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The French startup model, an inspiration for Italy and Europe

Andrea Di Camillo, Managing Partner of P101 SGR | April 15th, 2019

Blablacar, Sigfox, Withings? They are Unicorns and they are French. Around Paris, innovation is pushed to the levels of London and Berlin. This was noted, at least since 2015, by the EY Venture Capital Barometer in France. The latest update explains that in 2018 “the sums raised surged by over 40% to over €3.6 billion“. The transactions were 645 in the year with an average value of €5.6 million. Market size has doubled compared to 2015, which is considered the turning point for the French venture capital system. The sums raised through fundraising are growing too. This means, according to EY, that French and international investors, “convinced of the potential of home-grown talent and projects”, “are now offering them the resources to become key players in their markets: scale-ups.”

France, startup nation

If, despite the uncertainties caused by Brexit, the UK raised €5.8 billion euros in 2018 and is still venture capitalists’ favourite destination, France is approaching and stands alongside Germany (€4.3 billion).

Artificial intelligence, Blockchain, Cyber Security, Smart City and Health Tech: in all these sectors, French startups are proving that they can design the future. In 2018, internet service startups raised the highest sum, €1.1 billion, followed by software companies (€745 million) and life science ones (€574 million). The richest deal was that of Voodoo in the gaming industry (€169 million).

But how did they reach this point? Obviously, the ecosystem has not blossomed all by itself: it was helped by incentives and targeted policies. A State program from which Italy seems to be taking inspiration, according to the statements of our current government.

A boom that comes from the State

Our hope for Italy is that the effects here will be the same as in France. In 2012, the French and Italian markets were almost identical in terms of development. Then Emmanuel Macron started a big change. It is no coincidence that Macron in France was already known as the startup minister, even its own political project En Marche! worked like a startup: filling the gaps in the political market with an agile structure and growing out of proportion in a very short time. In his project, even France had to be run as a startup. His work in favour of innovation began between 2014 and 2016, when he was  head of the Economy. At that time, the young minister laid the foundations for the French pro-startup legislation. In the same two-year period, investments in French startups rose from 0.2 to €2.7 billion, while in Italy, in 2016, the market stood still at €200 million.

Four days to found an innovative company

What has changed? The first innovation is contained in the Loi Macron that was approved in 2015 by Hollande government, thanks to which in France it now just takes 4 days to create a startup, compared to 5 days in the UK and 11 days in Germany. But removing barriers and delays was not the only lever that was used by Macron. Investments have weighed heavily in the process: since 2011, France has created the Ambition Numerique Fund, a venture capital fund, supported by the Caisse des depots et consignations and by Bpifrance – a public investment bank. At the end of 2018, the fund had invested €205 million in 43 startups.

The role of State investment

The real boom started in 2014: Bpifrance, together with the local Deposits and Loans Fund, announced that it would invest €1.1 billion in startups. Moreover, Bpi created a €500 million fund for scaleups, i.e. for investment rounds from €10 million. As a consequence, new French venture capitalists were born, capable of bringing in the money that was needed to support the growth of international champions with over 500M funding. To this, the ability to attract large international VC operators followed, operators that were interested in investing in already quit big and promising companies that could use big investments. In addition, Macron, who had just been elected prime minister, launched a further €10 billion fund. In short, every promise was followed by a concrete and targeted action.

Time to scale up

After all this, France started “producing” unicorns, like Blablacar or Withings. The latter produces digital medicine devices and, in 2016, was acquired by Nokia for 191 million dollars (but then returned to the hands of one of the original co-founders, Éric Carreel). At the beginning of 2018, the founder of another French unicorn, Sigfox (IoT) received a one-billion-euro offer from a corporate company: but it refused the offer as it was considered to be too small.

An inspiration for Italy and Europe?

Macron plans to create a €50 billion fund to train unemployed French people to use digital tools and to digitize the bureaucratic machine. He also plans to improve and extend super-fast Internet and wi-fi networks. But above all, he wishes to create a united European digital market, which is probably the only true element that could help create a European ecosystem of startups.

In short, France has quickly laid the foundations to transform its economy through thousands of new innovative companies that will support large traditional companies, activating a virtuous cycle that also attracts important international investments.

All of the above can surely be an example for Italy in order to try and fill the gap that has unfortunately been created in recent years, but which could also represent “the” opportunity for our country.