Taking Stock Of Tech Startups In Paris

Last week I attended Open Coffee in Paris where I met a bunch of interesting entrepreneurs. I also met the people who run a PR firm in Paris called Ballou PR. They asked me to do a full day “speed dating” session and a Pont Party during my time in Paris. After explaining the details of both, I said yes. I am not sure which is more fun, meeting 16 entrepreneurs in one day or drinking wine in the early evening on a bridge over the Seine, but honestly they both sounded good to me.

The Pont Party is next week, the 17th to be exact, at 18:30 on Passerelle Solferino. I posted the details last night. If you are in Paris and want to meet entrepreneurs, you should come by.

I did the “speed dating” event yesterday and I mentioned it briefly in a post last night. I want to add some more color, give my high level impressions, and talk about a few specific companies that have live services you all might want to check out.

Again, I’d like to thank Marc Brandsma of Chausson Finance and Ken and Colette from Ballou for putting it together. I linked to their online coordinates in the post last night.

Marc, Ken, and Colette work with Parisian startups every day and I was able to get a few minutes alone with them over breakfast and lunch to talk about the overall state of the startup market in France, but specifically Paris. Since we don’t invest in biotech, cleantech, or hardware or communications, my comments are going to be limited to web technology, mobile, and gaming applications.

In some ways, being an entrepreneur in Paris is like being an entrepreneur anywhere. The odds are against you, nothing comes easily, and most people think you are crazy. It’s harder to be an entrepreneur in Paris than it is in Silicon Valley. It also seems harder than NYC or many cities in the US. And I suspect it’s harder than London as well.

Entrepreneurship is a French word and modern day venture capital was invented by a Frenchman named George Doriot. If you don’t know about Doriot, you haven’t been reading this blog recently. But even though the French have a historical connection to entrepreneurship and venture capital, the French economy and society doesn’t seem to be particularly supportive of entrepreneurship.

It starts with the economics of being an entrepreneur. The tax situation in France is such that if you make it big with a startup, you’ll probably move to Belgium or Luxembourg so you can keep most of the fruits of your labor. That’s a big deal because, as we know, it’s the past successes and the people who have had them that seed the next successes.

But it’s also true that the French society doesn’t value risk taking in quite the same way that the US does. I heard yesterday about a tax break that the government recently passed that allows wealthy people invest in startups instead of paying windfall taxes to the government. Sounds great, right? But tax and financial advisors quickly came up with schemes to route those tax breaks into super safe investments that simply capture the tax breaks but take no risks. Maybe that would happen in the US too, but somehow I think our culture in the US values likes to play higher up on the risk/reward curve.

Being an entrepreneur in Paris is a bit like being one in NYC. It’s not like Silicon Valley where everyone seems to be starting a company, working in a startup, or investing in a startup. In NYC and Paris, most people work in big companies and don’t read Techmeme and Valleywag. So when you are an entrepreneur in NYC or Paris, you are the nutty one, not the mainstream.

But all that said, the entrepreneurs I met yesterday were very typical of the people I meet every day in our business. And they are working on exactly the same problems/opportunities that startups in the US are working on.

Here a list of the general areas that the sixteen startups I met with yesterday are working on, along with the number of companies I saw working in that area, and a comment about whether our firm had looked at a similar opportunity in the past three months (noted as “current”):

Entertainment ratings/reviews – one company – current
Mobile banking – one company – current
P2P lending – one company – current
Interactive/Internet TV – two companies – current
Sentiment analysis/tracking – one company – current
Stock footage – one company – current
Mobile gaming – two companies – current
Mobile RSS – one company – current
iPhone apps – one company – current
Prediction markets – one company – current
Virtual worlds – one company – current
Video ad creation – one company – current
Mobile/web integration – one company – current
Career/Jobs web service – one company – current

What that list tells me is that Parisian entrepreneurs are as up to speed on where the current opportunities as much as anyone in silicon valley, NYC, or anywhere else in the world. I’ve talked a lot about this lately, but globalization means that the word travels fast. Don’t think that the most interesting mobile games or iPhone apps will be built in Silcon Valley or even the US. Some will. Many won’t be.

And I thought that the quality of the technologists I met (some of the presenters were the technical founders, some were not) was very high. And most of the development teams were local, built from the ground up in France. That is different from what we are seeing more and more of in the US.

