intention to make sure Paris, and the country overall move from being just a “start-up nation” to “a country of global-player technology companies”.

One of the main initiatives comes from Digital Minister Mounir Mahjoubi, who announced that the country would invest at least 150 million euros in funding by 2020, according to Bloomberg.

But that’s not all.

Macron has announced a €10 billion national innovation fund and outlined plans to streamline the country’s corporate tax and labor laws to make it easier for companies to hire staff and issue stock options to new employees.

And in addition to that financial pledge mentioned before, the French government wants to break down any hurdle that prevents French startups from raising a $100 million+ funding round in France, becoming a unicorn and eventually going public.

Money is flowing to Paris like it’s the Renaissence

The UK and Germany dominate stories about European investment levels given the multibillion-dollar scale of capital investments into these countries, but digging beneath the surface, the French did more than winning the World Cup last year.

In 2018, France attracted $3.7 billion of capital investment, of which 2.6 billion flowed directly to Paris, way ahead of cities like Berlin ($2.2 billion), Barcelona ($1 billion) or Amsterdam ($240 million). 

According to the State of European Tech report, Paris has the third-highest number of funded companies overall (AND per million citizens) since 2013.

Source: State of European Tech
It also ranked second in the number of deals that happened in 2016, 2017 and 2018, only behind London.
Source: State of European Tech

What’s more impressive, the Paris ecosystem invests, on average, $28,467 per professional developer, only surpassed by Finland, Sweden and the UK. 

It’s safe to say that the French start-up ecosystem is booming. And the energy is contagious. 

Even US-based funds like TechNexus are starting their peregrination and using Paris as a base to invest in Europe.

A few months ago, around 40 partners of venture capital firms like a16z and Greylock, as well as limited partners, came to Paris to talk about tech in France and see the ecosystem first hand.

Macron at Station F
Being in Paris feels like being in the US midwest (Chicago, Cincinnati, Detroit, etc.) circa 2014 – an immature ecosystem with an underdog mentality, where everyone pushes forward.

It’s not an underdog at all though... 

Talent is flowing to France

Tech talent in Europe has a much higher mobility rate than the rest of the population. As I mentioned before, talent follows talent.

The French tech visa overhaul announced a few weeks ago is a major win for tech immigration.

The previous version of the visa was limited to roughly 100 companies that were selected as part of the Pass French Tech program and employees also had to graduate with a master’s degree.

Now, the visa is diploma agnostic, and more than 10,000 startups meet the requirements to hire foreign employees more easily

This puts France in a unique position, way ahead of other countries that are rejecting immigration like the UK, Sweden, and the US. 

All this money and knowledge gravitating towards Paris generates an intimate, tight-knit community, with Station F at the center of it all.

Station F is the biggest startup campus in the world, with 34,000 sq meters and 3,000 desks. Funded by billionaire Xavier Niel, it formalized and provided a hub to an already growing but scattered Parisian tech scene. 

And the impact is clear as we can see from their first year:
  • 1034 participating startups and 4882 residents
  • €250 raised by 232 companies
  • 8 acquisitions
  • €1.7 billion portfolio

But it’s not all roses 

France, and particularly Paris, is a great place to found or work at a startup. But it feels like the hype is a bit ahead of the companies.

First, there is a lack of success stories to back the narrative. There are GREAT companies poised to become one (Front, Algolia, Alan are just some) and they will exit eventually, but they aren't there yet.

That is a minor problem that will be fixed with time. There are two bigger issues looming though.

The main setback of living in the French Capital is its cost of living. It’s an expensive city. In fact, it tied at 1st with Singapore an Hong Kong.

The problem with that is salaries don’t match the cost of living.

A study of tech salaries by found that Paris had the lowest cost-of-living adjusted salary of all cities reviewed, at about $56,000 in San Francisco dollars.


The average developer salary in Berlin is €45,929 per year, and in Paris is €38,516 per year, but Berlin is 25% cheaper according to Numbeo

Some argue that lower salaries are because of the great work culture, top tier schools, a beautiful city, free health care and a lot of ticket restaurant. 

But I don't buy it. I think you can have both and talent doesn't need to settle for lower salaries. Even though you can live pretty well with €35,000/year in Paris, companies need to start paying more. 

I understand the concept of market rate, and I’m not saying companies should pay more out of goodwill (although some do.) 

But that's short-sighted. Market rate for tech talent is not local anymore. It’s global (or at least European), particularly for A-players, senior technical engineers and executives. 

If you are hiring on a 30-mile radius around your office, you are doing it wrong. Other companies will go international, leverage open borders, and the best people will leave for greener pastures.

Paris has a unique opportunity

Despite my criticism, Paris has a unique opportunity to overtake London as the top startup hub in Europe.

Someone I talked to this week mentioned: “London is shooting itself in the foot”.

Brexit is a shitshow, the tech ecosystem is taking a considerable hit and the gap between the two cities is narrowing down.

In 2017, London received €5.6 billion in investment, and Paris €1.6 billion. In 2018, London received €4.4 billion, and Paris €2.6b.

In 12 months, London attracted 22% less capital, while Paris gained 62.5%.

Frédéric Court, a French venture capitalist who has spent much of his working life in London, mentions:
“In the past 10 years, there’s been amazing work done to make London the center of the European tech ecosystem, but with Brexit, that has stopped. The momentum has shifted to Paris.
But can France capitalize on it? 

The problem with being an underdog is being a chronic underdog. It's an addictive mentality. It feels good to be underestimated, to have no responsibilities and to be applauded when you go to bat with zero expectations and hit a home run. 

Comfort is a double-edged sword. Sometimes you don’t recognize that moment when you need to step in and overtake your competitor.

I believe Paris is on the right track. It needs a few success stories, higher salaries to match the cost of living and time to mature, and educate founders, VCs and entrepreneurs.

Great things are happening.
Macron announces €5 billion late-stage investment pledge from institutional investors

The French government has convinced institutional investors to invest more heavily in late-stage VC funds and asset managers.

Remagine secures $35M fund backed by media giants to focus on entertainment and media tech

Remagine is relatively new European VC fund that focuses on investments in entertainment tech, including AI, gaming, sports and esports, AR/VR, consumer and commerce.

France says it will block Facebook's Libra cryptocurrency in Europe

Officials have concerns about Libra's impact on government sovereignty. So they are goin full-French and killing it.

The Power Broker

One of the most fascinating books I ever read and according to Goodreaders, "one of the most acclaimed books of our time, winner of both the Pulitzer and the Francis Parkman prizes."

It takes a thriving ecosystem for entrepreneurs to fail safely

Fantastic piece by Nicolas Colin on why Europe needs is to build an ecosystem where entrepreneurs can quickly bounce back.

The genius Neuroscientist who might hold the key to True AI

Karl Friston’s free energy principle might be the most all-encompassing idea since Charles Darwin’s theory of natural selection. But to understand it, you need to peer inside the mind of Friston himself.

7 ideas you can steal from Lego’s intrapreneur in residence

Start testing immediately with a no-tech "pretotype", keep the team small, work in two week sprints + other ideas that Lego's innovation team uses.

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  • Agorapulse, a previously bootstrapped social media management platform, raises €16.6 million
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  • Munich-based healthtech startup Kaia Health raises €7.3 million to expand its digital back pain treatments in the US

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