Parlevu Fronzas? Why French startups seem to focus on their home market & what’s changing

Just a few years ago, France was probably not the first country to pop up in the minds of most high-tech investors. The French tech scene was viewed, by some, as inward-focusing, building their products and services for the French national market first (and sometimes only!), instead of focusing on creating international startups right from the start. 

However, in a relatively short period of time, things have been changing quickly in the French tech scene. According to the latest stats provided by Business France, there are around 10,000 startups in France. It is the European country with the highest number of high-growth tech startups. The ‘La French Tech’ movement, created in 2013, has boosted this dynamic, by uniting the players in the field of entrepreneurship around the same banner and the same objective: to accelerate the number of startups and to spread French innovation internationally.

Which market to target? 

With 67 million inhabitants, France is already a great market. With unique elements that make it very different from the ‘Anglo-Saxon’ markets (USA, UK…) and other emerging countries, with BRIC (Brazil, Russia, India, China) in the lead, we understand why it can be interesting to concentrate on the consolidation of one’s national market before going on to conquer other countries. But what are the main barriers to international markets? 

With more and more successful French companies whose main product is a service provided online, it seems easy to launch globally from the start. However, this imposes a number of constraints, often underestimated. Among the most important ones is the need to think directly about the diversity of consumer needs in different countries instead of sometimes optimising a product for French consumers alone.

This also goes without saying, but learning English is sometimes an underestimated task. Although we are seeing some changes in French startups, still very few French startups’ press releases, websites, social media etc. are also available in English, meaning that global customers and immediately blocked.

Ambitious public/private partnerships 

Macron’s administration has made tech startups one of the government’s priorities, in order to create jobs and put France on a sustainable path to growth. The ‘La French Tech Mission’ is a government-led team at the intersection of the public sector and the startup ecosystem. Their long-term mission is to bolster France as a country where tech startups can start, scale and succeed, and they do so through a visa scheme for startups, incrwasing access to funding, campaigns, special programmes and support for their 50+ French Tech communities worldwide. 

According to the annual barometer on the state of health of the French startup ecosystem, published by the firm EY, La French Tech raised €5.4 billion in investment this year. That’s 7% better than in 2019, which was a record year. However, this positive figure should not be the only one. If we compare this with the growth of previous years, we notice a significant drop, since in 2019, the amount of funds raised had increased by 39% compared to 2018, and by 41% in 2018. Compared to its European neighbours, France is in second place, just before Germany (€5.2 billion), and very far behind the United Kingdom (€12.7 billion).

To match its ambitions, €5 billion will be allocated by France’s main institutional investors to finance innovative companies over the next 3 years: €2 billion in venture capital funds specialising in late stage companies (raising more than €50 million) and €3 billion for funds managed by asset managers specialising in investing in listed technology stocks.  These amounts will complement Bpifrance’s objective to invest €1 billion via its own funds and the “Programme d’investissements d’avenir” (PIA) over the next three years in late stage startups.

So what’s going on with French startups? 

With all this positive news in recent years we can’t help but wonder why investors, entrepreneurs and business organizations have been struggling to connect with France before. There are a couple of reasons why French startups have been focusing on their home market: 

  • The “Made in France” label is popular in French households: A strong government commitment and a growing interest from the French population in where their purchases come from pushed many companies to use the “Made in France” label as their only viable strategy for exploiting this economic patriotism. However, we’ve seen many insincere uses of this label over the years and the recent administration has shown a greater interest in building the international image of french startups and in positioning France as an international “Startup Nation”.
  • How your startup presents itself to the world and the language you operate in count a lot: If the country of origin is a company’s defining added value, its product may be facing problems. Fast-growing US-based startups and scaleups are mostly building and selling products/services that solve international users’ issues. Therefore, operating in English from day one enables startups to set their ambitions from the beginning and send a message to their customers in different markets. French startups have been working with “by the French, for the French” method, but it’s changing at every level as explained above. 
  • French culture in every company: With the exception of companies selling French culture as their core brand, entrepreneurs have no real reason to pick a French name for a startup, especially tech startups. Picking the right name for a company is acknowledging that the market is much bigger than France and that it will help moving towards that from the beginning. Companies like BlaBlaCar and Back Market have understood that and it has worked. 

A commitment to an open economy

France is creating a fund to protect home-grown technology companies that may become “prey” for foreign buyers, adding this vehicle to its bailout package for startups. 

In late 2020, the French Finance Ministry created an initial €150 million fund through state-backed lender Bpifrance Financement SA to invest in local companies if they’re approached by an unsolicited foreign investor. The government may increase the fund to €500 million in early 2021. Furthermore, although the French market has been the main focus of La French Tech’s startups, they also started building ‘French Tech communities’ around the world from 2013, which encourages foreign startups to grow in France.

It’s also worth mentioning France’s growing innovation hubs, such as Station F in Paris, the largest startup incubator in the world, which is headed up by Director Roxanne Varza. Funded with €250 million by French billionaire tech tycoon Xavier Niel in 2017 (who we interviewed here). This monumental space boasts 366,000 square feet, multimillion-dollar art installations and a whole host of success stories.

It’s clear that thanks to political commitments like these, and the support of the banking sector through financial investments, the ambitions of French startups are changing. It’s quite likely that we will see more and more French startups and scaleups play a bigger role on the international stage in 2021 and beyond.