I often hear that European startups often get focused on the regional or even country specific opportunities and as such the upside of investing in Europe startups is not as high as US startups. The sixteen companies I looked at broke out like this:

France focus: 3
Europe focus: 2
Europe/Asia focus: 1
Global focus: 10

So, it’s true that some French startups do focus locally or regionally, but most of the companies I met with are thinking globally day one. I don’t know if that’s a recent change in orientation or something else, but I see that as very positive.

So that’s it for the color commentary and high level impressions. Here are a few interesting web services I learned about yesterday. Check them out and let me know what you think.

– social service for entertainment focused on ratings
wixi.com – invite only service for sharing music and video
twitrss – a mobile RSS reader in early alpha that uses twitter for sms alerts
yoowalk – a virtual world built entirely in flash available via a web browser
mypronostic.com  – prediction marketplace

French only, soon to be available in additional languages/countries:

vozavi.com – shopping service based on web-wide sentiment analysis
doyoubuzz – online resume hosting service

#VC & Technology

Comments (Archived):

  1. Pascal-Emmanuel Gobry

    Fred, thanks for such an amazing post. There are plenty of great insights in there, and I’m happy to see that, unlike too many French people, you don’t report as bleak a picture as could be. I’ll almost certainly have more elaborate thoughts later in the day, maybe on my blog. Overall I definitely think you get the picture right.So, the big question: anything you’re going to invest in?

    1. fredwilson

      To soon to tell on the investment front

  2. stephanelee

    Fred,Once again, right on the spot.As a fan of your blog, I do look forward to meet you on the Solferino Passerelle.See you soon.Stephane.

  3. Oleg

    Very interesting post, Fred.Are you going to pay a visit to Israel in the same manner?By the way, Discus login/registration does not work in Opera 9.51

    1. fredwilson

      I will alert them about operaI will do israel soon but not this month

      1. Jeremie Berrebi

        Will be happy to meet you in Israel when you will be thereJeremie BerrebiFrench/Israeli entrepreneurZlio.com

  4. benton.yetman

    surprised to see that 10 of the 16 had a global market focus, thanks for pointing that out. I’m interested in hearing you compare that trend to the focus of the companies in your Berlin meetings today, which have traditionally seemed to be more global in focus…

  5. WayneMulligan

    Fred,As a US investor (investing with US dollars) would it even be appealing to invest in a Euro-country? The exchange rate seems like it would dramatically affect the potential rate of return on the investment.-Wayne

    1. flyintiger

      Yes, it will affect returns…but upwards! Unless you think that the USD is going to get much stronger in the future, so far, the only way is down…which -as Euro investors- penalizes our USD investments.

    2. fredwilson

      I guess it all depends on where the currencies go from here. We could also hedge the currency risk

  6. John Sjölander

    Thank you Fred. I’ve been waiting for a comparison like this from you. As a swedish entrepreneur I find it interesting and I think you’ve pinpointed a lot of how european startup climate is.Thanks!

    1. Marc Brandsma

      Fabrice left France years ago and he is now a happy and succesfull US entrepreneur – it is up to us, the people he left behind to ensure that the cliché he’s carrying around are all but true – and we’re moving in the right direction

  7. wanderingstan

    Glad that you got to talk to Leafar at Ulik, I had intended to recommend it. The excitement when I speak to him is palpable, as is his frustration at not having a larger community of entrepreneurs–or a supportive cultural climate. I fear that by being in Paris, Ulik missed the chance to become what iLike is on Facebook now–they had a huge headstart when the FB platform came out.

  8. Fabrice Epelboin

    Refreshing point of view, thanks for that. True, it ain’t always easy being an entrepreuneur in France, and taxes are less a problem than the overall risk aversion culture, but still, they’re some great tech guy and cool ideas to transform into great startups…Focusing on something else than a local (small) market is definitely the key to success if you’re starting from France, that’s for sure.

  9. Hootan

    Fred, having lived in Europe for several years, I always wondered why there were not more musicians coming out of the west European nations. My thinking was, musicians in the US suffer because they’re broke, but European artists could really focus on their art due to the social democratic net that they could rely on. I guess not.As a broke, nutty NYC entrepreneur, I wonder whether the pressure of our American free-market system and the need to survive economically independently is a part of the equation that fosters our entrepreneurial culture more than elsewhere. Perhaps the lack of this pressure, compounded with the tax issues you mention, just dampens the spirit in Europe. Damn shame given the fantastic lower education there. Our country has its roots in Puritanism and risk-loving cowboys. I’d like to think we entrepreneurs keep the American cowboy tradition alive!

