Why France is the New Incubator for Start-up ISVs

Here's why France is recognized as one of the world’s favorite go-to spots for start-up software companies.

ISV Startup

France is known for a lot of things: fine wine, designer clothes, succulent cuisine… and now it’s starting to be recognized as one of the world’s favorite go-to spots for start-up software companies to set-up shop.

France has always been a hotbed for ISVs in Europe, (historically coming in a close-second behind Germany and ranking well before the UK) due to its’ unique ability to attract a mix of Top Tier players and innovative upstarts alike. Due to a combination of France’s strong culture of innovation and top-notch engineering schools, R&D has typically stayed put in France while growing companies sought to relocate the rest of their operations elsewhere.

Over the past year, the situation for start-up ISVs in France has been propelled to a whole new level. Exactly one year ago, French President, Emmauel Marcon, announced a €10 billion (USD $11.7 billion) fund to support innovation (along with sizable tax breaks for start-ups) as a boost to help launch a new wave of momentum for French Tech, securing France’s position as a leader in “hyper-innovation.” The government even created the “French Tech Visa,” a fast-track procedure allowing three types of international tech talent (startup founders, employees, and investors) to obtain residence permits valid for four years on a renewable basis. And as recently as a month ago, Macron again reiterated his support for ISVs by announcing even higher investments backing research on artificial intelligence (allocating an additional €1.5 billion [USD $1.76 billion] of funding between 2018 and 2022).

In addition to strong government support for ISVs, Paris is also now home to the world’s largest campus for tech start-ups, Station F, which houses an entrepreneurial ecosystem under one (very large) roof (and 34,000 square meters of office space). Here, thousands of founders, partners, investors and talented employees mingle together, creating a true catalyst for innovation by providing start-ups with access to a number of services including personalized coaching, fundraising, and privileged access to research labs. Backed by Xavier Niel (French billionaire start-up superstar and founder of Free Telecom, THE disrupter of France’s telecommunications industry, which has now become the country’s second-largest Internet Service Provider, and the third largest mobile operator), Station F is the place to be.

Sounds good, doesn’t it? Here are some other reasons why your start-up should consider relocating to France:

Access to Great Resources

Not only is the labor force less expensive than it is in the US or other countries in Europe, they are also one of the most highly tech-savvy (due to easy access to top-quality higher education, as mentioned earlier). The job market in France has been relatively stagnant and talented individuals have the tendency to accept work outside of the hexagon when they can’t find it at home; France’s start-up initiative is first and foremost about retaining that talent and creating a source of new employment for them.

Venture Capitalists also abound—in fact, with over €7.5 billion (USD $8.81 billion) amassed between 2014 and 2017, French VCs have raised more funds than any other country in Europe, beating out their British and German counterparts, putting France on the map as a hotspot for venture capital. This growth is non-negligible and makes France that much more attractive for the start-up ISV.

Attractive Tax Incentives and Simplified Regulations

France has traditionally been seen as heavy on the tax button, but times have changed. Tax credits and subsidies to finance engineering costs can help start-ups cover 30% of all R&D expenses. Called the “Crédit d’Impôt Innovation” (CII) or innovation tax credit, this €6 billion (USD $7 billion) program is a measure that enables the partial funding of outlays incurred to enhance the functionalities of any device on a given market (and can come in the form of a reimbursement or reduction of corporate tax). And since the innovation tax credit is a French tax measure, it is not taken into account when calculating European-provided funding (which can come as an additional boost to the ISV). Plus, expenses are not capped—so patent costs, the costs of subcontracted research, operational expenses, and related social expenses, are all eligible for CII spending.

The French government has also simplified administrative procedures and regulatory standards to help reduce the number of publishing requirements for SMEs. Because of this, setting up a business in France takes only 4.5 days on average as opposed to 6 in the UK and 14.5 in Germany. Needless to say, this helps significantly reduce business start-up costs.

The Gateway to Europe

With 65 million consumers, not only is the French market big enough to deliver a sales Proof of Concept for the start-up ISV, it also provides immediate access to the EU market. From a sales and marketing perspective, it’s a good place to start testing the viability of a product before rolling it out in full scale across the zone. Since the French by nature are highly critical, the direct-market feedback a start-up ISV can get by growth hacking and soliciting early (French) adopters for feedback about their solution can help them build a product people want to use.

From an infrastructure standpoint, France is experiencing what some are calling a data center boom. Marseilles (in the South of France) is becoming the newest data center gateway between Europe, the Middle East, and Africa as more and more companies’ set-up shop. The Cloud’s “Big Five” have data- centers in France already, and Microsoft already finalized the construction of four brand new (Azure) ones (3 in Paris and 1 in Marseille) that were opened for business last March. Surprisingly, electricity costs in France are cheaper than many of their European neighbors; and the climate is more temperate as well, which help bring down the operational costs of such centers.

 Unbeatable Work-Life Balance

Retaining talent in France is also easy because the work-life balance is exceptional. The French are evaluated as being some of the most productive workers in the world, getting more done in less time than their American counterparts.

Conclusion

For any start-up founder, the recipe for success is a mix of several key ingredients: a talented team, an innovative offer, a value proposition that responds to a demand by the target market, and a competitive edge. A profitable start-up needs a coherent business model, and help in developing a viable go-to-market strategy. Incubators are key as they help establish the foundations for growth, and France is becoming the reference for ISVs interested in expanding to Europe.  

Datacap Systems
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Liz Lemarchand
Liz Lemarchand is the Chief Operating Officer of MediaDev, a global IT marketing firm. She has 20 years of marketing experience and provides strategic counsel to software vendors both large and small.