La French Tech looks to replicate Silicon Valley success - the French way

Can France use Brexit uncertainty to develop its growing tech ecosystem, La French Tech?

Building the next Silicon Valley is never an easy task, but France is hoping to further develop its growing tech ecosystem, La French Tech, by capitalising on Brexit uncertainty and extending its leadership in fields such as tech for good and AI for humanity. Growth is there: the latest French Tech report card by C.B. Insights found that France's startups raised $3.5 billion in funding in 2018, an increase of 8% over 2017, and more than $11.71 billion has been raised across 2,511 deals since 2014.

"Silicon Valley shouldn't be copied because it is so unique and so advanced that trying to copy something like that would be like trying to recreate Versailles elsewhere," argues Xavier Lazarus, partner and co-founder of Elaia Capital, a venture capital fund based in Paris. "Silicon Valley should be a model but we should use our differences to create something else."

France as a growing tech hub

Philippe Vimard, CTO of Doctolib, a French telemedicine start-up, has worked in the start-up environment in five different countries, and was VP of the Expedia Technology Group in the mid 2000s. Following a new round of funding of $170 million (€150 million) in March, Doctolib's valuation rose to $1.13 billion, earning it unicorn status.

Vimard said that what has made France a good environment for tech investment is two related movements. On the one side, funds have become more available for entrepreneurs to bootstrap their ideas and really invest in changing the ecosystem. "This has really picked up in the last two years and over the last five years, we have seen that the investment in the technical system in France has been larger than in the rest of Europe," he says.

Vimard adds that where you have a growth in funding, it attracts more people and entrepreneurs into the start-up ecosystem. "You need more talent, which is always the essence of success."

Linked to this, then, are what Vimard calls "true measures being taken to favour the arrival of new talent in France." The French tech visa for employees took effect on March 1, 2019 and made it easier for start-ups that qualify for the visa, like Doctolib, to hire people wherever they are and bring them to France through a faster process. Doctolib recently recruited from Mexico through the process, something that would have been more difficult in the past, according to Vimard.

"There is a general sense that the government are favouring the creation of new businesses and a general positive momentum in the communications of the government that France is a good place to be. A virtue cycle is starting to happen," he says.

Lazarus has watched the evolution of the sector over the last 16 years since his company's founding. Elaia Capital focuses on early stage deals at the pre-seed, seed and series A level, with 75% deal origination in France and growing European interest with a focus on Spain and the UK.

Elaia Capital investments have mostly been in very early stage companies with global capacity for expanding in the company, and a strong tech or even deep tech angle in the business models, such as those in AI, data science, IoT and increasingly a strong trend towards digital for life sciences. They are currently managing a portfolio of 400 million euros.

"For the first 12 to 13 years of our existence, we were pretty alone in the market, saying that France is a good place to do venture capital, that technology could create value, and so on," says Lazarus. "Over the last three years, the atmosphere has completely changed."

Lazarus explains that there are good reasons for that. "People have been trying to build this ecosystem since the late 1990s. You need a full cycle to get the results and now we have seen major exits from those that entered the market in the mid-2000s to 2010. So now we have second wave or even third wave entrepreneurs that over the last five years are starting companies. The entrepreneur level has been strongly raised in our country."

He adds that, secondly, the trend of innovation means that most of the easy things have already been done, so what is left is difficult in terms of technology. He cites the example of AI. "This is where our country is pretty strong in training and educating our young people. We have a strong background in mathematics that has been there for 200 years and we can take advantage of that."

The community value of La French Tech

Lazarus notes that, in companies like Facebook, the last two heads of the AI division were French, which, he says, is a signal that puts the capacity for the country to express its talent. "It's good timing for very technical companies," he says.

He also says that the cost structure is favourable. "Even though Paris is an expensive city, it is still less expensive than San Francisco," Lazarus says. "The quality of hiring is good and so large US companies are investing locally. We now have a full ecosystem of academics, entrepreneurs, accelerators, early stage seed, late seed, corporates and so we can start to see results."

COO Gaétan Rougevin-Baville of Meero, a French online platform for photographers, explains: "Being part of the La French Tech ecosystem is a great way to foster emulation through a network of business and tech experts who share their best practices. It speeds up the rate at which we encounter business opportunities, as well as facilitates our recruitment of talented international hires."

Rougevin-Baville says that, as a result of being a key actor in this strong ecosystem, Meero has been able to raise its global profile, attracting interest from major players around the world. "More specifically, it has opened up incredible opportunities for us, making us eligible for several programs and grants, including research grants for our AI centre," he says.

Doctolib's objectives are to improve access to healthcare for patients and to provide tools and solutions for medical professionals to be more efficient in their practices. Their model focuses on partnering very closely with their practitioner user base to co-design the products they make. For example, they recently launched Telehealth, which allows doctors to see patients remotely. "We have had a good pick up on this because we have been working with more than 500 doctors to co-design the product to ensure it will fit their needs and be a value-add for patients," Vimard says.

Despite their unicorn status, Vimard says that Doctolib's team operates as though it is day one and focuses on making it best practices and processes evolve all the time. "We truly are a team of entrepreneurs. In the last five years we have hired more than 860 people and we plan to hire another 1,000 in the coming years."

The value of La French Tech in scaling up lies in the its position as a community. "La French Tech is a community, which allows us to exchange with other companies in the ecosystem and to share best practices on how to scale up a start-up. Because even though we are in different industries, we are facing very similar challenges in terms of talent acquisition, back-end product development, marketing, and so on," Vimard says.

"More of what is currently happening needs to happen. We need to continue to have more start-ups to attract more talent to attract ideas and people to join the community." 

Lazarus believes there needs to be greater development of international, diverse talent within start-ups, which is why he welcomes the new tech visa. He also thinks that the corporate environment needs to expand as it is not at the scale of countries like the US.

On the financing side, Vimard believes that it is important to develop the right level of scale up funds to bring support to the start-ups to keep their development going. There are not many IPOs for technical start-ups in France, though this is starting to change. "We need more of those examples," he says. "Keep pushing and pressing."

One of the major challenges for Meero in the start-up phase was recruitment - sourcing and recruiting tech talent has always been incredibly difficult. "Additionally, raising visibility for the company within the French ecosystem itself was also a challenge," Rougevin-Baville says. "That being said, our current rapid growth and expansion is bringing its own set of obstacles, as we make plans to expand the company and our presence worldwide. All the issues we faced in the beginning, when we were starting up in France - recruitment, raising visibility - we're now facing in multiple countries - which is challenging, but exciting all at the same time."

The differing factors seem to be aligning to position France as a favourable destination for tech investment and innovation. Vimard says: "We believe that France is a great place to launch and build a company right now."