  10. Mikko

    Sounds pretty familiar. In Finland, we live in the shadow of Nokia and the government’s efforts to boost entrepreneurship are not really startup friendly. The VC scene is almost nonexistent and the few players are very risk averse.Luckily, even without the conventional support structures, an enthusiastic startup culture is growing and plenty of people with strong web/mobile backgrounds (everybody seems to have at least couple of years of mobile experience in this country) are starting their own companies. And because the country is so small, we have to think global from the get go.

  11. Jerome Camblain

    Two things worth mentioning:1- the French ASSEDIC (the state agency that pays out the unemployement benefits to job seekers) is by far the biggest French VC!!!Indeed, having lost a job, one can start a company while still receiving a large percentage of his/her former salary during two years (as unemployement benefits), as he/she works for no salary in setting up the new business. It is a scheme set up to promote entreprneurship in order to create new jobs.It is not a direct investment, but it is economically very similar.2- the current stock market turmoil will help start-ups hire better trained employees. Indeed in France as the risk appetite is low (as you wrote) the best engineers choose to join large listed firms for the prestige on their resume. The stock options were acting as golden hand cuffs as noone would change jobs and lose the virtual capital gains as long as the market remained high. As the options are under water, we see greater career mobility and smaller firms now get a chance to strengthen their human capital. The low markets has started to give us (entrepreneurs) an easier access to human capital, let’s hope it does not cut access to funding.

    1. Solomon Hykes

      Jérôme,That only works if you are laid off. If you quit your job to start a company, you won’t get a dime.

      1. Jerome Camblain

        Sure, but it is still a very neat measure.otherwise, usually one can bargain with HR : I resign – you want a very well managed transition- so you draft the paper as a firing for divergence of opinions, no extra cost to the firm & a very fine transition (I wait until you find replacement and I train that person)

        1. Solomon Hykes

          That is definitely a common bargain. I see the proliferation of these workarounds as a symptom of the problem: broken incentives.ACCRE is a very appreciable government help (zero payroll tax on founder salaries for the first year), but the conditions for eligibility are too tight.

  12. leafar

    Wanderingstan I do appreciate your intention of recommending us and the part on our excitement. Regarding our potential (missed ? not sure at all) let me make a few remarks:- iLike is a about flux (scrobbling) like last.fm which is very different from our stock approach. We have a lot of users coming from last.fm and they call us the last.fm for the rest. We do a complementary job. – Building an intelligent, warn and personalized database is an amazing opportunity on many verticals not yet addressed.- I do feel a bit of frustration with the ecosystem in France but i’t’s getting better : people start to feel the urge and work on it a lot with opencoffee for example. Fred coming to visit us is also a great signal – I was very impressed by the vision he has for NY VC and European opportunities.- Europe is also a incredible blessing. I’ve written about it one year ago ( http://ub0.cc/1k/p ). Language Barrier, Cultural differences, Time, Feedbacks from USA… etc- We’ve learned to be frugal and resilient, though road with great sightseeings ! – OpenSocial & FB Connect have great potential to compensate the headstart you’re talking about. And there are still lot of SN available to stricke this kind of deal.- UGC take time (when not on the edge of “piracy”) and meanwhile we’ve been building technologies that will have great potential while we wait for the Grail of pure semantics. Micro Collaborative Filtering, Natural Language Classification (We’ve been living with Dewey Decimal Classification for two long and since everything is miscellaneous there’s a lot of disruption possible here, look at librarything amazing achievements) and a few other librarian tricks.–> U.[lik] will finally have a proper website (seed is possible) in a few weeks, hope you will like it as well as all our improvements.There’s nothing like a good fight and Babel is like Roma (not built in one day) ;-DAlways a pleasure to exchange ideas with you.

  13. Solomon Hykes

    Fred,Did you discuss the French payroll tax as a barrier to developing your business? For an employee to pocket 40,000 euros the real cost is 70,000.

  14. fredwilson